The American Prospect #309

30th Anniversary Issue THE NEOLIBERAL INTERNET PAUL STARR

WILLIAM BARR’S EXTREMISM BRAD MILLER

FA L L 2 0 1 9

USING PRESIDENTIAL POWER

FOR GOOD The next president can use laws already on the books for constructive change—without abusing executive power.

DAVID DAYEN • MARCIA BROWN • BEN ADLER • NATALIE SHURE GRAHAM STEELE • BRYCE COVERT • SANDEEP VAHEESAN • GABRIELLE GURLEY VICTOR FLEISCHER • RACHEL COHEN • SCOTT LEMIEUX

Progressives can’t afford to abandon the working class.

For decades, progressives led the way in fighting for policies to protect, strengthen and grow the working class.

From fighting against offshoring to rallying for better wages and working conditions, progressives stood up for America’s blue collar workers when nobody else would.

Progressives can’t quit the fight now. In 2020 and beyond, we must continue to fight for America’s workers.

americanmanufacturing.org

contents

VOLUME 30, NUMBER 4 FALL 2019

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COLUMNS 4 PROSPECTS HOW TO REALLY END SHAREHOLDER CAPITALISM BY HAROLD MEYERSON

FEATURES 6 SPECIAL REPORT USING PRESIDENTIAL POWER FOR GOOD 7 THE DAY ONE AGENDA BY DAVID DAYEN 9 CANCEL STUDENT DEBT— ALMOST ALL OF IT BY MARCIA BROWN 11 AGGRESSIVELY ADDRESS THE CLIMATE CRISIS BY BEN ADLER 14 FORCE DRUG COMPANIES TO LOWER PRICES BY NATALIE SHURE 16 OVERHAUL THE BUSINESS OF WALL STREET BY GRAHAM STEELE 19 CREATE A PUBLIC OPTION FOR SIMPLE BANKING BY BRYCE COVERT 21 UNLEASH THE EXISTING ANTI-MONOPOLY ARSENAL BY SANDEEP VAHEESAN 24 MAKE MARIJUANA EFFECTIVELY LEGAL BY GABRIELLE GURLEY 26 CREATE A MORE PROGRESSIVE TAX POLICY BY VICTOR FLEISCHER 28 HELP 800,000 WORKERS JOIN A UNION BY RACHEL M. COHEN 30 WAIT A MINUTE, COULD JOHN ROBERTS BLOCK ALL OF THIS? BY SCOTT LEMIEUX 34 THE FORTY-YEAR WAR BY REPRESENTATIVE BRAD MILLER 42 THE COMING PRIMARY CHALLENGES TO CORPORATE DEMOCRATS BY ROBERT KUTTNER 48 HOW NEOLIBERAL POLICY SHAPED THE INTERNET— AND WHAT TO DO ABOUT IT NOW BY PAUL STARR 55 THE NEW UPRISING ON A COUNTRY ROAD BY DAVID DAYEN 62 HOW PRIVATE EQUITY MAKES YOU SICKER BY EILEEN APPELBAUM 66 ON SUMMER VACATION, AND HUNGRY BY KALENA THOMHAVE

CULTURE 71 NEVER AGAIN, EXCEPT FOR RIGHT NOW BY JONATHAN GUYER 74 MONOPOLY AND ITS DISCONTENTS BY GERALD BERK 77 THE CRASH OF AUSTERITY ECONOMICS BY ARJUN JAYADEV AND J.W. MASON 80 PARTING SHOT AND NOW, ANOTHER WORD FROM A FANATIC BY EDDIE PEPITONE Cover art by the Prospect; images by Popicon / Shutterstock and Lukbar / iStock by Getty

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from the Editor

W

e are simultaneously embarking on change and continuity at the Prospect.

First, the change. I’m proud to introduce you to three new writers who have joined our staff since our last issue.

ALEXANDER SAMMON is our new staff writer. He comes to us from The New Republic, and previously he wrote for Pacific Standard and Mother Jones.

Alex is a fantastic chronicler of politics and corporate power who has already been off to a great start at prospect.org, writing about taxes, Uber, the dialysis industry, and much more. You will see plenty of great work from him in future issues and online.

We also have two new writing fellows. Longtime readers of the Prospect know the rich legacy of the writing fellows program, which gives young journalists the unique opportunity to get valuable career development and mentorship in a two-year paid position.

BRITTANY GIBSON , originally from Jersey City, New Jersey, joins us as a writing fellow after completing her degree in journalism at Rutgers University. A dual national of the U.K. and the U.S., Brittany has spent the past year in Paris and London, taking writing classes at Université de Paris and completing an internship with CNN International. She brings a global perspective to the Prospect’s coverage.

MARCIA BROWN is a native of Shaker Heights, Ohio, who was the Sammon editor-in-chief at The Daily Princetonian at Princeton University.

In her interview, she described how her reporting improved the work conditions of a security guard—in her high school. Thus far at the Prospect, Marcia has broken news on the Trump administration’s efforts to degrade the asylum system, and the effort of states to rein in wasteful corporate welfare in the guise of economic development. She has the lead story in our presidential-power package in this issue, about canGibson celing student debt.

I also want to single out SUSANNA BEISER , our longtime proofreader, who has been promoted to associate editor. Susanna is a consummate professional who is indispensable to our print magazine and online coverage. We’re pleased to have her as part of our team.

Welcome to our new staffers!

With the change comes continuity. In 1989, Robert Reich, Bob Brown Kuttner, and Paul Starr decided that there was room on the liberal left for a new magazine that combined policy and narrative. The first actual magazine came out the following spring, but the organization was founded 30 years ago.

Over the years, it has carved out a foundational space within the progressive infrastructure. The honor roll of writers and thinkers who have contributed to the Prospect is too long and distinguished to recount here. The number of issues we have led the way on is similarly vast. If the Prospect never published another word, it will have left its mark on America.

Fortunately, we are still publishing words. Lots of them! And this issue combines the tradition of the Prospect’s past with its bright future. We have a special section on the significant advances the next Democratic president can make on policy under existing statutes, without passing a single piece of new legislation. And we have two stellar features from our co-founders, ROBERT KUTTNER and PAUL STARR , which are respectively about primary challengers to corporate Democrats and the tech sector as the ultimate avatar of neoliberal thought.

The ability to draw from the decades of knowledge of the people who built this organization while introducing new talent and new ideas enlivens the Prospect, and I hope you will recognize that in these pages. Continuity and change.

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EXECUTIVE EDITOR DAVID DAYEN FOUNDING CO-EDITORS ROBERT KUTTNER, PAUL STARR CO-FOUNDER ROBERT B. REICH EDITOR AT LARGE HAROLD MEYERSON DEPUTY EDITOR GABRIELLE GURLEY ART DIRECTOR MARY PARSONS MANAGING EDITOR JONATHAN GUYER ASSOCIATE EDITOR SUSANNA BEISER STAFF WRITER ALEXANDER SAMMON WRITING FELLOWS MARCIA BROWN, BRITTANY GIBSON EDITORIAL INTERNS DANIEL BOGUSLAW, TACY CRESSON, ISAAC SCHER, CLAIRE WANG CONTRIBUTING EDITORS MARCIA ANGELL, GABRIEL ARANA, DAVID BACON, JAMELLE BOUIE, HEATHER BOUSHEY, JONATHAN COHN, ANN CRITTENDEN, GARRETT EPPS, JEFF FAUX, MICHELLE GOLDBERG, GERSHOM GORENBERG, E.J. GRAFF, BOB HERBERT, ARLIE HOCHSCHILD, CHRISTOPHER JENCKS, JOHN B. JUDIS, RANDALL KENNEDY, BOB MOSER, KAREN PAGET, SARAH POSNER, JEDEDIAH PURDY, ROBERT D. PUTNAM, RICHARD ROTHSTEIN, ADELE M. STAN, DEBORAH A. STONE, MICHAEL TOMASKY, PAUL WALDMAN, SAM WANG, WILLIAM JULIUS WILSON, MATTHEW YGLESIAS, JULIAN ZELIZER PUBLISHER ELLEN J. MEANY COMPTROLLER ANNE BEECH COMMUNICATIONS SPECIALIST STEPHEN WHITESIDE BOARD OF DIRECTORS MEHRSA BARADARAN, DAAIYAH BILAL-THREATS, CHUCK COLLINS, DAVID DAYEN, SHANTI FRY, STANLEY B. GREENBERG, JACOB S. HACKER, AMY HANAUER, DERRICK JACKSON, ROBERT KUTTNER, ELLEN J. MEANY, MILES RAPOPORT, JANET SHENK, ADELE SIMMONS, GANESH SITARAMAN, WILLIAM SPRIGGS, PAUL STARR, MICHAEL STERN SUBSCRIPTION CUSTOMER SERVICE 1-888-MUST-READ (1-888-687-8732) SUBSCRIPTION RATES $19.95 (U.S.), $29.95 (CANADA), AND $34.95 (OTHER INTERNATIONAL) REPRINTS INFO@PROSPECT.ORG

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Prospects

How to Really End Shareholder Capitalism

BY HAROLD MEYERSON

T

he list of signatories to the Business Roundtable’s revised statement of corporate purpose—replacing its devotion to the primacy of shareholders with a new commitment to customers, employees, and communities as well—makes for some discombobulating reading. Here are the CEOs of American and United Airlines, companies that have reduced the experience of standard air travel to a scrunched, benumbed ordeal; of Boeing, whose inattention to safety took hundreds of lives; of Johnson & Johnson, whose sales of opioids took thousands of lives; of Comcast, whose regional cable monopolies routinely and inexplicably hike their prices; of Abbott, Allergan, and Pfizer, whose drug oligopoly makes Comcast look like a piker; and of ExxonMobil and Chevron, whose—well, you know.

Moving from concern for the planet to concern for their own employees, here’s the CEO of Amazon, next to whose un-air-conditioned warehouses ambulances were regularly stationed to whisk away workers passed out from heat exhaustion; and of Walmart, the company that responded to the efforts of meatcutters in one Texas store to join a union by shuttering the meat department in that store, in all of its Texas stores, and in all its stores in five nearby states.

CEOs have thrived under shareholder capitalism as never before.

A report this August from the Economic Policy Institute (EPI)— issued five days before the Business Roundtable’s pronunciamento— showed that CEO compensation has risen by 940 percent since 1978, a period that roughly coincides with

4 WWW.PROSPECT.ORG FALL 2019

the onset of conducting business to maximize shareholder value. During the same four decades, median worker compensation rose by a bare 12 percent.

The cognitive dissonance that arises from reading the Roundtable’s new affirmation of stakeholder capitalism and the list of corporations whose CEOs put their names to it, combined with the EPI report, makes one thing unmistakably clear: Stakeholder capitalism does not trickle down—nor has it ever trickled down—from CEOs and corporate boards, whose care and feeding depend on their control and pocketing of corporate resources. Stakeholder capitalism appears only when stakeholders force it on CEOs and their boards.

It happens when workers become so militant and have amassed enough power to take some of that power from their bosses; and when workers, consumers, and voters team up at the polls to compel the creation of a more egalitarian and democratic polity and economy.

IT MAY WELL BE THAT the Round-

table signatories have had it with some aspects of shareholder capitalism, but that the form of capitalism they truly pine for isn’t stakeholder, but managerial. That form of capitalism was first described by Gardiner Means and New Deal brain-truster Adolf Berle in their landmark 1932 book The Modern Corporation and Private Property. In it, they noted that the corporations then dominating the American landscape—corporations like Standard Oil, U.S. Steel, and General Electric—were no longer controlled by once-dominant owners like John

D. Rockefeller, Andrew Carnegie, or J.P. Morgan, but by corporate managers who had a good deal of autonomy when it came to investment and other business decisions.

The era of managerial capitalism extended from the 1920s, with the maturation of corporate structure and the professionalization of the managerial class, through the 1970s, when rising competition from German and Japanese imports and heightened inflation engendered by the rise in oil prices weakened profits, diminished managers’ standing, and helped create a more assertive generation of speculators posturing as market-perfecting shareholders.

From the junk bond dealers of the 1980s to today’s “activist investors,” CEOs have spent decades fending off or, more commonly, succumbing to shareholders threatening them, ultimately, with job loss unless they funneled more money to those persistent pests.

The signatories to the Roundtable’s statement may hope that doctrinally disavowing shareholder capitalism will somehow diminish the challenges to CEO suzerainty from private equity predators and such shakedown artists as Carl Icahn and Nelson Peltz.

But managerial capitalism and stakeholder capitalism are by no means the same thing. Both may have peaked in the decades after World War II, but they came together from different directions, with different aims, and produced distinctly different results.

Indeed, when Berle and Means described the several-decade rise of managerial capitalism in 1932, stakeholder capitalism had yet to be born. From the end of World

War I through the mid-1930s, the managerial capitalism of General Motors CEO Alfred P. Sloan and the top managers at such dominant companies as U.S. Steel and General Electric involved the forcible suppression of unions and the underpayment of their workers, who also received no benefits from their jobs and routinely faced arbitrary terminations.

It was only in response to the nationwide progressive uprising of the mid-1930s—from general strikes to the legalization of collective bargaining to factory seizures by organized workers—that the managerial capitalists were compelled to accept a diminution of managerial autonomy—that is, unions. Crucially, for a time, workers as stakeholders also had the support of the state.

During World War II, corporations involved in war production were effectively compelled to unionize, and were subjected to the wage and price supervision of government agencies consisting of public, managerial, and labor representatives.

When the war concluded, unions were at the peak of their power, and the most aggressive and powerful union—the United Auto Workers— took on the nation’s most powerful company (and largest employer), General Motors, in an effort to extend that tripartite control of wages and prices into the postwar era. UAW Vice President (and shortly to become President) Walter Reuther led a 113-day strike of hundreds of thousands of GM workers with the demand that the company “open its books” so that workers and the public could see how much GM could afford to raise wages without having to raise the prices of its cars.

Prospects

Managerial capitalists everywhere blanched at the prospect of having their key management decision—product pricing—made subject to public scrutiny and, perhaps, even control. Responding to unions’ power and popularity, however, President Harry Truman appointed a three-member commission (one of them Kansas State University President Milton Eisenhower—Ike’s brother), which calculated that the company could raise wages by an average of 19.5 cents a hour—real money in 1945—without raising prices. Not surprisingly, GM disputed that figure, though at the strike’s end, the UAW workers won something close to that: an hourly raise of 18.5 cents.

Nonetheless, GM had narrowly held the line on its managerial authority. The experience had been so searing, however, that in the subsequent GM contracts of 1948 and 1950, the UAW won not only substantial raises, but also company-provided pensions and health insurance, an annual cost-of-living increase, and a productivity benefit atop the contracts’ stipulated raises. The provisions in these contracts set the pattern for the entire auto industry, and many of those provisions became standard in other major corporations as well—not, however, without unions exercising their power to disrupt to win them. During the supposedly somnolent Eisenhower 1950s (Dwight this time, not brother Milton), America averaged roughly 300 major strikes every year.

That was stakeholder—definitely not managerial—capitalism. Compelled to confront that level of worker militancy and power on a regular basis, many managers became resigned to worker power as the price of doing business. “The job of management is to maintain an equitable and working balance among the claims of the various directly affected interest groups: stockholders, employees, customers, and the public at large,” said the chairman of Standard Oil of New Jersey (later renamed Exxon) in 1951.

The chief consequence of this

modus vivendi between capital and labor was broadly shared prosperity. During the three decades of postwar stakeholder capitalism, the real median income of American workers doubled, while the highest marginal tax rates of the immediate postwar years—topping 90 percent during the early 1950s—placed a weighty cap on CEO pay.

BY THE MID-SEVENTIES, however, the

assault on stakeholder capitalism was taking off. In 1970, Chicago economist Milton Friedman, in a disastrously influential essay for The New York Times, argued that the sole purpose of a corporation was to increase its profits. In 1976, Harvard economist Michael Jensen co-authored an equally damaging article with William Meckling, contending that corporate boards could and should ease the pain top managers might feel from losing power to major shareholders by scaling CEO pay to increases in share prices, thereby aligning CEOs’ (ballooning) fortunes with shareholders’. In time, this proved to be a happy harmonic convergence for everyone except the 99 percent—and the chief reason why the CEOs’ repudiation of shareholder capitalism may run no deeper than a couple millimeters.

The assault on the stakeholder postwar order went well beyond the doctrinal. In 1981, Ronald Reagan’s mass firing of striking air traffic controllers led to open season in the corporate sector on unions, while his proposed elimination of high taxes on the highest incomes, which Congress enacted, jump-started the renaissance of the American super-rich. In the same year, General Electric CEO Jack Welch proclaimed that his company would shed all but its most profitable divisions, a policy which benefited shareholders but also by 1985 had reduced the number of GE employees (in what previously had been regarded as lifetime jobs) by more than 100,000. In business schools, the business press, and boardrooms

and C-suites everywhere, Welch was acclaimed as the model CEO of the age. And one year later, Reagan’s Securities and Exchange Commission effectively removed the penalties for corporate leaders when they authorized the repurchase of their companies’ stock, even if they stood to gain (and how) from the process.

It’s now increasingly clear that maximizing shareholder value has led to minimizing everything else a corporation could and should do. Today, the dividend and share buybacks of our publicly traded corporations amount to roughly 100 percent of their after-tax profits; in 1972, they amounted to just 24 percent of profits. Under shareholder capitalism, both wages and investment have been starved.

A 2016 paper by Simcha Barkai of the University of Chicago’s Stigler Center found that the labor share of the national income declined by 6.7 percent between 1984 and 2014, while the amount corporations invested in new or expanded ventures also declined by 7.2 percent. The sum of those totals was redistributed to shareholders over those years, whose share of the national income rose by an almost corresponding 13.5 percent.

Similarly, a study earlier this year by economists Daniel Greenwald of MIT ’s Sloan School of Management, Martin Lettau of Berkeley, and Sydney Ludvigson of NYU attributed 92 percent of the rise in share prices between 1952 and 1988 to economic growth, but found that from 1989 through 2017, growth accounted for just 24 percent of the rise in the value of shares. More than half of that rise—54 percent— came from redirecting income away from employees.

This doesn’t validate Proudhon’s famous charge that “property is theft,” but it doesn’t invalidate it, either.

CLEARLY, WHAT MOVED Roundtable

Chair Jamie Dimon of JPMorgan Chase and his fellow CEOs to issue their statement was the avalanche of polls documenting the

growing disenchantment with them and with American capitalism generally, and the growing levels of support, particularly among the young, for unions and even socialism. The evident popularity of Bernie Sanders’s and Elizabeth Warren’s proposals for social democracy and stakeholder capitalism must have figured in as well.

If the CEOs want to demonstrate an actual commitment to stakeholder capitalism, there are some changes in the way they do business that could demonstrate good faith—changes that, in theory, the CEOs could institute by themselves or, that failing, lobby Congress to mandate. Herewith, a few stakeholder-ish suggestions: They could cease contractually forcing their employees and consumers to forgo the courts when they have a grievance, and to instead submit their grievances to company-backed arbitration. (EPI recently reported that in five years’ time, 80 percent of U.S. employees will be compelled by their employers to go to arbitration.)

They could cease opposing their employees’ efforts to unionize—or support a law to enable workers to unionize by signing union affiliation cards, and to require binding arbitration if the workers and bosses can’t agree on a contract.

They could support the proposals of Senators Tammy Baldwin and Elizabeth Warren to enable employees to elect at least onethird of the members of corporate boards, and proposals to grant shares, with voting rights, to employee organizations within every corporation.

Simply to enumerate such particulars of stakeholder capitalism as these, of course, is to make clear how inconceivable it is that the Roundtable signatories would actually move to a stakeholder model. As was the case in the 1930s, ’40s, and ’50s, it’s stakeholders, not CEOs, who create stakeholder capitalism—and only then by driving a stake through actually existing capitalism’s heart.

FALL 2019 THE AMERICAN PROSPECT 5

THE NEXT ADMINISTRATION: USING PRESIDENTIAL POWER FOR GOOD

TheDayOneAgenda

Laws already on the books give a president great discretionary power for constructive change— without abusing executive power.

BY DAV ID DAY EN I L L U S T R AT I O N S BY V I C TO R J U H A S Z

6 WWW.PROSPECT.ORG FALL 2019

THE DAY ONE AGENDA

P

resident Obama inspired a lot of progressive disappointment for often failing to live up to his lofty rhetoric. But a strain of liberal thought defended him by insisting that presidents just weren’t that powerful. Political scientist Brendan Nyhan mocked the mindset of the uninitiated by calling it the Green Lantern Theory of the Presidency, after the DC Comics hero who possessed a ring that gave him near-total power, bound only by his imagination and will.

To Nyhan, partisans hold the misguided notion that a president “can achieve any political or policy objective if only he tries hard enough or uses the right tactics.”

In reality, he argued, a strong legislature, a Supreme Court that can overturn laws, and the dynamics of a polarized age make policy accomplishments a difficult climb.

Theoretically speaking, this is all correct. A president has a thicket of checks and balances to maneuver through. But America has also been passing laws for over 232 years, and buried in the U.S. Code are the raw materials for fundamental change. It doesn’t take Green Lantern’s ring to unearth these possibilities, just a president willing to use the laws already passed to their fullest potential.

The Prospect has identified 30 meaningful executive actions, all derived from authority in specific statutes, which could be implemented on Day One by a new president. These would not be executive orders, much less abuses of authority, but strategic exercise of legitimate presidential power.

Without signing a single new law, the next president can lower prescription drug prices, cancel student debt, break up the big banks, give everybody who wants one a bank account, counteract the dominance of monopoly power, protect farmers from price discrimination and unfair dealing, force divestment from fossil fuel projects, close a slew of tax loopholes, hold crooked CEOs accountable, mandate reductions of greenhouse gas emissions, allow the effective legalization of marijuana, make it easier for 800,000 workers to join a union, and much, much more. We have compiled a series of essays to

explain precisely how, and under what authority, the next president can accomplish all this.

The need for a Day One agenda is particularly acute as we head into 2020. I keep sensing an undercurrent of despair when talking to liberal partisans about the election, a sigh that beating Trump is not enough but all that can be done. Yes, Democrats are only an even-money shot, at best, to flip the Senate. And yes, even if they succeed, Mitch “Grim Reaper” McConnell can obstruct the majority with the filibuster, and it would not be up to the next president, but the 50th senator ideologically, someone like Joe Manchin or Kyrsten Sinema, to agree to change the Senate rules to eliminate the 60-vote threshold for legislation. (There’s always budget reconciliation, but that limited path goes through the same conservaDems.)

But this reality does not have to inspire progressive anguish.

Anyone telling you that a Democratic victory next November would merely signal four years of endless gridlock hasn’t thought about the possibilities laid out in this issue. And if you doubt the opportunity for strong executive action, let me direct your attention to Donald Trump.

MAKE NO MISTAKE: Trump is an

autocrat, more than willing to break the law to realize his campaign promises. His invocation of inherent, extreme executive power, egged on chiefly by Attorney General William Barr, is in fact dangerous, as former Representative Brad Miller lays out for us later in this issue. Trump has asserted the right to ignore Congress’s oversight function, reinterpret laws

based on his own preferences, hide information from lawmakers and the public, promise pardons before illegal actions take place, appoint acting heads of federal agencies without advice and consent from the Senate, and raise the specter of emergency to follow through on his campaign promises.

But in a significant number of cases, Trump’s pathway has sprung from a simple proposition: When Congress gives the executive branch authority, the president, you know, can actually use it.

Trump’s health and human services secretary is employing the federal Food, Drug, and Cosmetic Act of 1938 to test the importation of lower-cost prescription drugs from Canada. His education secretary canceled student debt automatically for 25,000 disabled veterans, implementing part of the Higher Education Opportunity Act of 2008. His agriculture secretary is resurfacing the work requirements already present in the Supplemental Nutrition Assistance Program statute, to prevent states from waiving them.

We’ve similarly seen Trump apply Section 232 of the Trade Expansion Act of 1962 to impose tariffs on imports he deems present a risk to national security. He also used the Commodity Credit Corporation, established in 1933, to send billions of dollars to farmers, to protect them from the blowback from his own tariffs.

Even his most tyrannical action, transferring billions from the Defense Department to build sections of a wall along the Mexican border, had the backing of a federal law: The National Emergencies Act of 1976 allows limited circumstances for presidents to move around money, despite Congress

holding the purse strings. (It was such an emergency that he waited seven months to announce the second batch of funding shifts.)

Few of Trump’s ideas have been good policy, from a progressive perspective. Some, like the invocation of emergency powers, are a common tool of despots which never turns out well even when used by small-d democrats, from Lincoln’s suspension of habeas corpus to Roosevelt’s Japanese internment camps.

But Congress has routinely transferred its authority to the executive branch, putting arrow after arrow into a quiver that presidents now have in their arsenal. I despise radical “unitary executive” theories that misread the Constitution to presume an unassailable executive. But the president, by definition, carries out the laws.

Trump has been using it for ill. An effective Democratic president could use it for good.

THE U.S. GOVERNMENT is one of

the world’s largest purchasers of goods and services. This alone gives presidents widespread power to influence the economy by setting benchmarks for federal contractors to deliver high minimum wages, pay equity, safe workplaces, and shared prosperity. The government can even stop doing business with distasteful companies that rely on federal contracts, like the private-prison industry.

The government also manages giant swaths of public land, and can choose to open it up to development and fossil fuel production, or shut that down. And there are all sorts of statutory programs where presidents get to set the rules. When President Kennedy in 1962, after much prodding and delay, fulfilled a campaign promise to prohibit discrimination in federally aided housing, all it took was the proverbial “stroke of a pen.”

As Trump has repeatedly shown, in entire issue areas like foreign policy and immigration and global trade, the next president would have expansive authority, all granted by a plain reading of the Constitution,

FALL 2019 THE AMERICAN PROSPECT 7

specific congressional statute, or the legislative branch’s studied deference.

Who the next president chooses for the Federal Reserve Board will define the course of economic policy.

Presidents can make regulatory decisions like who qualifies for overtime pay. They can decide who serves as a worker’s employer, a critical determination for collective bargaining. They can choose whether corporations should still enjoy a “safe harbor” to facilitate stock buybacks that enrich investors at the expense of workers. They can’t bring forth Medicare for All, but they can use Section 1332 waivers from the Affordable Care Act to enable single-payer programs at the state level, and potentially use nearly $1 billion from the ACA’s Prevention and Public Health Fund to defray startup costs.

Once you start thinking about the possibilities, it’s hard to stop. Statutory language is sometimes clear and sometimes muddled, but regulatory discretion is almost always broad.

What a president chooses to emphasize, and how much the letter of the law can be bent to their preferences, makes a huge difference.

Executive orders are a poor substitute for the authorities already existing in statutory language. It’s nice that Democratic primary candidates have been talking about executive orders, such as Kamala Harris’s proposed actions to mitigate gun violence, or Beto O’Rourke’s ideas on immigration.

Some executive orders will make a huge difference in people’s lives, like Harris’s, Amy Klobuchar’s, and Cory Booker’s plans for clemency boards and mass commutations for low-level federal drug offenders. (Joe Biden’s plan along these lines, predictably, is far narrower.)

But there’s no substitute for authority from Congress. And in a surprising number of cases, presidents already have it. They don’t have to rummage for a few votes for financial reform; the architecture of existing law allows them to reform already. They don’t have to muster courage from swing-seat representatives to fight big corporations and tax the rich; the Federal Trade Commission and the IRS can get us there.

Public momentum can keep these rules in place, as advances for the

8 WWW.PROSPECT.ORG FALL 2019

The Prospect has identified 30 meaningful executive actions, all derived from authority in specific statutes, which could be implemented on Day One by a new president.

American people tend to stick around.

For instance, when you cancel publicly held student debt, as the education secretary has the authority to do under the “compromise and settlement” provision of the Higher Education Act, it’s difficult to un-cancel it. When you license out excessively priced prescription drugs to generic competitors, as the government can do under the Bayh-Dole Act of 1980 or Section 1498 of the federal code, it’ll be difficult to un-license it, and shoot drug prices back up again.

And aggressive executive action can spur legislative action. Congress doesn’t particularly like governing, but they hate being circumvented.

Presidents making known their intentions to use existing statutes to solve problems can lead to lawmakers finally getting around to it themselves.

IT TOOK BARACK OBAMA roughly six

years to make executive action a priority, after attempts to woo Republicans in Congress were fully exhausted. Finally, he famously said, “I’ve got a pen and I’ve got a phone.” It’s important that presidential hopefuls think about what they can do that Mitch McConnell cannot mess with right from the jump.

But the substance of those actions matters as well. If you want to fully understand the differences between the candidates, you can ditch the uninformative debates and simply ask what executive actions they plan to take.

Making this reality will take an understanding of the administrative state that Democrats have paid scant attention to in the past. It will take nominating personnel throughout the executive branch with the imagination and creativity to scour the statutes and recognize opportunities to act. And most important, it will take a commitment to wielding power.

There’s a difference between control and power. Democrats like to take control; doing something useful while in control has been a different proposition. Barack Obama had to be browbeaten into protecting Dreamers with DACA , or showing his support for same-sex marriage. Too many Democrats still live in a perpetual defensive crouch, afraid to make policy for fear that somebody might not like it. They

crave approval rather than progress.

This gets the structure of modern politics completely wrong. We have had successive wave elections practically every year since 2006, because voters are desperate for politicians to help them with their increasingly precarious economic situations, and politicians keep failing to come up with robust solutions. These wild electoral swings will not end without tangible steps to wield power. On certain issues, Trump has taken action, only on the very unpopular priorities of a xenophobic base. To restore a lasting political coalition, Democrats must take action of their own, to improve people’s lives.

We need not fear executive power, as long as it promotes the general welfare.

This will certainly inspire criticism.

Even Obama’s relatively incremental moves inspired conservative shouts about a socialist tyrant. Of course, these cries will come from the same corners that sat mute throughout the Trump presidency. (To be fair, all parties exhibit situational ethics when it comes to executive power.) Democrats must be willing to ignore these crocodile tears, and hit back with one simple sentiment: “I’m not disrupting the constitutional order; I’m carrying out duly passed laws. I’m doing my job.”

The Prospect has assembled a team of journalists and subject matter experts to identify numerous core areas where executive authority is available and warranted. We hope this can serve as a guide for how change can happen starting in 2021, regardless of who runs Congress. We also look at whether the Supreme Court can act to overturn these efforts through its own radical constitutional reinterpretations. While the threat of the Roberts Court nullifying good policy exists, that cannot become an excuse for inaction.

Finally, we asked every major Democratic presidential candidate—19 as of press time—whether they would commit to any or all of these 30 executive power actions. To their credit, some had already announced their intentions to do so. You will see these answers throughout this package, revealing the candidates’ commitment to act the way the founders envisioned presidents to act: taking care that the laws be faithfully executed.

THE DAY ONE AGENDA

Cancel Student Debt— Almost All of It

IN HIS PAPER AND in our inter-

An obscure, decades-old provision called “compromise and settlement” authority could allow the Department of Education to opt out of collecting trillions in debt.

BY M A RC I A BRO W N

R

ight now, more than 44 million Americans hold nearly $1.6 trillion in student debt, and this debt is ruining lives. It prevents people from buying a house or car, getting married, and starting a family. To activists, it’s a policy failure.

“The idea of making individuals and families pay out of pocket for something that’s a right and public good is wrong,” says Ann Larson, co-founder of the Debt Collective, an organization that advocates for student debt cancellation.

Both Elizabeth Warren and Bernie Sanders have boldly called for student debt to be forgiven, giving students financial freedom and allowing a reset for the tragic way we finance higher education.

Clearly, such a plan would run into resistance from Mitch McConnell and Republicans in Congress, and perhaps even some Democrats. But Warren and Sanders don’t need Congress to cancel at least 95 percent of all outstanding student debt.

The answer, according to Luke Herrine, a Ph.D. student in law at Yale, lies with an obscure statute dating back to the Eisenhower presidency known as “compromise and settlement” authority.

This authority was granted to the Department of Education first in 1958 and then codified further in the Higher Education Act of 1965.

Herrine, who recently finished a public draft of a paper on the subject, explained in an interview that compromise and settlement operates similarly to the concept of prosecutorial discretion, a “whole line of jurisprudence” that “is not really something the

courts can question.” For example, if someone hits your car, you have standing to sue. But there’s nothing that says you must sue.

Similarly, the Department of Education can just decide not to collect on student loans.

Compromise and settlement gives the Education Department this explicit authority. Herrine writes: “ED has absolute discretion to determine when to stop collections, when to collect less than the full amount, and when to release debtors’ claims in toto.”

This power has grown in potential scope over time. In 2010, President Obama signed the Student Aid and Fiscal Responsibility Act, a bill ushered in as part of the Obamacare law. SAFRA

eliminated middleman banks that issued student loans with a government guarantee, instead creating new lines of credit for students directly from the Department of Education. This meant that after 2010, virtually all student loans became public loans. Today, the government is responsible for $1.5 trillion of the $1.6 trillion in student debt. And these loans are the easiest to cancel through compromise and settlement: The government can simply opt out of collecting on them. (The few privately collected student loans still out there would be more difficult to deal with; Herrine writes that the Department of Education “would have to use its powers creatively to obtain possession.”)

views, Herrine explains that much of this thinking dates back to a Supreme Court case. In Heckler v.

Chaney (1985), several inmates on death row argued that the drugs that would be used to kill them were not approved by the FDA for that purpose, and therefore the drugs’ manufacturers violated the Federal Food, Drug, and Cosmetic Act. But the FDA declined to enforce the act in this case.

This upheld an important precedent: An agency’s actions are presumptively unreviewable by the court when it comes to refusing to exercise enforcement. For the student debt case, Herrine argues, this precedent means that a court may view any decision to settle or cancel debt as similarly unreviewable.

“I think there’s a real question about who the fuck would sue and what would their suit be?” Herrine says. It would be hard for someone to show that they had been harmed by a decision not to collect on student loans, and therefore hard to show that they have standing in court. The most likely possibility would be a private servicer whose job it is to collect on student

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loans because, with the government declining to collect on them, they’re out of a job. But even so, Heckler v.

Chaney seems to indicate that this is just not reviewable by the courts.

That’s not to say there won’t be roadblocks. The scale of the debt forgiveness might require sign-off by the attorney general. If the debt is considered revenue to the federal government, the Office of Management and Budget would similarly have to approve a large, long-term loss. And finally, the next president would need to make sure that the debt forgiveness isn’t taxed, given that cancellation of debt is considered a form of earnings. “That would turn debt to the Department of Education into debt to the IRS, [with] no repayment plan, just liens on the house,” Herrine says. But the next president could surmount all of these hurdles, should he or she instruct the agencies accordingly.

To pull this off, a president would need strong convictions amid what would surely be howls of protest from deficit hawks, says Elizabeth Popp Berman, sociology professor at the University of Michigan. “I can’t think of another example where an executive agency has made a budgetary decision on the scale of the amount of money involved with a widespread debt cancellation.”

CANCELING STUDENT debt is no new

idea. The Department of Education already uses a bevy of programs to alleviate debt for certain populations.

There’s a program to discharge the debt of permanently disabled veterans, a program that reduces interest rates to zero for service members deployed to a combat zone, and a program to cancel loans that were fraudulently issued, like for worthless diplomas from predatory for-profit colleges.

There’s also the Public Service Loan Forgiveness Program. It forgives the remaining balance on direct loans for public servants—including public employees, teachers, and nonprofit workers, equaling roughly one-third of all Americans—after they’ve made monthly payments for 10 years.

The Trump administration has looked coolly on many of these programs. In the past year, over 54,000 requests for Public Service Loan

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Today the government is responsible for $1.5 trillion of the $1.6 trillion in student debt. And the government can simply opt out of collecting on those loans.

Forgiveness were processed and just 661 were granted relief. But Trump did just recently speed the cancellation of debt for 25,000 disabled veterans, under the Higher Education Opportunity Act of 2008, after criticism that the vets weren’t getting the relief they were owed.

In other words, the conservative idea that canceling debt is immoral— students made these choices, after all—holds no water. We cancel debt for students all the time. The difference is that compromise and settlement would completely alter the current student debt ecosystem.

The issue of student debt cancellation reached its highest pitch after revelations about the for-profit college sector.

These companies used deceptive marketing promising students job placement for technical training that never materialized, inducing them to borrow heavily to enroll. The same recruiting tactics are applied to forcing students to stay enrolled so that they keep taking out loans. In the end, students were largely unable to make more than they had before going to college—and now they owe thousands in debt.

Two lawyers for the National Consumer Law Center, Robyn Smith and

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No Democratic presidential candidate has promised to cancel student debt unilaterally, under compromise and settlement authority. ANDREW YANG has promised a “Bailout for the People,” which would partially forgive student loans for recent graduates. But he presents no mechanism for this forgiveness. Only two candidates, BERNIE SANDERS and ELIZABETH WARREN , have proposed substantial student debt cancellation (in Sanders’s case, canceling all of it; for Warren, canceling about 95 percent). Warren said in a statement to the Prospect that she was “still looking into the extent of legal authority” under compromise and settlement. The Sanders campaign cited his legislation as the primary option. But “if Congress refuses to act on this issue,” the campaign wrote, “Bernie will explore other available avenues to relieve existing student debt.”

At a town hall in New Hampshire, TOM STEYER expressed interest in canceling student debt, but said, “It’s going to take breaking the corporate stranglehold on democracy to get there.” He’s wrong: It’ll just take a determined president.

LIGHT

Deanne Loonin, first identified compromise and settlement authority as a way to cancel for-profit debt in the spring of 2015, in a letter they wrote to the Obama Department of Education.

But the department resisted the idea.

Herrine picked up on Smith and Loonin’s suggestion, as one of many student activists who banded together to defend for-profit college students from having to pay fraudulent debts. The activist work—which included a debt strike—refined their thinking about the essential unfairness of the higher-education finance system. One of the activists, Thomas Gokey, still carries about $37,000 in debt. “The value of education was drilled into me as a kid,” Gokey told me. “You should sacrifice anything else for it with the idea that there’s some economic mobility with it. I believed all of that. I no longer do but I still believe in education.”

In interviews, several people told me that the Education Department feared that using compromise and settlement to cancel broad swaths of debt for defrauded students would be an implicit admission of its failure—over decades—to ensure sufficient oversight of for-profit colleges. Robyn Smith rejects that line of thinking. “The federal government isn’t there to just make money,” she says. “They’ve got to grant relief when they fail to do their job.”

Or maybe the department officials wanted to keep their career options open. One of then-Education Secretary Arne Duncan’s deputies now works for the company that owns the for-profit University of Phoenix, and another works for a for-profit company that sells online technology to colleges.

USING COMPROMISE and settlement

authority would be transformative.

First, it would help end abuse by student loan servicers, which have been repeatedly cited in lawsuits for failing to identify alternative payment options for students and squeezing them for unnecessary payments and extra fees.

It would also have powerful macroeconomic effects. The Federal Reserve has released numerous papers indicating that runaway student debt has hampered the housing market. A student who doesn’t come out of college

THE DAY ONE AGENDA

with a mortgage, in the form of loan debt, is more likely to purchase a home or a car, and that money cycles through the economy. A Levy Economics Institute paper even makes the case that canceling debt is affordable, because of the positive economic effects. The paper estimates that canceling student debt could increase gross domestic product by $86 billion to $108 billion per year, which offsets the effect on the deficit. It would also reduce unemployment, creating at its peak 1.2 million to 1.5 million jobs annually.

Some of the biggest beneficiaries of student loan forgiveness would be working-class people who often don’t land high-paying jobs or inherit wealth, and thus have little cushion to pay off mammoth loans. Black borrowers in particular struggle to pay off their student debt due to the historic racial wealth gap. Leaving them saddled with it only compounds this inequity. While some have criticized student debt cancellation as not doing much in the way of wealth redistribution, the benefits to students of color and those who happen to be poor would be life-changing.

Canceling student debt doesn’t solve the whole problem. If colleges remain as expensive as they are now, debt will continue accruing. But cancellation could force a conversation about a better way to finance higher education, one that doesn’t inevitably result in a $1.6 trillion debt burden on people who are just starting their working lives. We’re already seeing that conversation begin.

“I think it’s been kind of amazing of what’s happened over the last four months or so that all of a sudden that debt cancellation has gone into being one of these fringe-y ideas to something that’s seriously being debated

by Democratic presidential candidates,” says Berman. As Herrine says, a president who wants to forgive student debt doesn’t need to do anything except appoint the right person as education secretary.

“The fact that we are not helping these people really reflects badly on who we are and our leadership,” says NCLC ’s Smith. “You can look at a country and see what kind of country it is by seeing how it treats poor people.”

Aggressively Address the Climate Crisis

Existing laws give the executive branch the power to transform the energy sector.

BY BEN A DL E R

W

hen he first ran for president, Barack Obama did not set forth an executiveaction agenda on the environment. The centerpiece of his green agenda was to pass a law creating a cap-and-trade system to regulate climate pollution—a law that would explicitly have given up the Environmental Protection Agency’s authority to regulate carbon dioxide emissions under the Clean Air Act. But Obama learned the hard way, via the collapse of Senate negotiations over cap-andtrade, that Republicans could not be induced to pass climate legislation.

After some dithering, Obama turned in his second term to using the executive branch’s full authority to combat climate change.

Democratic presidential candidates are currently campaigning on ambitious climate legislation such as the Green New Deal, but they should know from Obama’s experience that the real environmental action in their prospective administration could come through regulatory and diplomatic actions taken under existing legal authority—and would have to if the Republicans keep control of the Senate. Luckily for them, there is a lot that can be done, thanks to some broad powers created decades ago.

Here are the five primary ways in which the next pro-environment president can mitigate climate change through executive actions: International diplomacy. The next president’s first test on climate change may come before they even take office, because the next major round of global climate negotiations is set for mid-November 2020, right after the presidential election. Since the United States only accounts for 15 percent of global greenhouse gas

emissions, forging an ambitious global agreement for concerted international action to cut greenhouse emissions will be essential to averting catastrophic climate change. In 2015, then-President Barack Obama played a leading role in negotiating the Paris Agreement, setting it up with bilateral announcements of intent with previously recalcitrant large developing nations, including China, Brazil, and India. The national pledges made in Paris would not lower emissions fast enough to stay below the widely shared goal of less than two degrees Celsius of warming over pre-industrial levels.

The environmentally concerned signatories hoped, however, that nations would return every five years to make increasingly bold commitments, once the political framework had proved workable and technological advances eased the path economically.

President Donald Trump withdrew the United States from the agreement, and his administration certainly won’t be working toward a stronger deal in 2020. Before the next chief executive has even taken office, a Democratic president-elect would want to persuade other nations that the United States will be rejoining the international community, meeting its original emissions targets for the 2020–2025 period that it committed to in Paris, and starting to develop the more advanced emissions targets for the 2025–2030 period that the next agreement will likely cover. Then, a suite of domestic policies governing everything from energy and transportation to public lands management will have to be developed to ensure the United States will be able to actually meet those goals. This will take months and years, but doing it as soon as possible will be essential to

FALL 2019 THE AMERICAN PROSPECT 11

assuring the rest of the world that the U.S., the world’s largest economy— which is responsible for more than 25 percent of cumulative emissions—will be playing its part. “There will be a need to publicly affirm and go beyond the U.S.’s commitment to Paris and put together a comprehensive plan to fulfill its emissions reductions pledges,” says John Coequyt, the Sierra Club’s global climate policy director, “and that’s going to take some time.”

The Clean Air Act. Obama’s signature domestic climate policy was the Clean Power Plan, an EPA regulation limiting carbon emissions from power plants under Clean Air Act authority. The plan has been revoked by the Trump administration and replaced with a rule requiring much smaller cuts to carbon emissions from electric utilities. Reinstating the Clean Power rule will be among the next pro-environment president’s top priorities.

But the ongoing decline of coal in favor of natural gas and renewable sources such as wind and solar has eclipsed the goals that the Obama administration originally laid out. The Clean Power Plan aimed to reduce power plant emissions by 32 percent from 2005 levels by 2030. As an Environmental Defense Fund blog post noted in June, “In 2015, when the Clean Power Plan was finalized, the Energy Information Administration (EIA) projected baseline power sector carbon dioxide pollution would drop 10% from 2005 levels by 2030. Based on recent trends and technological developments, however, EIA’s most recent projections estimate that power sector carbon pollution would be at 34% below 2005 levels by 2030—surpassing Clean Power Plan targets—even without federal climate regulation.”

So, beyond merely returning to the Obama-era benchmarks, which many utilities can now meet without any extra effort, the next administration could go further and increase the rule’s ambition. “I think the 2015 Clean Power Plan was aiming to go farther than gas and renewable trends were heading for at that time, but the trends have picked up,” says David Doniger, senior strategic director of the Natural Resources Defense Council’s Climate and Clean

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The next president’s first test on climate change may come before they even take office.

Energy Program. “Now, business-asusual trends are the same as the Clean Power Plan required. A responsible administration would have said, ‘It’s time to strengthen the CPP and go farther.’” Trump didn’t do that, of course, but his successor could.

Public lands management. The scale of land controlled by the federal government, especially in the Western states, is massive—and so too is the amount of coal mining and oil and gas drilling that occurs on public land.

The executive branch has wide latitude

under the law to decide how best to manage federal land and waters. In November 2018, the U.S. Geological Survey reported that nearly one-quarter of the country’s carbon emissions emanate from fossil fuel extracted on public lands. As of 2016, 41 percent of American coal was mined on federal leases. Fossil fuel extraction on federal land—especially coal—is being subsidized by the American taxpayer. A January 2015 Headwaters Economics report found that “as a result of loopholes and subsidies, coal companies

THE DAY ONE AGENDA

end up paying just an effective royalty rate of 4.9 percent—well below the 12.5 percent rate required by law.”

A lack of transparency and competition leads to leases being sold for below-market rates. In January 2016, then-Interior Secretary Sally Jewell announced a moratorium on coal leasing while the program was reviewed. Two months after taking office, Trump reversed that policy and re-opened the public lands for private profiteering from coal.

During the 2016 presidential primaries, pressure from Senator Bernie Sanders and environmental activists forced Hillary Clinton to embrace phasing out fossil fuel leasing on public lands and oppose drilling off the Atlantic Coast. That has since become the common position of the pro-environment 2020 presidential candidates. All ten candidates who participated in CNN’s climate change town hall in September proposed an end to new leases for fossil fuel extraction offshore and on federal land.

Presumably, any of them would use their authority to adopt such a policy, although it would undoubtedly trigger legal challenges from fossil fuel companies and the states such as Wyoming that are most dependent on federal fossil fuel leasing. Even a more moderate president could have the Department of the Interior factor the social cost of climate pollution into its decisions about what to lease and how much to charge for it, which could eliminate the subsidy for fossil fuel development on public land and greatly reduce how much is extracted.

Another aspect of public land management that may become an important front in the war on climate change is bolstering areas that can absorb carbon pollution, such as national forests. That may mean changes to logging policies, for instance, or wetlands restoration. “One of the big differences between Obama’s Climate Action Plan and what’s likely to come from the next administration is that the next administration is going to focus a lot more on carbon sinks,” Coequyt suggested. “That could include [research and development] for carbon sequestration, but more likely a

government-wide effort looking at what can be done to make America more resilient and [better able to] absorb carbon in fields and in forests.”

All ten candidates participating in CNN’s climate change town hall proposed an end to new leases for fossil fuel extraction on federal land.

Clamping down on methane leakage. Natural gas is supposedly a

cleaner alternative to coal, as it creates half the level of carbon emissions when burned. Thus, the fracking boom in domestic oil and gas extraction has been hailed as an environmentally friendly way to replace coal-burning power plants with ones that run on natural gas. But numerous independent studies have found that some of that gas is released during the drilling and piping processes in fracking operations. Since unburned natural gas is mostly methane, a potent greenhouse gas, its escape into the atmosphere may moot the climate advantage of gas over coal. As Bloomberg News recently noted, “Although methane accounts for roughly 10% of U.S. greenhouse gas emissions, it’s been blamed for up to a quarter of the planet’s warming as it has more than 84 times the heat-trapping potential of carbon dioxide the first two decades after entering the atmosphere.”

The Obama administration

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Virtually every major candidate has introduced plans to mitigate the climate crisis. Most of the plans involve legislation, but many use presidential authority as well. Candidates have promised to implement new methane limitations (almost everyone, though O’Rourke, Warren, and Sanders add other pollutants), strengthen Clean Air Act rules (O’Rourke, Yang, Sanders, Castro), bulk up fuel economy and energy efficiency standards (Sanders, O’Rourke), and institute a “buy clean” program for government procurement (Steyer, O’Rourke, Castro, Klobuchar, Yang).

ELIZABETH WARREN has proposed to have the Securities and Exchange Commission direct all public companies to disclose the risk to their business from unchecked climate pollution.

But the point of convergence for the entire field involves placing a moratorium on fossil fuel extraction on public lands.

Every candidate who participated in CNN ’s climate town hall in September supported the moratorium. Barack Obama’s administration issued thousands of leases and permits on public lands to oil and gas producers, increasing oil production by 60 percent over the last year of George W. Bush’s term. Times have changed.

LIGHT

developed rules to require best practices for preventing fugitive gas emissions, such as quickly finding and patching leaks on public land and—again using the Clean Air Act—in new wells on private land.

(The law requires that rules on new sources must precede those for existing sources, and Obama never got to the latter, much to the dismay of many environmentalists.)

Trump’s EPA has already loosened the requirements on new wells and wells on public lands, and over the summer, it proposed largely revoking methane regulation on private land.

That, of course, may be tied up in court when the next president takes office.

In any event, the next president could reinstate Obama’s methane regulations and go a step further by regulating existing infrastructure—including the aging and often leaky wells and pipelines that are responsible for the vast majority of methane leakage.

Conventional pollution regulations. Climate change is not the only

social cost for which the coal industry has successfully stuck the American public with the bill. Mining and burning coal creates a number of harmful pollutants that are subject to federal regulation, such as sulfur dioxide, ozone, mercury, and coal ash. Tightening these regulations would limit the prevalence of coal mining and burning and raise the cost of those activities, accelerating their demise. The Trump administration, of course, has gone in the other direction, for example, by weakening a 2014 coal ash regulation.

“The transition away from coal is being undermined by unwillingness at EPA to strictly enforce the Clean Air Act,” says Coequyt. “If you strictly enforce the Clean Air Act on conventional pollution, it would help us with climate as well.”

So the next president will have plenty of opportunities to make the coal industry pay its own way. But that’s only part of what the next president will have to do to make up for lost time under Trump.

Ben Adler is a senior editor at City & State NY. He has written about environmental policy for The Washington Post, The Guardian, Reuters, and The New Republic.

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Force Drug Companies to Lower Prices

Presidents have two powerful sticks that could weaken the pharmaceutical industry’s power to rake in astronomical profits.

BY N ATA L I E SH U R E

I

n late September 2001, with Americans still reeling after the deadliest terrorist attacks in U.S. history, yet another frightening episode rapidly unfolded. A string of letters addressed in childlike block script began arriving at various media and congressional offices, each laced with deadly anthrax spores.

Once the envelopes were opened, the powdered pathogen could be dispersed by air and inhaled by recipients and bystanders, causing severe respiratory illness.

In the following weeks, 22 people were infected by anthrax sent through the mail, including the infant son of one ABC producer who’d brought his new baby into the office to meet his colleagues. As illnesses mounted, national-security officials reportedly grew concerned that anthrax could be deployed maliciously on a larger scale. As a prophylactic measure, the Bush administration decided to stockpile a few million units of Cipro—a drug that reversed the progress of anthrax poisoning and kept exposed individuals from getting too sick.

But there was a problem. Cipro was manufactured by Bayer, which had held a patent on it since 1987. That put the company in a position to extort the federal government by charging exorbitant prices to churn out the 100 million pills it wished to buy. With negotiations nearing a standstill, thenSecretary of Health and Human Services Tommy Thompson took an unusual step: He threatened to override Bayer’s exclusivity rights, and license the drug to a generics manufacturer instead. Bayer folded, agreeing to sell the pills

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for less than a dollar apiece.

The feared citywide anthrax attacks thankfully never materialized, but the event remains an important episode in a certain corner of intellectual-property law. It was the only time in modern history that a federal official declared an intention to use Section 1498 of the federal code—the so-called “eminent domain for patents”—to lower the price of a necessary drug. Eighteen years later, experts increasingly see 1498 (along with “march-in” rights through the Bayh-Dole Act of 1980) as potential sticks with which to whack the pharmaceutical industry. If invoked by a president, they could be powerful, if limited, tools for reining in drug costs without the cooperation of a hamstrung Congress.

The promise of wielding either 1498 or march-in rights lies in the patent system’s role in drug-pricing dynamics. A firm can secure patents on effective molecular compounds that guarantee them a years-long period of market exclusivity, ostensibly to incentivize the risk of researching and developing new drugs. Because the United States lacks the coherent regulation that keeps pharmaceutical prices down in peer countries, the monopoly conferred by drug patents essentially grants unlimited, unilateral pricing power to manufacturers. As you may suspect, firms set the prices of patented drugs unconscionably high, and only after the period of exclusivity ends can generics manufacturers compete against them to eventually make the treatments more affordable.

But if patent law has facilitated soaring costs for life-saving

drugs, it’s not exactly immutable.

Section 1498 “exists as the sort of ‘eminent domain equivalent’ in intellectual-property law,” explained Dr. Aaron Kesselheim of Harvard Medical School, who co-authored a law review article on the topic. “It presents an opportunity for the government to step in and say, ‘We’ve tried negotiating, we’ve tried leaving it up to the market, and you guys are pricing it at too high a level, and it’s causing a sort of national crisis’ …

I think that it would provide a sort of safety net if the current systems aren’t able to get to a point where essential medicine is available to those who need it.”

The 2001 Cipro incident, Kesselheim said, presents a fairly straightforward example of how even the specter of 1498 can act as leverage to lower prices. In more extreme situations where a firm refuses to play ball, the government can license the drug to enough generics manufacturers and pay appropriate damages to the original firm to offset lost profits. That last part, Kesselheim insists, is key: “You’re not just taking intellectual property and running away with it,” he emphasized.

“You’re providing a reasonable royalty for it.” That’s consistent with eminent domain’s requirement for “just compensation” for whoever’s property the government takes.

While Section 1498 has been on the books since 1910 and has been used repeatedly to procure items for military purposes, like nightvision goggles and lead-free bullets, it’s only rarely been used in a pharmaceutical context (including a number of times in the 1950s and 1960s that predated the advent

of a standardized generic-drug industry). But in recent years, ballooning costs have triggered genuine public-health crises that have renewed interest in the measure.

If wielded by a confrontational chief executive, it could weaken the unchecked industry power that allows pharmaceutical firms to rake in such astronomical profits.

For Kesselheim, it seems obvious that the reason Section 1498 has remained taboo boils down to pharmaceutical lobbying and industry power, as well as a potentially valid concern with driving away investment in the sector and reducing its motivation to bring drugs to market.

This being the case, he and other experts I spoke to stressed that it ought to be used sparingly, and not as an indiscriminate cudgel.

One example of circumstances that could reasonably lead a sympathetic president to trigger 1498 played out in Louisiana in 2017. The state faced one of the worst hepatitis C epidemics in the country, but the estimated $85,000 per-patient cost Gilead Sciences charged for their cure for the disease made treating all 35,000 of the state’s infected uninsured and Medicaid recipients prohibitive. Dr. Rebekah Gee, secretary of the state Department of Health, helped launch an inquiry into the use of 1498 as a potential tool to bring such treatment within the confines of state health care budgets. Dr. Joshua Sharfstein of Johns Hopkins led the investigation, and assessed the situation to be a very strong contender for using the statute.

“Initially, we started talking about it as a cost issue, and then took a step back and said, ‘This is about solving a public-health problem,’” he recounted. After all, hepatitis C is an infectious disease, and treating it serves the interests of both patients and the broader public. “So it was a very strong public-health rationale, not just to treat more people but reducing the spread substantially,” he said. “I think people understand intuitively why the government would want to protect people from a major

THE DAY ONE AGENDA

public-health threat, and then the question becomes, what are the tools at the state’s disposal to be successful in doing that?”

Once Sharfstein and his team advised Gee to go forward in her pursual of 1498, Gilead struck a deal with the state of Louisiana that offered the hepatitis C drugs on a fixed subscription basis for five years. While Sharfstein couldn’t say whether the publicized inquiry had anything to do with it, “by raising the specter of 1498, Dr. Gee showed people she was really caring about solving the problem— she wasn’t just trying to negotiate a slightly lower price.” In other words, her move had served to assure Gilead that the state was committed to buy at a volume that made the eventual subscription deal worthwhile. That’s what gives Section 1498 its power: Even the occasional suggestion of its use can keep drug companies in line.

Notably, Louisiana’s experience was preceded by the unsuccessful attempt to use another tool to reduce the price of a different hepatitis C treatment.

The Bayh-Dole Act of 1980 awards private entities patents to commercialize publicly funded research, and it helped lead to the privatized, high-profit U.S. drug industry. But Bayh-Dole included a caveat—the government enjoys the right to “march in” and take back any patent whose fruits have not been made sufficiently accessible to the public on “reasonable terms.”

While so-called “march-in rights” are generations younger than 1498, they’ve never been successfully used for drugs. A coalition of public-interest groups asked the National Institutes CANDIDATE

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LIGHT

So-called “eminent domain for patents” or “march-in rights” could be powerful tools for reining in drug costs without the cooperation of a hamstrung Congress.

KAMALA HARRIS and BERNIE SANDERS have both

publicly endorsed using “march-in” rights to commandeer the patents of prescription drugs not offered under reasonable terms, and license them to competitors. ELIZABETH WARREN and BETO O’ROURKE vowed to do the same in statements to the Prospect. Harris, Sanders, and O’Rourke have also endorsed using Section 1498, the “eminent domain for patents” authority, which could potentially affect more medications than march-in rights. CORY BOOKER does vow to “take patents away” from drug companies that sell medications at lower rates abroad, but he doesn’t specify a mechanism.

of Health to overturn AbbVie’s hepatitis C treatment patent in 2013, citing reasons similar to those that Sharf­ stein outlined years later, but the NIH declined, arguing that cost was an insufficient justification for doing so.

In other words, the NIH contended the drugs were indeed available on “reasonable terms,” despite the fact that only 15 percent of hepatitis C patients nationwide have actually received treatment largely due to staggering costs.

“It’s crazy that it’s this paper tiger that’s never really been used,” said Jay Thomas of Georgetown Law, who wrote an analysis of march-in rights for the Congressional Research Service. “It’s just kind of sitting there moribund.” As Thomas outlined, while Section 1498 applies to any patented drug, march-in rights apply only to patents born directly out of publicly funded research. This translates into around 25 percent of important medicines, Dr. Arti Rai of Duke Law told me by phone. March-in rights also pose serious timing obstacles, since the government could only license the drug in question for manufacture after the end of a potentially years-long appeals process.

Still, Thomas believes, breaking precedent and using march-in rights could spook drug companies into better practices: “It would be something good to use once,” he said, “because then the next time the VA says, ‘We’d like to pay this much per pill,’ the drug company will go, ‘OK! Because otherwise, we’ll get marched in!’”

In this sense, march-in rights could have relevance far beyond the drug being marched in, creating a stick to force better pricing practices across the industry. It would require an NIH director ideologically committed to the idea that excessive prices prevent drugs from being distributed on “reasonable terms,” and there has been substantial controversy over this point.

As Rai tells it, the fact that marchin has never been used undermines the premise of Bayh-Dole itself. “It was supposed to be in the public interest,” Rai said. “It was certainly a part of why Bayh-Dole got passed, so the commercialization was balanced by public interest … march-in is part and parcel of Bayh-Dole, and the fact that

it hasn’t been used is problematic from my perspective.”

However, Rai noted, a growing category of drugs is practically impervious to the levers of 1498 and march-in rights, even if a motivated president did decide to use them. While standard drug compounds can be easily licensed and manufactured as generics, the same doesn’t necessarily apply to biologic drugs. So far, these highly expensive drugs make up only a small but increasing portion of the pharmaceutical industry, but can’t be easily licensed because their manufacturing process is often too difficult to devise without trade secrets—something 1498 and march-in can’t easily force a firm to divulge. Moreover, high prices for treatments like insulin and EpiPen are driven by patents on delivery devices rather than the drug itself, complicating the legal calculus for breaking them.

Ultimately, as efforts to facilitate affordable treatments of anthrax and hepatitis C suggest, having march-in rights and 1498 on the table could do much to restore government power relative to the pharmaceutical industry, empowering it to act on patients’ behalf. Bernie Sanders has indicated a willingness to invoke both means for years, and Kamala Harris has signified an openness to doing so as well. Meanwhile, better regulation of Big Pharma could make pricing less dependent on the unilateral whims of a patent holder, and greater public funding for R&D and clinical trials could undermine the industry’s argument that its eye-popping prices are necessary. This would make the development, testing, and provision of life-saving drugs more democratically accountable.

In the absence of systemic overhauls, Jay Thomas has other ideas.

“Maybe we have to get antitrust authorities in,” he opined. “[These companies] are very coddled. Right now, they’re not efficient innovators.

Like, ‘Oh, we’re not going to innovate if we actually have to sell U.S.-developed technologies to U.S. citizens on reasonable terms.’” Thomas laughed.

“I don’t think that’s going to work.”

Natalie Shure is a writer and researcher whose work focuses on health, history, and politics.

FALL 2019 THE AMERICAN PROSPECT 15

Overhaul the Business of Wall Street

Remaking the financial system does not require any new laws.

BY G R A H A M S T E E L E

‘‘W

hen the president signed the financial reform law, that was half-time,” one of Wall Street’s top lobbyists said about the aftermath of the Dodd-Frank Act. “The legislators left the field and now it’s time for the regulators to take over.” That byzantine process of rule-writing and implementation moved at a glacial pace, was captured by industry, and resulted in rules that were riddled with one loophole after another.

As a result, the Trump administration didn’t really need congressional action to realize its deregulatory agenda, though some lawmakers were willing to do Wall Street’s bidding anyway. Witness regulators’ recent gutting of the Volcker Rule, the ban on banks engaging in risky and speculative trading that was one of the few structural reforms contained in Dodd-Frank, a change regulators made on their own.

There are two important lessons from this experience. One is that remaking the financial system does not need new laws. Congress has delegated so much authority over the financial sector to watchdog agencies that experts questioned whether they even needed new legal authority to overhaul the industry after the 2008 financial crisis. The second is that tinkering around the margins is insufficient. A new presidential administration needs to use that authority to go big and change the fundamental structure of Wall Street.

CUTTING DOWN THE BIG BANKS

While the Dodd-Frank Act contained important reforms, it didn’t end the existence of Too Big to Fail banks by breaking them up. It did, however, establish a process that requires banks to draw up a “living will,” proving that

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they can go bankrupt without triggering a financial crisis. Regulators evaluate these plans, and they have the authority to restructure a bank if the living will doesn’t pass their smell test, by forcing a bank to “divest certain assets or operations,” per DoddFrank’s language. This could be a meaningful tool to shrink the size and complexity of the largest banks.

The Federal Reserve also has the unilateral authority under a law called the Bank Holding Company Act to force large banks to divest subsidiaries if they threaten the safety, soundness, or stability of the financial system, a lower standard than the one required by the living will process.

The Fed can also order divestitures when it determines that a large bank is not well managed. While the Fed has never used either of these powerful tools, they certainly have a rationale to do so, given ample evidence that the largest banks take outsized risks on a daily basis.

The boldest breakup proposal would impose a size cap on our largest banks. The enforcement action against Wells Fargo in the wake of its fakeaccount scandal shows that the Fed already has legal authority under the Federal Deposit Insurance Act to cap the growth of any bank that engages in unsafe and unsound behavior or violates any Fed-imposed conditions.

While this authority has to be used on a bank-by-bank basis, imposing a cap on the dozen or so most systemic banks wouldn’t be overly burdensome for a large agency with lots of staff and resources. Alternatively, Dodd-Frank allows the Fed to impose any broadbased regulation that it determines is “appropriate” in order to “prevent or mitigate risks to the financial stability of the United States,” potentially including size limits.

The Trump administration didn’t really need congressional action to realize its deregulatory agenda. A new president needs to use that authority to go big.

Another way to limit the power and reach of the financial supermarkets would be through limits on bank activities. Over decades, the Office of the Comptroller of the Currency, a national bank regulator, used letters and orders to broaden the meaning of “banking” and any “equivalent” activities under the National Bank Act to include increasingly complex financial products. Likewise, under Alan Greenspan, the Federal Reserve interpreted the 1999 Gramm-Leach-Bliley Act expansively to allow banks to trade and own commodities like oil, gas, and electricity and own and operate commercial businesses like shipping, warehouses, and pipelines as “complementary” to financial activity. The broad interpretations of these powers were done unilaterally, so they can also be restricted or reversed in kind.

Separately, the FDIC could use its authority to provide or withhold deposit insurance as leverage to restrict activities that are unsafe or unsound. In this sense, regulators could confine government support to plain-vanilla banking services, encouraging the idea that banks should be boring—taking deposits, lending them out, and then going golfing.

Maybe no activity is more “unsafe and unsound” than the largest U.S. financial institutions’ investments in businesses that are significant drivers of climate change. Over the past three years, the six largest U.S. banks provided over $700 billion in fossil fuel financing. Large banks and asset managers are also making investments in the companies driving deforestation, including in the Amazon rain forest, which is fast approaching a state of crisis.

Climate change poses very real risks to the U.S. financial system, and regulators have various financial authorities at their disposal to force Wall Street to divest from fossil fuel financing, including higher capital charges for financing fossil fuel projects and deforestation, stress tests that account for the true financial risks from climate change, and even portfolio restrictions on financing projects that drive fossil fuels and deforestation. By failing to take

THE DAY ONE AGENDA

knocking down the big banks and other bad actors

meaningful action, U.S. regulators are both neglecting their duty to preserve financial stability and jeopardizing the goal of Green New Deal proponents to achieve net-zero greenhouse gas emissions in the United States.

TACKLING THE INDUSTRY’S OTHER BAD ACTORS

Private equity is a predatory business model that enriches a few elites at the expense of workers, retirees, and communities. Investors lose out, too, and they need substantive protections from being fleeced by excessive fees and unimpressive returns. Current policies have been far too modest to really influence the power of these firms.

There are bold new proposals being advanced to crack down on private equity looting. While targeting some of the worst abuses, including the asset stripping that private equity engages in as portfolio companies approach bankruptcy, requires legislation, other reforms can be done by regulation.

The IRS could crack down on some types of management fees that private equity uses to strip wealth from portfolio companies, while receiving favorable tax treatment as capital gains. The IRS proposed regulations to treat these fees as ordinary income and tax them at a higher rate, but they have not been finalized and could be strengthened. The SEC can also

shut down the egregious tax loophole known as “carried interest,” based on its authority under the Investment Advisers Act of 1940. The law allows the agency to prohibit fund manager compensation derived from the “share of capital gains,” which is how private equity titans unjustly take earnings at a lower tax rate. The SEC and Department of Labor could also prohibit private fund managers from requiring pension plans to waive their fiduciary duties to their investors.

Credit rating agencies were among the banks’ biggest accomplices in the financial crisis, which is impressive given the fierce competition for that title. They nonetheless emerged from the reform process largely unscathed, and there is even some evidence that the bad practices that precipitated the last crisis are returning to the marketplace.

A Dodd-Frank amendment instructed the SEC to restructure rating agencies directly, but the agency ignored the statute and implemented a weak series of paperwork requirements. However, the SEC could return to Dodd-Frank to enact a variety of structural reform options, including breaking up the big-three cartel that controls the market, or exposing them to additional legal liability for faulty ratings. The SEC could also follow the plain language of the DoddFrank amendment, and develop a new model for assigning credit-rating jobs to firms, eliminating the conflicts of interest that arise when large securities issuers can use future business flow to influence credit ratings.

The failure to prosecute high-level executives for white-collar crimes has fed calls for more individual accountability. Like many other issues, this is a question of a lack of will rather than legal authority. The SarbanesOxley Act, enacted after the Enron scandal, requires CEOs to attest that their financial filings and internal controls are sufficient. While the SEC has failed to use this provision aggressively to pursue executives responsible for corporate scandals, SOX, as it’s known, could be a powerful tool. The attestation statute includes possible prison time, and meaningful personal liability will make executives more attentive to compliance. When laws

FALL 2019 THE AMERICAN PROSPECT 17

are broken, attestation also establishes legal liability that the government can use to pursue white-collar cases that has been lacking. The SEC can also require companies to establish a “performance bond” that locks up executive compensation for a set period of time, making it available so that responsible executives, rather than the company’s shareholders, pay fines and penalties.

PROTECTING CONSUMERS

A new administration has all the tools it needs to begin to remedy historic and still present discriminatory lending practices, which have perpetuated the racial wealth gap. An economic and racial justice agenda would include re-elevating the Consumer Financial Protection Bureau’s Office of Fair Lending back into the bureau’s enforcement division and conducting a meaningful crackdown on lending discrimination. Bank regulators could also reinvigorate the Community Reinvestment Act as the tool it was meant to be: a way to drive investment into low-income communities of color.

And they could revive a Department of Housing and Urban Development rule that requires affirmative remediation of past discrimination, not mere promises not to do it again.

A cartel of three private credit bureaus keeps track of our financial transactions. Their data assists lenders in deciding who can get a loan and on what terms, and even whether people get a job or an apartment. Credit reporting is the industry with the most complaints in the CFPB’s public database, and that combined with the massive Equifax data breach and subsequent botched remediation process tells you all you need to know about how poorly these companies are run. These forprofit companies work for and with lenders, not consumers. This leads to a mess of inaccurate and erroneous information that benefits lenders, which can charge more or use the threat of a negative report to coerce borrowers.

CFPB could fix this distorted system by using its authorities over research, consumer complaints and information, fair lending, and financial literacy to create a public credit bureau.

A credit bureau run by a consumer

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We will never get the financial sector that we need if Trump administration regulators are allowed to keep their jobs.

protection agency would have lower costs for consumers and lenders alike, ensure accurate reporting of financial information, only allow access to credit information for limited financial purposes, and provide consumers with services to help them improve their financial awareness.

The government can also put the states to work. For decades, nationally chartered banks have appealed to federal law, and the solicitous agencies enforcing it, to “pre-empt” state attorneys general from investigating or enforcing unfair and predatory banking practices. Wall Street reform sought to tip the balance back in favor of the states, but captured federal regulators ignored the intent of Congress and issued a rule that misinterpreted the law. A new watchdog at the Office of the Comptroller of the Currency could reinterpret the National Bank Act to give states more leeway to hold banks accountable. This would enable strong enforcement of state consumer protection laws, like caps on interest rates for consumer loans.

CANDIDATE

SPOT-

The financial industry has been absent in the 2020 Democratic primary. In 2016, Hillary Clinton and Bernie Sanders released detailed financial-reform plans, and fought over them repeatedly in primary debates. Through the first three debates of 2020, there has not been a single question about the financial industry. The stakes are certainly higher today, since the Trump administration has consistently deregulated the sector, setting up the conditions for another crash.

All that said, there is a divide on this issue. Bringing back anti–housing segregation rules and potentially closing the carried interest loophole represent low-hanging fruit. BETO O’ROURKE endorsed a public credit reporting bureau in his small-business plan. Those with a greater understanding of Wall Street’s role in our economic lives go much further.

BERNIE SANDERS has endorsed enforcing rules reducing the size and risk of large banking institutions, reforming the credit rating agencies, holding CEOs accountable under SarbanesOxley, and building a public credit registry. ELIZABETH WARREN endorsed all of the above as well, though she hedged a bit on the credit registry, saying, “A public option in this space is worth considering.” Warren has pushed banking regulators to use many of these tools over the years, including the FDIC’s living will authority and IRS crackdowns on carried interest.

LIGHT

THE FINANCIAL SYSTEM WE NEED

Key to this financial-reform agenda is the adage that “personnel is policy.”

We will never get the financial sector that we need if Trump administration regulators are allowed to keep their jobs. The CFPB’s Kathy Kraninger and the FDIC ’s Jelena McWilliams both have terms leading their agencies until 2023, and in Kraninger’s case, it would take negligence or malfeasance in order for her to be removed.

An incoming administration must have a plan for enacting its agenda, even if Republicans hold a majority in the Senate to frustrate presidential nominations, or if Trump appointees continue to serve in the executive branch. That means learning from conservatives’ creative arguments around removal powers, for example, by citing a CFPB director’s use of her consumer protection agency’s power to help the absolute worst actors in the financial marketplace as grounds for firing. It also means strategic and aggressive use of the Vacancies Act, the federal law that governs vacancies in important positions.

None of this will be easy. Senator Dick Durbin (D-IL) once said that the banking industry is “the most powerful lobby on Capitol Hill. And they frankly own the place.” In the modern administrative state, agency lobbying is intense.

One study of the Volcker Rule’s original interagency rulemaking process found that 93 percent of agency contacts during the sample period came from industry trade associations or companies. If all else fails, industry can always sue to challenge any new reforms, and there’s no telling how many of the cases will end up in the hands of the extreme and unqualified judges that President Trump and Senator Mitch McConnell have packed into the federal courts.

A new administration should welcome these fights. Each loss clarifies which side our representatives are on, and each victory would put us on a path toward a more just and equitable financial system.

Graham Steele is the director of the Corporations and Society Initiative at Stanford Graduate School of Business. Previously, he was minority chief counsel for the Senate Banking Committee.

THE DAY ONE AGENDA

Create a Public Option for Simple Banking

Under current authority, the post office can expand its financial services options. A major postal workers union even has it in their bargaining contract.

BY BRYC E C O V E R T

N

early every Democratic presidential candidate promises to address growing economic inequality and increase financial stability for American families.

From the $15 minimum wage pushed

by Bernie Sanders to Elizabeth Warren’s universal child care plan to Kamala Harris’s significant expansion of working-class tax credits to Cory Booker’s baby bonds, lots of big ideas have been floated to put more money into the pockets of those who need it most.

What these plans overlook is a quick and easy way to accomplish what they want, without further congressional action: Use the power of the White House to kick-start postal banking across the country, offering financial inclusion to those who are currently shut out of the mainstream system. “Access to basic banking and financial services is part of basic economic security,” noted Mark Paul, assistant economics professor at New College of Florida, who has written about postal banking.

More than one in five Americans relies, at least in part, on institutions outside of traditional banks. Six percent of Americans have no bank account at all—including 14 percent of black people and 11 percent of Hispanics—and another 16 percent are “underbanked,” meaning they have a bank account but also turn to nontraditional services.

Families that make less than $40,000 a year are far more likely to fall into these categories than those who earn more.

That pushes them toward predatory operators: payday lenders who give borrowers fast cash for interest rates that can amount to more than a 600 percent APR , for example, or check cashers who exchange quick money for checks for a fee. In 2018, two-fifths

of the unbanked, who have no bank accounts, turned to these alternative financial services. They charge outrageous prices, costing customers about $89 billion in interest and fees in 2012.

Meanwhile, traditional banks are closing up shop. They shuttered over 6,000 branches between 2008 and 2016. Those losses created 86 new “banking deserts,” populated areas with no banks within ten miles. The problem is disproportionately afflicting majority-black neighborhoods and low-income ones.

Tens of millions of Americans can’t access broadband internet to do their banking and need to visit a storefront for basic transactions. In too many areas, there’s no bank to serve them.

But there is “a brick-and-mortar post office in every single ZIP code across this country,” Mark Paul pointed out.

And, importantly, 59 percent of post offices are in ZIP codes with one or no bank branches. “The basic idea of postal banking is to intervene in this broken marketplace,” Paul explained.

Postal banking could also help support the post office. Despite revenue increasing last year, it still has $13.2 billion in debt and a net loss for the year of $3.9 billion. The crisis, which was mostly manufactured by 2006 congressional legislation forcing the agency to prefund its retiree health benefits 75 years out, could be eased by new revenues from expanded financial services.

“Even lending out money at rates far below those offered by payday lenders, the post office would indeed be able to secure a significant revenue stream,” Paul said. In other countries, after letter mail, financial services represent the biggest driver of revenue for postal services, accounting for 14.5 percent of revenue in developed countries in 2012.

59 percent of post offices are in ZIP codes with one or no bank branches.

“It’s good for the people of the country and it’s good for the post office,” said Mark Dimondstein, president of the American Postal Workers Union.

“The post office has a mission of binding the country together, and certainly this does that.”

Perhaps the best news is that some of this could be accomplished without getting Congress involved. In a report published in 2014, the U.S. Postal Service Office of Inspector General noted that the 2006 Postal Accountability and Enhancement Act mostly prohibits the postal service from offering new, non-mail services. “However, given that the Postal Service is already providing money orders and other types of non-bank financial services, it could explore additional options within its existing authority,” the report states.

The postal service also agreed to a contract with the APWU in 2016 that included memoranda of understanding that established a joint task force to consider opportunities to increase revenue, including expanding financial services, requiring at least one pilot program to be launched within a year.

The APWU even selected three potential host cities—Baltimore, Cleveland, and the Bronx, New York—as sites for the pilots. But they have yet to occur.

Action could easily be goaded along by whoever occupies the White House.

The U.S. Postal Service is run by the postmaster general, which a Board of Governors appointed by the president and approved by the Senate appoints.

“A new president could just fill that board with directors who are friendly to [postal banking] and then … say to the postmaster general, ‘This is what we want,’” said Mehrsa Baradaran, law professor at the University of California-Irvine, who has also written extensively about postal banking.

The major holdup at the moment is the current postmaster general, Megan Brennan. “She’s focused on cutting costs as opposed to starting new things,” Baradaran said. But the postmaster general serves at the request of the Board of Governors, which could easily ditch Brennan if their desires for postal banking are not met.

The USPS inspector general at the time of the 2014 report promoting postal banking, David Williams, is

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CANDIDATE

SPOT-

Several candidates have endorsed the concept of a postal banking system, including ELIZABETH WARREN (since back in February 2014), BERNIE SANDERS (since back in March 2014), ANDREW YANG , BETO O’ROURKE , and JOE SESTAK . Yang’s statement does not suggest that he would support the creation of post office banks through the Postal Service’s existing authority. Sestak did express support for a pilot program. Sanders and Warren appear to be more determined to make this a reality. On his website and in a statement to the Prospect, Sanders stated that “the Postal Board of Governors and Postmaster General must work with postal workers and unions to provide banking services.” He even cited the APWU ’s collective bargaining agreement. Warren has taken this a bit further. In 2018, she met with Postmaster General Megan Brennan, urging her to honor the APWU agreement and initiate pilot postal banking programs.

“I firmly believe current law permits the USPS to expand the financial services it offers,” Warren wrote in response to our questionnaire. There’s little doubt that Sanders and Warren will work to get postal banking done; most of the other major candidates in the race have said little to nothing about it.

LIGHT

actually the current vice chair of the Board of Governors. So that’s at least one member in support. Currently, only five of the nine board slots are filled. Four new pro–postal banking members plus Williams would give the board a majority for pilot programs almost immediately, and the muscle to get them implemented.

Even funding is available to test out the process. Congressman Bill Pascrell (D-NJ) successfully passed a bipartisan amendment in the Fiscal Year 2020 Financial Services and General Government appropriations bill allocating $1 million to establish a postal banking bill. The appropriations package passed the House of Representatives but is awaiting action in the Senate.

The U.S. has already tried out postal banking before. Between 1911 and 1967, the post office offered a place to deposit savings. For some time it was very popular, peaking in 1947 at four million customers and nearly $3.4 billion in deposits. It’s “an all-American idea,” Paul said.

Other countries do it to this day: 51 postal services had 1.6 billion savings and deposit accounts as of 2010.

According to a Universal Postal Union

20 WWW.PROSPECT.ORG FALL 2019

The U.S. has already tried out postal banking before.

“It’s an allAmerican idea.”

report, after banks, postal services are “the second biggest worldwide contributor to financial inclusion.”

The 2014 USPS OIG report argued that the post office could most easily start offering payment services, such as bill and e-commerce payments, electronic money orders, and personto-person money transfers not unlike Venmo. It could market a reloadable prepaid debit card that would allow people to load their paychecks or other money onto it and then withdraw cash, pay bills, and exchange money. The report also notes that the cards could be used to send or receive tax refunds or payments and other government debts. The post office could partner with a bank to offer interest-bearing savings vehicles tied to their cards.

This would be relatively simple for the post office to implement. It already issues more than $20 billion in money orders every year, sells international money orders to nine Latin American locations through the “Dinero Seguro” program, and cashes U.S. Treasury checks. So it has the infrastructure to handle money ready to go. Postal banking might require expanding that infrastructure and adding software, but it would be building on an existing platform, not creating one from scratch.

The APWU and its Campaign for Postal Banking wants to see pilot program sites in both rural and urban areas with these types of basic services. “Based on those pilot programs, make an assessment of what worked and what didn’t work and then how to spread it,” Dimondstein said. “Really the obstacle is the political will and the operational will of the post office to try some new things.”

The OIG report also argued that the post office could offer small personal loans, stepping into the breach to offer a nonpredatory service to people who currently have to turn to payday lenders or even pawnshops for fast cash.

These could be delivered at less than one-tenth the fees charged for a typical payday loan of similar size, the report claims, while still affording a small profit for the post office. If the next president wants to ban payday lending and limit interest rates on consumer loans, providing an alternative would be critical, as access to emergency

credit remains desperately needed.

A postal banking regime under existing authority probably could not deliver these types of loans, not without legislative approval. But debit card and online bill-pay accounts that simulate most of the features of basic banking, without the potentially high fees or data brokering of private-sector options (postal banking would fall under the Privacy Act of 1974, which governs the use of government data collection and would likely prohibit selling financial information) would provide a strong start.

If a Democratic president got smaller pilot projects off the ground, it could lift the larger project, creating demand to increase the offerings nationwide. “You can start out helping low-income people, then if it succeeds expand to help everybody,” said Baradaran. “The next step, the home run, would be a public option in banking.”

Advocates like Paul and Baradaran would like to see a full suite of offerings at the post office, including checking and savings accounts, debit cards, and no-fee ATMs. Eventually, a true public-banking option could compete with traditional banks. It wouldn’t just be for the poor, either. “I can think of plenty of middle-income folks that really hate their bank,” Paul noted.

Look only to the continuing exposures of Wells Fargo’s efforts to cheat its customers. A postal banking option could draw people away and pressure traditional banks to change their practices.

Proving the concept of a service that is widely used globally and was once in place domestically would reap benefits beyond financial inclusion, Baradaran explained.

“I think there’s been, starting in the Reagan era, this idea that the government does everything badly and the private market can do everything better,” she said. “The post office has a very democratic and egalitarian mission at its heart. Allowing the post office to show that, I think, would be a good way of allowing for more things like that in the future.”

Bryce Covert is an independent journalist writing about the economy. She is a contributing op-ed writer at The New York Times and a contributing writer at The Nation.

THE DAY ONE AGENDA

Unleash the Existing Anti-Monopoly Arsenal

Corporate power can be neutralized if federal agencies simply used the prodigious authority they’ve been granted.

BY S A NDE E P VA HE E S A N

T

he next presidential administration has the legal authority to tackle corporate power. On the surface, that claim may seem surprising. After all, won’t a president committed to going after mergers and monopolies be stymied by a judiciary hostile to antitrust and regulation of big business and by a Congress unlikely to enact major antitrust reforms?

The reality is quite different: The president already has extraordinary authority under decades-old statutes.

The question is will he or she appoint officials—to the Department of Justice (DOJ) Antitrust Division, Federal Trade Commission (FTC), U.S. Department of Agriculture (USDA), and other agencies—determined to tame corporate dominance of our economy and politics. The Trump administration has failed to tap into its standing authority, and the Obama administration, while certainly better, had only a modest record of achievements. A new president could reverse that pattern by aggressively deploying the anti-monopoly powers spread across numerous federal regulatory bodies.

What are the things a progressive president could do to revive antitrust law and anti-monopoly policy?

Although the list is long, I will focus on four items that should be high on the antitrust agenda. Using their untapped authority, the DOJ, FTC, and USDA can restrict unfair and exclusionary business practices, block further corporate consolidation, restore Americans’ right to repair everything from farm equipment to smartphones, and protect livestock producers from powerful meat-packers.

To be sure, the next administration should not be blind to the legal risks posed by a hostile Supreme Court, but

those risks do not counsel inaction.

Corporate concentration has meant that ordinary Americans pay more for essentials, earn less at work, lose opportunities to start businesses, and are forced to accept corporate control of politics. By making methodical and strategic use of the powers that Congress has vested in federal agencies, the next administration can achieve tangible and popular gains that will be firmly rooted in statutory law and existing legal precedent.

ENDING UNFAIR COMPETITION AND PRACTICES THROUGH THE FTC

The Federal Trade Commission, established in 1914, has the power to make national antitrust policy. In 1890, Congress had passed the Sherman Act, the first federal antitrust law. But in a 1911 case, Standard Oil Co. of New Jersey v. United States, the Supreme Court held it had the ultimate power to interpret the Sherman Act and determine what antitrust would mean in practice. In response to this judicial activism, Congress created the FTC to be an expert investigative and policymaking body that would recapture authority from the Court and operate under the watchful eye of the public and its elected representatives.

Section 5 of the Federal Trade Commission Act gives the agency authority to identify and prohibit “unfair methods of competition.” Congress purposely drafted the language in broad terms and delegated expansive policymaking power to the commission. In FTC v. Sperry & Hutchinson Co. (1972), the Supreme Court stated that the FTC, in establishing rules of the marketplace, can consider “public values beyond simply those enshrined in the letter or encompassed in the

While the FTC has many worthy targets, it should start with a rule against oppressive contracts limiting worker mobility.

spirit of the antitrust laws.” Furthermore, under modern administrative law, agencies like the FTC are entitled to judicial deference for their interpretations of open-ended terms such as “unfair methods of competition.” In practice, this means that the FTC has a broad mandate to create a fair marketplace and prohibit abusive, exclusionary, and predatory business practices.

While the FTC has many worthy targets, it should start with a rule against oppressive contracts limiting worker mobility. Employers have imposed noncompete provisions on approximately 30 million workers in a wide range of industries and occupations. These contracts prevent workers from taking a new position or starting a business in their field or industry after leaving their current employer. For instance, until it was named and shamed in 2015, Amazon prohibited its warehouse workers from accepting employment with any business that did or could compete with any Amazon product or service (a very long list) for 18 months after they left Amazon. Noncompetes impair worker mobility and depress wages, reduce the formation of new firms, and prevent workers from leaving abusive or unsafe environments.

Using its rulemaking power, the FTC should ban noncompetes for all workers, as a coalition of labor and publicinterest groups requested in a March 2019 petition. (Full disclosure: The coalition includes the Open Markets Institute, where I work.)

The FTC should also enact a rule against exclusive dealing and similar practices that monopolists use to block new rivals, handicap competitors, and deprive customers of choice.

Dominant firms in a range of markets have demanded that customers, wholesalers, and suppliers not deal with rivals, or they have rewarded them for not doing business with competitors. In July 2018, the European Commission found Google liable for protecting its search monopoly by, among other tactics, paying mobile handset makers to pre-install the Google search app exclusively. In beer, craft brewers have accused Anheuser-Busch InBev of encouraging and pressuring distributors not to

FALL 2019 THE AMERICAN PROSPECT 21

carry competing brews. The FTC has challenged exclusionary contracts by several corporations with dominant market positions, including Intel.

The FTC should issue a rule prohibiting dominant firms from locking up customers, distributors, and suppliers through exclusivity arrangements and foreclosing fair competition.

The FTC should also play a central role in taming runaway prescription drug prices. Under the FTC Act, as well as existing Sherman Act precedents, it has substantial authority to challenge branded drug companies’ improper extension of their monopolies. To its credit, the agency, under both the Obama and Trump administrations, has gone after branded drug companies for paying rivals in exchange for not introducing lowerpriced generic versions. But much remains to be done.

The commission should attack drug evergreening in which branded drug companies obtain a new round of patent protection on trivial reformulations of existing drugs and then encourage doctors to prescribe the new drug in place of the current version. It should also stop the regulatory fraud and deception of drug companies. Branded drug manufacturers have shut out generic competition through such tactics as obtaining patents through fraud on the Patent and Trademark Office and filing erroneous patent information with the Food and Drug Administration.

STOPPING FURTHER CORPORATE CONSOLIDATION

Although they have adopted a tolerant attitude toward corporate consolidation in recent decades, the DOJ and the FTC have the power to restore strict anti-merger rules. Some of the Supreme Court’s most important decisions on the anti-merger section of the Clayton Act date from the 1960s.

These rulings, in line with the text and intent of the Clayton Act, restricted mergers and acquisitions between direct rivals and customers and suppliers. For instance, the Supreme Court in a 1962 decision recognized that Congress feared both the economic and political consequences of consolidation and corporate

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concentration. In deciding whether a merger was illegal, the Court at the time looked to market shares and a history of rising market concentration.

It refused to accept the argument that economies of scale and other “productive efficiencies” justified mergers that would otherwise be illegal mergers.

These rulings remain good law.

Since 1982, the DOJ and the FTC have used the guidelines to weaken merger law. They have steadily raised the market share threshold at which they’ll challenge mergers between direct rivals and practically legalized mergers between customers and suppliers and corporations in unrelated industries. In a clear disregard for the rule of law, the agencies, in their guidelines, have ignored still-valid Supreme Court decisions from the 1960s and permitted several mega-merger waves over the past four decades.

By issuing new merger guidelines, the DOJ and the FTC can breathe new life into the musty but important Supreme Court anti-merger decisions and restore a merger policy in line with Congress’s original vision. What would guidelines true to the Clayton Act and Supreme Court interpretation resemble? The DOJ and FTC should hew to CANDIDATE

SPOT-

There has been more talk about antitrust in this presidential campaign than any in the past 100 years. Most of that talk recognizes that laws already on the books can accomplish most of the goals of promoting competition and fighting monopolies. ELIZABETH WARREN and BERNIE SANDERS have expressed this willingness on a host of fronts, in particular taking on Big Agriculture and altering antitrust guidelines. A protégé of Warren’s, Rohit Chopra, is one of two Democratic commissioners on the Federal Trade Commission, and has been outspoken about the agency using its rulemaking authority.

The candidate whose persistence on antitrust issues might surprise you is AMY KLOBUCHAR . She is the ranking member of the Senate Judiciary’s antitrust subcommittee, and is writing a book on the subject. Her First 100 Days agenda includes a number of areas where she would use executive action on competition policy, including stopping noncompete clauses, updating the merger guidelines, rewriting agriculture rules, and ending “pay for delay” agreements among prescription drug companies.

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legislative intent and strive for simplicity, in place of the pro-merger bias and complexity of the current framework. In new guidelines, the agencies should establish simple market share and concentration thresholds for deciding whether a merger is illegal.

Drawing on 1960s merger practice, the agencies, for instance, should treat a merger that creates a firm with 10 percent or more of a market as illegal and state they will block it in court.

And illegal mergers should not be permitted on “efficiency” grounds.

A strong anti-merger policy would foster decentralized market structures. It would also compel businesses to grow through product improvements and investment in new plants and facilities, instead of by swallowing existing firms. Growth by acquisition eliminates rivals and can create and entrench market dominance.

RESTORING CONSUMERS’ RIGHT TO REPAIR

The agencies should seek to restore consumers’ right to repair their smartphones, automobiles, and other durable goods at independent repair shops or on their own. Product manufacturers, including Apple, John Deere, and Honda, have engaged in tactics such as limiting the availability of spare parts and schematics, bundling new parts with repair service, and redesigning products to limit easy servicing. As a result, owners of a wide range of durable goods are compelled to get costly repairs done by manufacturers or manufacturer-authorized technicians, or to purchase new products.

The Supreme Court in a 1992 decision gave government enforcers a powerful tool with which to attack restrictions on the right to repair. In Eastman Kodak Co. v. Image Technical Services, Inc., the Court held that a manufacturer can violate the antitrust laws by limiting access to replacement parts. In that case, Kodak had restricted the sale of replacement parts for its photocopiers and forced most copier owners to obtain parts and servicing from Kodak technicians.

The Court held that Kodak’s restraints on competition in the market for copier parts and service could

THE DAY ONE AGENDA

violate antitrust law. It critically concluded that competition in the market for copiers did not necessarily prevent abuse in the aftermarkets for parts and service. The Court questioned economists’ heroic assumptions of how real-world customers behave when deciding between competing products. It reasoned: For the service-market price to affect equipment demand, consumers must inform themselves of the total cost of the “package”—equipment, service, and parts—at the time of purchase; that is, consumers must engage in accurate lifecycle pricing. Lifecycle pricing of complex, durable equipment is difficult and costly.

In order to arrive at an accurate price, a consumer must acquire a substantial amount of raw data and undertake sophisticated analysis. The necessary information would include data on price, quality, and availability of products needed to operate, upgrade, or enhance the initial equipment, as well as service and repair costs, including estimates of breakdown frequency, nature of repairs, price of service and parts, length of “downtime,” and losses incurred from downtime.

The Court noted that purchasers compare the sticker price and quality of machines and may not evaluate the life-cycle costs of purchasing a Kodak copier versus a Xerox copier. Then, once an individual or office purchased a Kodak copier (costing thousands of dollars), Kodak could exploit them in the markets for maintaining and repairing their machines.

The antitrust agencies should use the Kodak decision to resurrect consumers’ right to repair their own products where they want. For instance, the DOJ and the FTC can challenge manufacturers’ bundling of products and services, which limits consumers’ and farmers’ ability to get their cars, smartphones, and tractors repaired at independent shops. Prevailing antitrust doctrine proscribes bundling by a firm with dominance: A manufacturer with power in one market (say,

The USDA has broad power to establish rules of fair market conduct and protect chicken, hog, and livestock producers from abusive processors.

parts) cannot extend its dominance into another market (say, service) by requiring customers to purchase the two as a bundle. The antitrust agencies can also strike down manufacturers’ restrictions on the sale of parts and tools and ensure that independent service shops can obtain the items they need to repair equipment. While action from Congress, the Patent and Trademark Office, Copyright Office, and other policymakers is critical for fully restoring the right to repair, antitrust enforcers have significant power to curtail manufacturer monopolization of repair services.

PROTECTING FARMERS FROM AGRICULTURAL MIDDLEMEN The USDA has the authority to pro-

tect cattle ranchers, hog farmers, and poultry growers from powerful buyers and processors. Congress enacted the Packers and Stockyards Act in 1922 to protect these farmers and ranchers from deceptive, discriminatory, and unfair practices by packers and other agricultural processors. In practice, the USDA has broad power to establish rules of fair market conduct and protect chicken, hog, and livestock producers from abusive processors.

Following a legislative mandate in the 2008 Farm Bill, the Obamaera USDA sought to establish robust protections for producers. In rules proposed in June 2010, the USDA announced it would restrict processors’ ability to engage in price discrimination, protect producers from arbitrary or retaliatory termination of their contracts, ban mandatory arbitration, and regulate the tournament system in which some producers receive bonuses at the expense of others. These bonuses or pay cuts are based on the size and quality of fattened livestock, even though the packers determine the quality of the animals, feed, and medicines that farmers receive. Congress, following massive lobbying from industry trade groups and the 2010 midterms in which Republicans captured the House, barred USDA from finalizing these rules for the next several years. In December 2016, the USDA issued an interim final rule that would establish significant (though incomplete) protections for producers.

The Trump administration has since moved to repeal these protections and even abolish the office at USDA in charge of enforcing the Packers and Stockyards Act. The USDA should expand on the 2010 proposed rules. It should establish a presumptive ban on price discrimination, prohibit packers from using shortterm contracts that they can terminate at will, outlaw retaliation against growers for airing grievances or engaging in cooperation with other producers, and grant producers an effective right to decline arbitration of legal disputes.

USDA should also ban the tournament system and create clear criteria for unfair and discriminatory practices in each livestock sector.

While these rules would not remedy the basic power disparity between producers and processors and not eliminate the need for structural solutions, they would limit the discretionary authority of processors. In restricting how processors can exercise power, USDA rules would protect producers from some of the worst abuses that exist today. They would be a major step toward a more equitable agricultural sector.

In all the areas I’ve mentioned— unfair business practices, excessive corporate concentration, consumers’ right to repair, and farmers’ dependence on dominant middlemen—the next presidential administration has great power to tackle the monopoly crisis. Even without new legislation, the next president can limit corporate power with the awesome anti-monopoly authorities already vested in the DOJ, FTC, USDA , and other federal agencies. The next president can free workers from the grip of noncompete clauses, stop monopolists from walling out rivals, promote affordable prescription drugs, brake corporate consolidation, restore consumers’ right to repair their possessions, and protect farmers from abusive meatpackers. A president determined to achieve those goals will have the tools to do it on January 20, 2021.

Sandeep Vaheesan is legal director at the Open Markets Institute. He previously served as a regulations counsel at the Consumer Financial Protection Bureau.

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Make Marijuana Effectively Legal

By rescheduling cannabis as a less dangerous narcotic, the next president can upend the drug war and the damaging effects on communities of color.

BY G A BR I E L L E G U R L E Y

T

he dissonance between state and federal marijuana laws has created a legal jumble of bad policies and work-arounds.

Statehouses, Congress, and the White House have created a labyrinthine world of marijuana rules and rulemaking. The next president however, can clean up much of this mess with the stroke of a pen.

The wave of state-level marijuana liberalization over the last decade represents one of the more robust assertions of federalism in American history—all the more remarkable considering it concerns a drug linked to ethnic and racial stereotypes (despite centuries of medicinal use). Eleven states and the District of Columbia have legalized recreational marijuana, with seven states making the move just since 2016. Thirty-three states (two-thirds of the 50) have legalized medical marijuana. Arizona and Florida may see questions about marijuana legalization on the 2020 ballot.

No such changes have been made on the federal level yet, however, despite the efforts of some members of Congress. It does not matter “whether you agree or disagree with decriminalization, legalization, or medicinal [use], states are going to do this,” Democratic Representative Barbara Lee of California, who has introduced three marijuana bills and co-chairs the Congressional Cannabis Caucus, tells the Prospect. “This is not going to go backwards.”

Given the rising acceptance of marijuana use, the next president will have unprecedented public support to end the federal policies that fostered decades of ill-fated drug enforcement strategies, including the so-called “war on drugs,” that have

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disproportionally affected African Americans and Latinos. A potential Democratic administration would be well placed to dismantle marijuana prohibitions, especially if Democrats maintain their numbers in the House and can gain control of the Senate.

But if control of Congress fails to materialize, a Democratic president can still make progress on marijuana.

The executive branch can exercise its administrative powers to reschedule marijuana by moving the drug to a less restrictive tier of controls.

Marijuana is illegal under the Controlled Substances Act: It falls into Schedule I, the highest of the five tiers of regulation for drugs with a strong potential for abuse and no currently accepted medical use, a distinction that marijuana inexplicably shares with heroin and LSD. These prohibitions limit scientific and medical research and clinical trials on marijuana—even though more than half of the states have approved the drug for medical use. As Washington State University sociologist Clayton Mosher, co-author of In the Weeds, a marijuana policy history, notes, cannabis opponents “use anecdotes to prove that marijuana is a dangerous drug.” But they simultaneously claim that supporters’ anecdotes arguing cannabis “has medicinal uses are not scientific evidence.”

Laboring under these prohibitions, researchers also must secure federal permission for testing and adhere to restrictive protocols before investigating a drug now used by many people with cancer, epilepsy, and other illnesses and conditions. Meanwhile, cannabis businesses cannot deduct ordinary business expenses from their federal taxes. Treasury Department

regulations mean banks largely avoid the sector, leaving many marijuana businesses in the multibillion-dollar industry dependent on cash transactions and at risk for crime.

The attorney general is the main actor in administrative rescheduling. The president can direct the AG to review a drug’s status, or the AG can act independently to initiate a scheduling review. The secretary of health and human services or outside groups—medical associations, state or local entities, or individual citizens—can also petition the AG to begin the review.

The AG must consult the Food and Drug Administration on medical and scientific findings about the drug, public-health risks, and potential for abuse. Under the statute, the HHS secretary’s scientific and medical recommendations are binding on the AG. The Drug Enforcement Administration also provides recommendations. After the AG reviews the agencies’ responses, he or she has several options: keeping marijuana in Schedule I, moving it to another schedule where less restrictive

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Responding to our questionnaire, BERNIE SANDERS promised to “take executive action to deschedule and legalize marijuana nationwide.”

ELIZABETH WARREN also vowed to “delist marijuana,” which her campaign clarified as an endorsement of administrative descheduling. To our knowledge, they are the first presidential candidates to formally endorse effective legalization through executive authority. CORY BOOKER has introduced legislation (which Sanders, Warren, KAMALA HARRIS , and TULSI GABBARD have co-sponsored) called the Next Step Act, which would deschedule marijuana legislatively. That would of course rely on a Congress still stuffed with drug warriors.

Sanders and Warren take it a step further.

BETO O’ROURKE wrote a book advocating for cannabis legalization in 2011, and asked President Obama to deschedule or reschedule administratively in 2014. AMY KLOBUCHAR said she would “start the evaluation process” of rescheduling by collecting scientific and medical recommendations from the Food and Drug Administration and the Drug Enforcement Administration. PETE BUTTIGIEG , ANDREW YANG , and JULIAN CASTRO support marijuana legalization, but do not explain the mechanism for doing so. JOE BIDEN would reschedule cannabis as a Schedule II drug.

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THE DAY ONE AGENDA

controls prevail, or descheduling it entirely—taking the drug off the list of controlled substances. The latter is legalization in all but name.

This administrative route is the only one the executive branch can use to relax controls on cannabis. The president could issue executive orders in narrow instances to relax the consequences of marijuana use, such as removing prohibitions against federal employees using recreational or medical marijuana. A 1986 Reagan-era executive order allowed federal agencies to fire employees for illegal drug use.

Although there have been numerous attempts to remove marijuana from Schedule I, neither the FDA nor the DEA has sanctioned rescheduling—even though synthetic drugs containing THC, the psychoactive ingredient in marijuana, have been placed in less restrictive schedules.

Gaining administrative assent to changing marijuana policy, however, could be shifting, as developments during the campaign season may moderate resistance to rescheduling— and give a new president new tools of persuasion.

At the end of August, the FDA and the National Institutes of Health co-signed a letter to Senator Brian Schatz, a Hawaii Democrat, to call for additional avenues for research into marijuana and a streamlined registration process to facilitate research.

The agencies noted that a significant barrier to research is the lone University of Mississippi facility, which is currently the only federally approved research location. That means researchers lack access to diverse varieties of cannabis that could be used to manufacture different kinds of medications. The letter was silent on administrative rescheduling, but pointed to marijuana’s “continued placement” in Schedule I as a hurdle for researchers who cannot buy products from state dispensaries and face other bureaucratic and cost obstacles, which may prove to be insurmountable for some scientists.

In August, the DEA , too, published its plan for overseeing growing marijuana for scientific and medical research. In 2016, the agency had

Prohibitions on marijuana limit scientific and medical research and clinical trials— even though more than half of the states have approved the drug for medical use.

announced that it would consider new applications for researchers seeking to cultivate research-grade marijuana.

But the agency has never acted on the proposals that it received, which prompted a lawsuit by the Phoenixbased Scottsdale Research Institute.

ThinkProgress reported that the DEA published its announcement shortly before the next stage of the lawsuit.

In May, the Second Circuit Court of Appeals instructed the DEA to conduct “a swift review” in a case involving a group of private citizens seeking rescheduling of marijuana for medical reasons. The court noted that “the current law, though rational once, is now heading towards irrationality; it may even conceivably be that it has gotten there already,” and warned that it would decide the matter if the DEA fails to carry out an expedited rescheduling.

“The likelihood of rescheduling is certainly higher than descheduling,” says John Hudak, the deputy director of the Center for Effective Public Management at the Brookings Institution, who studies marijuana policymaking. “It’s something that has more support in Congress.”

Despite the fresh pressure to enable research on cannabis, recent vaping deaths, and the Trump administration’s decision to ban

flavored e-cigarettes, resistance to liberalizing marijuana regulations may be strongest among longtime DEA officials who are more invested in the agency’s drug warrior culture.

The current regime benefits the agency through civil asset forfeiture, which permits the DEA to keep cash and other goods seized during drug raids and has become a way to supplement congressional allocations.

Executive branch officials must consider whether a new Congress would likely accelerate its own deliberations on rescheduling (or descheduling), try to thwart an energetic AG determined to decontrol marijuana, or decline to act at all.

Of course, a truly committed president could install leadership at the DEA and FDA that would be determined to carry out rescheduling or descheduling, regardless of career staff’s wishes.

In a climate where marijuana arrests have outpaced arrests for violent crimes, the next president could also use clemency powers to pardon or commute the sentences of offenders for certain marijuana crimes, who are disproportionately African American or Latino. There is precedent for a blanket pardon—Jimmy Carter issued unconditional pardons to Vietnam draft dodgers in 1977, while both Donald Trump and Barack Obama have pardoned or commuted the sentences of individuals whose offenses involved marijuana (and in some cases, harder drugs). According to a 2015 Bureau of Justice Statistics report, about 11,500 people are serving federal sentences for marijuana. (Many people serving federal sentences have been convicted of marijuana trafficking.) To demonstrate leadership on the issue, Hudak suggests that the president could hold a “clemency event” for certain offenders with a group of like-minded governors.

By facilitating marijuana research, the next president can infuse public drug-education programs with stronger science. In recent years, veterans groups like the American Legion have become some of the country’s strongest advocates for cannabis rescheduling. Many veterans use marijuana to cope with PTSD, but the DEA thwarted the Scottsdale

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Research Institute study for years and the Department of Veterans Affairs did not want to refer people to those researchers (who are now reviewing their results, according to a Stars and Stripes report). More generally, VA doctors cannot recommend medical marijuana to patients.

This lack of comprehensive research undermines federal publichealth education initiatives. Surgeon General Jerome Adams and Secretary of Health and Human Services Alex Azar held a late-August press conference to unveil a public advisory about the dangers of marijuana for teenagers and pregnant women. Few medical experts would dispute highlighting precautions for these vulnerable populations. But as more pregnant women, especially younger ones, turn to cannabis for relief from morning sickness, research prohibitions mean there isn’t much data available about marijuana’s effects on pregnant women or fetal development, as there is, for example, on tobacco.

As for teenagers, fewer teens are using the drug, according to the federal government’s own study, although the surgeon general suggested teens’ marijuana use was increasing. While some studies show impacts on cognitive development, gauging the impacts over time would require longterm research trials. Adams also has raised eyebrows with his insistence in resurrecting the debunked notion that early use of marijuana is a gateway to the abuse of hard drugs.

The next administration would have both the administrative tools and the public backing it needs to eliminate many of the current legal uncertainties in the marijuana sector.

Congressional action that establishes a strong regulatory framework would be the most efficient and sustainable way to reschedule marijuana or to legalize it. But Congress as an institution, much like the DEA , has been tethered to outdated mores. By pursuing administrative remedies, pardoning minor offenders, and prioritizing science and research over the reefer madness fears of the remaining prohibitionists, the next president can strengthen the case for moving forward on marijuana.

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Create a More Progressive Tax Policy

Congress writes the laws, but the IRS interprets them, and they can do so in ways that make the system more fair.

BY V I C T O R F L E I S C HE R

T

he next president can and should use executive authority to make our tax system more equitable. The Tax Cuts and Jobs Act, which passed in December 2017, had been drafted in secret and then rushed to a vote, leaving the Treasury Department and the IRS with many gaps to fill. And there are still plenty of old loopholes that need fixing, some of which can be addressed, or at least mitigated, without legislation.

The scope of executive authority is wide-ranging. The Trump administration recently toyed with unilaterally indexing capital gains for inflation, reducing taxes owed for those blessed with investment income. This simple tweak would have lessened federal revenues by about $100 billion to $200 billion over ten years.

Ultimately Trump ruled out bypassing Congress “at this time.” That’s good news, because indexing capital gains would be bad tax policy. But the more interesting question is whether the Treasury Department had the right to do this on their own.

The Treasury Department’s authority derives from its role in filling gaps in statutes. When a statutory term is unclear or ambiguous, the Treasury Department can interpret the term in order to provide guidance to taxpayers.

The purpose of this authority is to allow Treasury to interpret the tax code, not to let the executive branch achieve by regulatory fiat that which could not be achieved through legislation.

Here, the argument would be that when the tax code says that your basis is equal to your “cost,” the term “cost” is ambiguous, and it could reasonably be construed to mean “cost, indexed for inflation,” rather than the amount of money that one actually paid. It’s a pretty weak argument in context;

Congress knows how to index for inflation when it wants to.

In 1992, the Treasury Department’s general counsel and the Justice Department’s Office of Legal Counsel both concluded that Treasury did not have the legal authority to redefine cost in this way. But Trump only declined to take action because “he does not feel enough of the benefits will go to the middle class,” an aide stated. The issue shows how a determined president can reshape tax policy without any help from Congress. I tend to take an expansive view of Treasury’s authority to interpret the tax code, which is rarely crystal clear. Here are a few ways a Democratic president might do so.

BECAUSE THE TAX CUTS and Jobs Act (TCJA) was a drive-by, staff at Treasury and the IRS have been hustling to offer

guidance on important areas such as the new deduction for pass-through business owners, interest expense limitations, and a new international tax regime. Treasury and the IRS have generally done a terrific job, particularly under the circumstances. But some of the proposed regulations have been overly generous.

Take opportunity zones, a tax break that is supposed to promote investment in poor neighborhoods. The statute is a confusing mess. For example, it requires that “substantially all” of the assets of a qualified opportunity fund be comprised of qualified opportunity zone businesses; “substantially all” of a qualified opportunity zone business must be comprised of eligible property; and such property must be used in the business for “substantially all” of the time it is held by the business. How this works in practice depends a great deal on policy choices made by Treasury. Proposed regulations define “substantially all” as either 90 percent or 70 percent,

THE DAY ONE AGENDA

CANDIDATE

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The candidates have focused less on taxes than you would expect in a presidential campaign. But there’s one executive action that’s been promised by some in the field that the front-runner might find ominous.

Both BERNIE SANDERS and ELIZABETH WARREN have promised to eliminate the “Gingrich-Edwards” loophole, where wealthy individuals use S corporation distributions on their earnings to avoid payroll taxes. JOE BIDEN not only hasn’t made this promise, he’s used this loophole. In 2017 and 2018, Biden and his wife Jill sheltered $13 million in earnings from speeches and book royalties through an S corporation. The tactic also conceals the source of the funds, leaving unclear who paid Biden for the speeches and how much. This could become an issue later in the race.

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depending on which section of the statute is at issue. When one stacks these generous definitions of “substantially all” on top of one another, a taxpayer might as a result get the opportunity zone tax break—deferral and partial exclusion of capital gains—even though less than half of the investment fund’s property consists of eligible property. Only a very business-friendly Treasury Department would interpret “substantially all” to mean “less than half.” A more progressive administration could rewrite the regulations to ensure that more investment in fact flows to poor neighborhoods.

The TCJA included a number of international provisions with an alphabet soup of names (GILTI, FDII, BEAT) that have mostly been interpreted in taxpayer-favorable ways.

Many of these provisions had an anti-abuse motive—that is, they were intended to ensure that U.S. corporations pay at least some tax on foreignderived income, and that foreign corporations pay at least some tax on U.S.-derived income. A new administration could issue guidance that better reflects what Congress intended.

A new president could order Treasury to issue guidance cracking down on old abuses as well. The Obama administration, while generally good on tax policy, did not use its authority as aggressively as some of us would have liked. A new administration might take a different approach.

Recall, for example, Mitt Romney’s IRA , which financial disclosure forms

Perhaps the most important thing the next president can do is to allocate more IRS resources to auditing the super-rich.

valued at between $22 million and $102 million. With contribution limits of a few thousand dollars per year, there is no way an IRA can grow that big without something fishy going on.

The most likely explanation is that Romney’s contributions were grossly undervalued to squeeze under IRS contribution limits. Some wealthy taxpayers play similar games with Roth IRA s, where future gains are not just deferred but go untaxed altogether. The Treasury Department could write regulations to force fair valuations of property contributed to IRA s, limit the types of property that can be held by IRA s, and take other steps to reduce IRA abuse.

Conservation easements are another playground for tax evaders. A conservation easement is a legal agreement to limit the use of land (or a portion of a property) for conservation purposes. A 1964 IRS ruling authorized landowners to take a charitable tax deduction for the value of the easement donated to the conservation trust or government agency that would oversee the easement. Creative landowners enlist friendly appraisers to inflate the value of the easement, sometimes even well beyond the market value of the entire parcel. In the worst of these transactions, promoters sell off pieces of the deal to individuals. While the IRS has cracked down on these “syndicated” deals, it remains an area with tons of abuse. The IRS could do more to crack down on these phony valuations.

There is the carried interest loophole, of course, which allows hedge fund and private equity managers to take much of their income as a capital gain, taxed at a lower rate. Treasury might have the authority to close that loophole entirely. Treasury could also act on related issues, such as revisiting regulations (proposed in 2016 but withdrawn by the Trump administration) that would have cracked down on “fee waivers,” a technique that fund managers use to convert ordinary income into low-taxed carried interest.

A new section of the tax code, enacted as part of TCJA , imposes a three-year holding period requirement for fund managers to take advantage of the carried interest tax break. The drafters of this code section allowed some loopholes that

make it easy for fund managers to avoid. Under the code section, fund managers can still keep that low capital gains rate by borrowing money from the fund itself and claiming it as a personal capital investment. Treasury could step in and shut down this and other techniques that make the code section easy to work around.

Another old chestnut is the “GingrichEdwards” tax shelter, most famously used by former Senator John Edwards and former Speaker of the House Newt Gingrich, which allows professionals to avoid the 3.8 percent Medicare tax by funneling income from professional services though a Subchapter S corporation.

That could be closed by treating more of the income passed through to the owner as salary income subject to payroll taxes rather than investment income, which is not subject to payroll taxes.

But perhaps the most important thing the next president can do is to allocate more IRS resources to auditing the super-rich. Our tax code is already peppered with perfectly legal opportunities for the rich to sharply reduce their tax burden. We ought to have little sympathy for those who, irked by paying any tax at all, cross the line from legal tax avoidance (such as holding on to appreciated stock) into illegal tax evasion (such as inflating charitable deductions with fake valuations).

In general, the IRS allocates audit resources like Willie Sutton, focusing attention at the high end, where the money is, and in areas with known compliance problems, such as EITC fraud. But audit rates at the top have plummeted in recent years as Congress has starved the IRS of resources. In 2015, the IRS audited 8.42 percent of taxpayers with adjusted gross income between $1 million and $5 million. By 2018, that figure dropped to 2.21 percent.

The decline is even starker for superrich taxpayers who make more than $10 million per year. In 2015, the IRS audited 34.69 percent of taxpayers who made more than $10 million. In 2018, that figure was 6.66 percent. But only the rich have benefited from this decline in IRS attention: Audit rates have mostly held steady for income groups below $100,000, and have even increased for those making between $50,000 and $75,000 (from 0.47

FALL 2019 THE AMERICAN PROSPECT 27

percent to a still-modest 0.54 percent).

Allocating more resources toward high-income earners could also enable more disclosure to policymakers about the nature of income and wealth and the ways the existing tax code is circumvented. It’s hard to make policy decisions without good information.

For example, we would know a lot more about whether a wealth tax was viable if we forced wealthy taxpayers to disclose the value of their assets every few years.

We could better understand the impact of changing the tax treatment of carried interest, founders’ stock, and other sources of private wealth by forcing large privately held partnerships and corporations to disclose the financial statements they provide to investors. These sorts of advances can only happen by shifting IRS resources to where the money is.

The temptation for tax evasion is even greater for those, like President Trump, who hold their business interests in partnerships. Slightly more than four million partnerships filed tax returns in 2017. Only 8,945 were audited, for an audit rate of only 0.2 percent, less than half the rate from 2015.

When I was a young lawyer, a partner whom I worked for explained to me that in certain areas of partnership tax, we—the tax lawyers hired by the partnership—effectively enforced the law. The law was complex and difficult, he said, and IRS resources were limited. The chances of an IRS agent ever questioning our work were about zero.

Twenty years later, with audit rates at 0.2 percent, the partner’s exaggeration has almost become literally true.

What the partner also meant was that we, as lawyers, had a duty to ensure that our clients obeyed the law, even if no one was watching. Playing the audit lottery was not a legitimate tax planning strategy. I wonder how many lawyers continue to hold that view. President Trump, after all, has bragged about not paying taxes for many years and has said that if he had paid taxes, the money would have been squandered. By cracking down on a few of these abuses, a new president could certainly change the tone at the top.

Victor Fleischer is a professor of law at the University of California, Irvine School of Law.

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Help 800,000 Workers Join a Union

One policy could facilitate a voice for the fastest-growing, and one of the lowest-paid, occupations in the U.S.

BY R A C HE L M. C O HEN

A

future president can leverage their executive authority to improve the working conditions of millions of home care and child care workers in the United States—low-paying, critical fields where more than 90 percent of workers are women. The easiest, and perhaps most straightforward, action the next president can take is restoring the union rights of over 800,000 home care workers. With a total of 14.7 million unionized workers in the U.S. in 2018, this single move is likely to generate a tangible increase in union density.

Home care workers provide support to elderly or ill patients in their own home. They include certified nursing assistants, personal health aides, and in some states family caregivers and companions. In addition to responsibilities like administering the proper dosage of medication, they assist with everyday tasks like bathing, meal preparation, and cleaning the home. Most of these workers are paid through their patients’ Medicaid coverage.

Home care is one of the fastestgrowing jobs in the U.S. economy.

The federal Bureau of Labor Statistics projects demand for home care workers will increase by 41 percent between 2016 and 2026 as more baby boomers head into retirement. And it’s also a notoriously low-paying profession, with median annual pay of just $24,000. Union protections can give these workers a voice on the job and bargaining leverage with states.

More than 500,000 home care workers are unionized through the Service Employees International Union. In 2014, the Obama administration facilitated this with the “Provider Payment Reassignment” rule, authorizing unions to automatically deduct dues from their

Medicaid-funded wages. Automatic dues deduction—also known as dues checkoff—makes it easier for workers to be union members, as they can permit their dues to be taken out of their wages directly, rather than deal with the hassle and chaos of sending their union individual checks each month.

Republicans correctly recognize that if they can make it harder to pay union dues, fewer workers will. Indeed, they have waged a long war on this checkoff provision, first at the state and more recently at the federal level.

Conservative activists have sought to nationalize what Republicans achieved in Michigan in 2013, by barring dues checkoff for home care workers in the state. Over the last six years, this has led to an 84 percent drop in SEIU Healthcare Michigan membership and a 74 percent drop in union revenue.

This attack on home care workers came on top of Michigan’s passage of right-to-work, which the U.S. Supreme Court effectively expanded for all public-sector workers in 2018 in the Janus ruling. Michigan activists, led by the right-wing Mackinac Center for Public Policy, have argued disingenuously that automatic union payments for home care workers amounts to exploitation and so-called “dues skimming.”

After successfully making home care dues checkoff illegal in Michigan, Republicans soon realized that getting other union-dense states to follow suit would be politically difficult, with their more labor-friendly lawmakers. So conservatives turned their attention to the federal government to hasten their antiunion agenda. The Koch-funded State Policy Network said their goal would be to get an administrative rule passed at Health and Human Services under Trump, and bragged on a private donor

THE DAY ONE AGENDA

call that they were “the only group that’s driving this effort at a national level.”

In May 2019, conservatives reached their goal, as the Trump administration’s Centers for Medicare and Medicaid Services (CMS) announced a new final rule barring home health care workers from automatically deducting union dues. The rule is currently being challenged in court, led by five state attorneys general and eight unionized home care workers. The plaintiffs argue that the Trump administration has illegally reinterpreted federal law “in service of anti-union objectives.”

While it remains to be seen if the courts will block the rule, a next president can restore workers’ union rights.

A future president could commit to immediately reversing this highly damaging decision, by scrapping the CMS rule. Doing so is within a president’s executive power, and does not require congressional approval.

While this would not overturn Michigan’s prohibition, which would still need its own state-level fix, the stakes remain high, not only for the current home care workforce but also for the workforce of the near future.

Potentially millions of home care staff would have an easier path to union membership if the Trump administration rule were eliminated, enabling workers to band together for higher pay, retirement benefits, and better working conditions.

An organized home care sector can also spur action on the looming longterm care crisis. In April, Washington state passed the nation’s first publicly funded long-term care benefit, a hard-fought victory by advocates including SEIU 775, which represents 45,000 home care workers in Washington and Montana. The law is poised to become a model for other states, but without strong labor backing, its prospects are dim.

The fight for a living wage goes right through the home care industry, and raising wages for the female-dominated profession would go a long way toward boosting pay equity nationwide. It also would be the most direct way to improve the fortunes of the labor movement, whose decline has accompanied setbacks for workers across the economy.

In this sense, restoring dues checkoff

for home care workers could positively impact even non-union worker wages.

A next president can also demonstrate their commitment to home care workers by using discretionary dollars from the federal Center for Medicare and Medicaid Innovation to fund demonstration programs assessing the impact of home care aides as key members of a patient’s health care team. Robyn Stone, the senior vice president of research at LeadingAge, a membership group of 6,000 nonprofits focused on elder care services, says that despite a recognition that home care aides deliver between 60 and 80 percent of all long-term care services, evidence of their actual impact on health care outcomes is overwhelmingly scant, which then makes it easier to devalue them as professionals delivering critical care.

The lack of research evidence is largely a reflection of society’s disregard for these workers more generally. A next president could begin rectifying this wrong by funding research to build the evidence base showing the importance of high-quality home care aides for the elderly, which could help estimate home care workers’ compensation value.

Home care is one of the fastestgrowing jobs in the U.S. economy.

Demand is expected to increase by 41 percent between 2016 and 2026, as baby boomers retire.

CANDIDATE

SPOT-

Where the candidates stand on this issue may intersect with how closely they have relied on labor in their political careers. In our questionnaire, BERNIE SANDERS promised to reverse the “anti-worker, anti-union rule” the Trump administration finalized to prevent home health care workers from deducting union dues from their Medicaid-funded wages. ELIZABETH WARREN also agreed to rescind the Trump regulation, saying in a statement that “we should make it easier for states to withhold union dues from Medicaid funds so that healthcare workers can unionize.” AMY KLOBUCHAR , JOE SESTAK , and BETO O’ROURKE support reversing the rule as well.

In 2018, when the Trump administration proposed the change, KAMALA HARRIS expressed opposition to it in a letter signed by the California congressional delegation (the state is a hotbed for unions). JOE BIDEN has spoken generically about stopping “Republican attempts to strip away workers’ rights to form unions and collectively bargain,” but not specifically about this issue. CORY BOOKER has similarly spoken vaguely about the importance of labor, without commenting on home health care workers.

LIGHT

Child care workers perform the critical work of caring for infants and toddlers. Many people across the country are still not well versed in the research evidence that shows the bulk of brain development happens in a child’s earliest years, and greater investments in our youngest learners can help close the achievement gap, and help more students graduate from high school and avoid the criminal justice system. A next president can use the power of the White House to elevate the issue of properly investing in young children.

In 2018, local elected officials in Washington, D.C., passed the most progressive legislation in the nation on this front. A key piece of the comprehensive bill is to raise the wages of early-childhood workers, a largely female and immigrant workforce.

While a president would need Congress to pass similar legislation on the federal level, they could begin elevating the importance of the issue by championing the District’s Birth-toThree for All DC Act. “State leaders must embrace their youngest constituents and share in the investment if we are to address this national need,” says Patricia Cole, senior director of federal policy at ZERO TO THREE . “But federal leadership is also essential. I would call on the president to convene a summit with the nation’s governors to underscore the high stakes for our future in solving the child care conundrum.”

Lastly, a next president must commit to prioritizing the scarcity of child care in the U.S. by ensuring that all candidates and administrators for the Departments of Education and Health and Human Services are committed to expanding access to earlychildhood learning, and by extension direct some existing federal funding streams—such as through Head Start and the Every Student Succeeds Act— to professional development for earlychildhood workers. Without a strong push from the federal level, the dearth of available child care opportunities will likely grow more severe.

Rachel M. Cohen is a journalist based in Washington, D.C., and a former Prospect writing fellow.

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Wait a Minute, Could John Roberts Block All of This?

How the Supreme Court might frustrate the effort to use statutory authority to advance a progressive agenda, and why the next president should follow through anyway

BY S C O T T L E M I EU X

E

xisting statutes give presidents a wide range of discretion to make policy choices and advance a progressive agenda through the existing regulatory state. There is, however, a big catch: the Roberts Court.

The most recent term sent strong signals that the Supreme Court is preparing to take power from the executive branch and arrogate it to itself.

After the constitutional crisis created by judicial attacks on the New Deal during FDR’s first term, the Supreme Court established doctrines that gave wide deference to the ability of the federal government to regulate the economy and to authorize executive agencies to implement broad policy objectives under statutory authority granted by Congress. And despite successfully rolling back liberal victories in other areas, the Burger and Rehnquist Courts mostly left these doctrines in place. But conservatives on the federal bench are showing signs of becoming bolder. Some of these involve attacks on legislative power based on the Commerce Clause, which nearly got the Affordable Care Act struck down. But there are increasing signals that the Roberts Court is about to revive long-discredited doctrines, or invent new ones, to attack the federal regulatory state as well.

NONDELEGATION DOCTRINE

What may prove one of the most important cases of the Supreme Court’s most recent term seems innocuous on its face. In a 5-3 decision in Gundy v. United States, the Court upheld a provision of the Sex Offender Registration and Notification Act, authorizing the attorney general “to prescribe rules” concerning offenders who would have to register as a

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sex offender although they had not previously been required to. Under existing law, this was an easy case. As Justice Kagan wrote for a plurality of the Court, “as compared to the delegations we have upheld in the past,” the SORNA provision is “distinctly smallbore” and “falls well within constitutional bounds.” So far, so good.

But the other opinions in the case are ominous. Justice Neil Gorsuch’s dissent was joined by Chief Justice Roberts and Justice Thomas, and almost certainly would have been joined by Justice Brett Kavanaugh had he been on the Court when the case was heard. Most disturbingly, Justice Samuel Alito filed a concurrence that did not join any part of Kagan’s opinion. Alito conceded that the provision of SORNA was constitutional under existing rules and it would be “freakish” to single it out, but “[i]f a majority of this Court were willing to reconsider the approach we have taken for the past 84 years, I would support that effort.” Kavan­ augh’s confirmation almost certainly gives Alito the majority he seeks.

The “nondelegation” doctrine is based on the premise that Congress acts unconstitutionally when it delegates its legislative authority to the executive branch by authorizing it to make policy choices. The doctrine was invoked in two 1935 decisions—Panama Refining v. Ryan and Schechter Poultry v. U.S.—to hold the National Industrial Recovery Act unconstitutional. However, the Court quickly (and correctly) abandoned the doctrine as an unworkable dead end. As Alito observed in his concurrence, even as the administrative and regulatory state has proliferated, the Court has not struck down an act of

The courts will be a significant constraint on the next Democratic administration, but that doesn’t mean giving up preemptively.

Congress under the doctrine in the subsequent 84 years.

What’s particularly disturbing about Gundy is that (unlike with the NIRA) there is nothing remotely unusual or novel about the delegation involved. Congress made a clear policy choice and simply left it to the executive branch to use its expertise to determine how it would be best implemented. Whole branches of administrative law are authorized by delegations less specific about policy than the one at issue in that case; practically the entire Dodd-Frank Act was left to executive branch agencies to decide the technicalities of financial regulation. As Kagan put it in her opinion, “if SORNA’s delegation is unconstitutional, then most of Government is unconstitutional.”

Nondelegation doctrine can sound superficially attractive—having elected officials make clearer choices sounds like a good thing. But as the political scientist George Lovell observed in an article defending the abandonment of the doctrine, the idea that the judiciary can force Congress to make clearer choices is naïve and ahistorical. Before the development of the modern regulatory state, Congress still routinely passed legislation that was accidentally or purposely vague, or simply refused to address major policy areas, allowing judges or state and local officials who are more easily captured by powerful interests to fill in the gaps.

Of course, the problem is that this is the future many conservatives want.

And because if the provision of SORNA is unconstitutional most of the U.S. Code is logically unconstitutional, conservative judges will have a plausible argument against any regulatory action made by a Warren or Sanders administration that offends them.

THE END OF AUER AND CHEVRON DEFERENCE?

Two important lines of doctrine hold that the courts should generally be deferential to executive branch agencies.

Chevron v. Natural Resources Defense Council (1984) held that if an agency rule did not contradict the relevant statutory text, courts should defer to agencies as long as their actions are “permissible” under the statute. And

THE DAY ONE AGENDA

Auer v. Robbins (1997) held that courts should defer to agency interpretations of their own rules unless the reading was “plainly erroneous.” Unlike many of the doctrines in the crosshairs of the Roberts Court, Chevron and Auer deference were not solely the creations of liberal judges. Indeed, both opinions were unanimous, and the latter was written by very conservative Justice Antonin Scalia.

But the political context has changed. A generation of conservatives liked agency deference because of the battles that the Nixon and Reagan administrations had with more liberal judiciaries. Today, younger conservatives are more skeptical of deference to executive branch agencies, a skepticism intensified by the second term of the Obama

administration. The Court has already begun to take a more aggressive posture.

When Roberts wrote the majority opinion in King v. Burwell, correctly rejecting an argument that would have made the Affordable Care Act’s tax credits to purchase insurance on state health insurance markets unconstitutional based on a hyperliteral reading of an isolated clause of the statute, he could have simply deferred to the interpretation of the law given by the IRS under Chevron.

But Roberts refused to apply Chevron. Instead, he argued that, because the case concerned a matter of great “economic and political significance,” Congress could not have wanted to delegate the policy choice to an executive agency, and so it was up to the

Court to definitively interpret the statute. This exception to Chevron doctrine is far from unique—the Court’s four most conservative justices have repeatedly argued that the doctrine should be severely limited or overruled, and with Kavanaugh on the Court this is very likely to happen.

In a ruling issued last June, the Court declined to overrule Auer deference outright in an opinion written

by Elena Kagan. Every Republican nominee except Roberts joined concurrences by Brett Kavanaugh and/ or Neil Gorsuch urging the overruling of the doctrine. However, Kagan’s opinion was so focused on emphasizing the limitations on the Auer doctrine that the Cato Institute pronounced itself as having effectively won, with Auer reduced to a “paper

FALL 2019 THE AMERICAN PROSPECT 31

tiger.” Kagan acknowledged three exceptions to Auer deference: When the authorizing text is unambiguous, when the interpretation in question does not reflect agency expertise, and when the agency’s interpretation has changed, Auer deference may not apply. Gorsuch’s concurrence declared that the doctrine emerged from Kagan’s opinion “enfeebled” and “zombified.”

Because of the substantial exceptions to both doctrines, what matters is not so much whether they are formally overruled as the general posture that the Court takes to executive agencies. Roberts in particular has made it a longtime specialty to nominally uphold precedents while slowly hollowing them out. And a majority of the Court seems prepared to take a more aggressive stance toward the executive branch. While Trump is in office, the Court may not move the needle much, but the next Democratic administration is likely to find a Court that’s more eager to substitute its own judgments for those of executive agencies. Many more policy questions are

Judicial decisionmaking is a complex interplay between policy preferences and legal factors; attention to detail and procedure will matter.

How About Packing the Court?

D

emocratic presidents would have options if the Supreme Court began to nullify administrative actions.

The Constitution does not specify how many justices must sit on the Supreme Court; the number shifted over time until the Judiciary Act of 1869 settled on nine. In 1937, Franklin Roosevelt announced a plan to expand the Court to as many as 15 judges, by appointing an “assistant” justice with full voting rights for every member of the Court over the age of 70 years and six months. This was derided as a “court-packing” scheme, and it never got a vote in Congress. However, the Court got the message. Weeks after FDR introduced the plan, Justice Owen Roberts joined New Deal liberals to approve a minimum-wage law in the state of Washington. The reversal seemed timed to preserve the structure of the Court; it became known as “the switch in time that saved nine.”

Some law professors have endorsed court-packing as a last resort, both PETE BUTTIGIEG and BETO O’ROURKE have mused about the idea, and ELIZABETH WARREN and KAMALA HARRIS refused to rule it out. Others have endorsed 18-year term limits for Supreme Court justices. Of course, either of those options would require legislation, not executive action.

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likely to be determined to be “major” by the Supreme Court for the purposes of Chevron deference, and Auer has so many holes as to provide little constraint on future Courts, even if it formally remains in place.

THE ELEPHANT IN THE MOUSEHOLE

Another exception that has been carved out of the general deference given to executive agencies is the socalled “elephant in the mousehole” doctrine. The phrase comes from a Scalia opinion in which he asserted that “Congress, we have held, does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” In such cases, the courts are not required to defer to executive agency opinions, because they lack proper legislative authorization. Both the Supreme Court and various lower courts have invoked the doctrine as a reason to reject rules promulgated by executive agencies.

The legal scholars Jacob Loshin and Aaron Nielson have argued that the “elephant in the mousehole” doctrine is essentially a variant of nondelegation doctrine, and is “not a workable reincarnation” of nondelegation “because it is not amendable to consistent application.” Whether courts are dealing with a mouse or elephant is likely to be driven mostly by policy concerns. But precisely because of its plasticity, this doctrine will be another useful tool for conservatives who wish to replace the policy preferences of agency officials with their own.

CONCERN, BUT NOT DEFEATISM

With conservative judges preparing for war with the administrative state, at least the next time it’s controlled by a president whose policy preferences they will generally oppose, it’s tempting to lapse into fatalism. If courts will undo the work done by executive agencies under the next Democratic administration, is it even worth thinking about what the next Democratic administration can accomplish without Congress?

This would be going too far. The courts will be a significant constraint on the next Democratic administration,

but that doesn’t mean giving up preemptively.

Even during the infamous Lochner era, in which the Supreme Court struck down economic regulations with a frequency unseen before or since, most progressive regulations survived. The Court had to come up with various tortured rationalizations to explain why states could regulate the hours of some demonstrably dangerous professions but not others, or why Congress could ban the interstate shipment of lottery tickets but not goods made with child labor. These explanations were never persuasive or coherent, but the key point is that most of the time the reforms enacted by creative legislators survived, even in a very hostile judicial environment.

The next Democratic president should still seek to use their authority creatively and boldly.

Another important point, given the judicial environment, is that attention to detail and procedure will matter.

The Supreme Court is a political institution, but that isn’t to say that the law doesn’t matter at all. Judicial decision-making is a complex interplay between policy preferences and legal factors. With issues that are a top priority for elite Republicans—such as, say, gutting the Voting Rights Act— the relative strength of the legal arguments basically doesn’t matter. But for lower-order issues, it might. The next Democratic administration needs to avoid giving Republican courts an excuse by making procedural or technical mistakes. Being careful won’t save every threatened regulatory action, but it might save some.

This is not to say that concern about what the new, more conservative Roberts Court will do is unfounded. There will be a lot of bad decisions, and the next Democratic administration will find some of its good work trashed by the courts. But that’s no reason to give up, either. Democrats need to be thinking now about how to use the administrative and regulatory state the next time they control it.

Scott Lemieux is a political science professor at the University of Washington. He writes for the blog Lawyers, Guns & Money.

The Forty-Year War William Barr’s long struggle to create an imperial presidency B Y R E PR E S E N TAT I V E B R A D M I L L E R

Attorney General William Barr in 2019

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I

‘‘

(o p p o s i t e pa g e ) j o s e lu i s m a g a n a / a p i m a g e s ; ( t h i s pa g e ) s c o t t a p p l e w h i t e / a p i m a g e s

have Article II, where I have the right to do whatever I want as president,” Donald Trump said in a recent speech to a far-right-wing campus organization. Trump is not a constitutional scholar, and he would not care at all about “constitutional architecture” were he not president. So where did this sweeping claim to executive power come from?

Trump’s claims are largely motivated by selfinterest, as all of Trump’s motivations begin with “self,” rather than any doctrinal belief.

Congressional investigations may expose his venality and perhaps criminality, so Trump will fight them tooth and nail.

But for Trump’s attorney general, William Barr, and others on the right, the effort to take power for the president from the courts and especially from Congress has been a 40-year project.

Barr and his comrades may find statements like “I have Article II” crass and narcissistic, but in their view Trump is generally correct. Executive power maximalists argue that the “original intent” of the framers of the Constitution was to create a strong president with concentrated power and a largely advisory Congress.

The historical evidence for that argument is exceedingly thin.

Yet Trump and Barr alike will adopt any means necessary to defeat challenges to presidential power, which even includes false testimony under oath by senior administration officials in judicial proceedings, as was the case in the failed effort to justify a citizenship question on the 2020 census. The claim to presidential power that may be most dangerous to democracy is the power to ration information to Congress and the American people.

Neither Congress nor the courts nor voters can effectively check power abused in secret. And Congress’s power to require information from the president may be the power most difficult to reclaim if Congress yields that power in a tactical retreat in advance of the 2020 election.

For Barr, this central confrontation with Congress over Congress’s power to investigate represents unfinished business.

AN ABUNDANT BODY OF LAW and democratic

thought, some eloquently stated, supports the power of Congress to inform itself and the American people. Congress first demanded information from the executive branch in George

The lawyers favored a much stronger presidency. They argued that the presidency had been stripped of proper constitutional powers in the aftermath of Watergate, but their proposals went well beyond reversal of post-Watergate reforms. Edwin Meese, the attorney general and most influential lawyer in the Reagan administration, questioned the constitutionality of independent agencies and suggested that the president could disregard Supreme Court decisions with which the president disagreed.

They decided to challenge Congress’s oversight power. Two House committees began an investigation into alleged political interference in enforcement and spending by the Environmental Protection Agency under the Superfund Act. President Reagan claimed

Washington’s first term, after a disastrous military expedition to the nation’s far-western frontier, Ohio. Many members of Congress, such as Representative James Madison, had been delegates to the Constitutional Convention and knew the framers’ “original intent.”

“The power of inquiry has been employed

by Congress throughout our history,” Supreme Court Justice John Marshall Harlan wrote in 1959, “over the whole range of the national interests concerning which Congress might legislate or decide upon due investigation not to legislate; it has similarly been utilized in determining what to appropriate from the national purse, or whether to appropriate.

The scope of the power of inquiry, in short, is as penetrating and farreaching as the potential power to enact and appropriate under the Constitution.”

A prominent American political scientist, Woodrow Wilson, 1982 said that the “informing function William Barr was one of a group of lawyers working in the Reagan and George of Congress should be preferred H.W. Bush administrations who held fringe views on presidential power. even to its legislative function.”

Congress’s “proper duty,” Wilson said, is “to executive privilege and directed EPA not to look diligently into every affair of govern- produce subpoenaed documents. The House ment and to talk much about what it sees. It held the EPA director, Anne Gorsuch Burford is meant to be the eyes and the voice, and to (Supreme Court Justice Neil Gorsuch’s mothembody the wisdom and will of its constitu- er), in contempt. ents.” If Congress is derelict in that duty, then DOJ’s Office of Legal Counsel (OLC) issued an “the country must be helpless to learn how it opinion that DOJ need not prosecute criminal is being served.” contempt of Congress charges that the House The Reagan administration upended this referred, despite statutory language that they rough consensus, bringing in a cadre of right- must. Armed with that opinion, DOJ refused ist lawyers to the Justice Department and the to prosecute. It apparently dawned on Burford White House with what were then seen as that the lawyers in the White House and DOJ fringe views on presidential power. (To most who wanted the fight with Congress did not legal scholars, those views are still fringe.) Barr risk jail time—but she did. Unnamed Burford was one of their number. Barr worked in the aides told reporters that Burford wanted to White House on legal policy for 16 months in provide subpoenaed documents to Congress, Reagan’s first term. but Reagan ordered her to stand down.

FALL 2019 THE AMERICAN PROSPECT 35

1988 Chief Justice William Rehnquist dealt a blow to the Reaganites when he upheld the constitutionality of the independent counsel law in his Morrison v. Olson opinion.

Career EPA employees leaked damaging evidence of misconduct by Burford’s leadership team. Representative John Dingell, the fiercest practitioner of congressional oversight in American history, said his committee had evidence of criminal conduct at EPA . Burford fired Rita Lavelle, the head of the Superfund program. Lavelle was later convicted of perjury in the House investigation.

The fight against the congressional investigation of the Superfund program unraveled.

Reagan agreed to produce all of the subpoenaed documents with minor redactions in what the House committees made public, and the House agreed to drop the contempt charge against Burford. While Reagan said publicly that Burford could stay in her job as long as she wanted it, unnamed aides told reporters that she should resign. Burford responded by resigning, so EPA could perform its important work without distraction, she said.

It would get worse for the Reaganite effort to defeat congressional oversight. The House Judiciary Committee opened an investigation into whether the DOJ had obstructed the congressional investigation into the Superfund program. The committee questioned whether DOJ should have the power both to advise the administration to disobey congressional sub-

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poenas and to decide whether to prosecute criminal contempt of Congress.

DOJ provided the committee some documents, but the committee later obtained more revealing documents that the Justice Department had not disclosed. The committee demanded the appointment of an independent counsel for possible criminal charges against Theodore Olson, the former head of OLC (and later the Republican lawyer in Bush v. Gore), for obstruction of the committee’s investigation and for perjury. Independent counsels had all of the investigative and prosecutorial powers that DOJ had, and could not be fired without good cause.

To Reaganites, every syllable of the independent counsel law was an unconstitutional encroachment on presidential power. Their overarching legal theory was the “unitary executive,” a phrase snatched from one of the Federalist Papers that explained why the

tive Branch is called upon to investigate its own high-ranking officers” justified the procedures established by the law. But Rehnquist did not limit the decision to those circumstances.

The opinion quoted accounts that the delegates to the Constitutional Convention seriously considered giving the Senate the power to appoint executive branch officials as a check on the president, a far cry from the argument that the “original intent” of the framers of the Constitution was to create a powerful “unitary executive.” Rehnquist’s opinion relied on a 1935 Supreme Court decision, Humphrey’s Executor v. United States, which approved the independence of the Federal Trade Commission, a decision that Reaganites hoped the Court would reverse.

The sole dissenter was Antonin Scalia, who described Morrison v. Olson years later as the “most wrenching” case in his time on the Court.

“To take away the power to prosecute from the

The claim to presidential power that may be most dangerous to democracy is the power to ration information to Congress and the American people.

Constitution did not give executive powers to a committee, as many favored. Reaganites argued that the Constitution granted all executive power to a single official, the president, and any attempt by Congress or the courts to limit that power, or to assign any executive function to anyone else, was unconstitutional.

Their legal theories were put to the test in the Olson case. The law at the time had a hair-trigger requirement to refer evidence of criminal misconduct by senior government officials to outside counsel. Meese did so, and the appointed independent counsel issued subpoenas to Olson and others. Olson filed a lawsuit to quash the subpoena and to declare the independent counsel law unconstitutional. The Reagan administration supported the lawsuit, Morrison v. Olson, which reached the Supreme Court.

Chief Justice William Rehnquist wrote the majority opinion, finding no problem with anything in the independent counsel law. The opinion stated that “the conflicts of interest that could arise in situations when the Execu-

president and give it to somebody who’s not under his control is a terrible erosion of presidential power,” Scalia said. “And it was wrenching not only because it came out wrong—I was the sole dissenter—but because the decision was written by Rehnquist, who had been head of the Office of Legal Counsel, before me, and who I thought would realize the importance of that power of the president to prosecute.”

Rehnquist addressed Scalia’s dissent in a three-sentence footnote, saying that Scalia’s argument required a “rigid demarcation” of presidential power, “a demarcation incapable of being altered by law in the slightest degree.”

REAGANITES HAD THEIR ASSES handed to

them in their fights with Congress, but William Barr wanted no truce.

Barr followed Rehnquist, Scalia, and Olson as head of OLC at the beginning of the George H.W. Bush presidency in 1989, less than a year after the Supreme Court decided Morrison v. Olson. OLC supposedly provides detached

1992

( l e f t ) j o e m a r q u e t t e / a p i m a g e s ; ( r i g h t ) m a u r e e n k e at i n g / c q r o l l c a l l v i a a p i m a g e s

Edwin Meese, Reagan’s attorney general, with Reagan’s defense secretary Casper Weinberger, who was indicted in the Iran-Contra scandal. In the last month of his presidency, George H.W. Bush pardoned Weinberger, at the suggestion of his attorney general, William Barr. Representative Dick Cheney (right) argued that the Iran-Contra participants were right to ignore the statutes.

legal advice to the president and the executive branch, and advises when proposed policies or actions cross constitutional red lines.

But OLC can also contrive arguments that the law allows or even requires whatever the president wants to do. It is almost impossible for a later administration to prosecute an employee of the federal government, civilian or military, for illegal actions, as long as OLC advised that the actions were legal at the time. In effect, OLC can pardon acts not yet committed. OLC’s power obviously can be abused, but it’s not always possible to know when or how that occurs, because OLC opinions are often secret, as is the conduct that OLC opinions approve.

Barr wrote and circulated throughout the executive branch a militant memorandum entitled “Common Legislative Encroachments on Executive Branch Authority.” The memo called for aggressive challenges to Congress’s claims to authority: “Only by consistently and forcefully resisting such congressional incursions can executive branch prerogatives be preserved.”

The memo treated the decision in Morrison v. Olson as narrowly limited to prosecution of senior executive branch officials, despite Rehnquist’s broad language. “The President,” Barr said, “as the head of a unitary executive branch, has a duty to ‘take Care that the Laws be faithfully executed,’ to coordinate and

supervise his subordinates, and to ensure that the executive branch speaks with one voice.”

According to Barr, the president alone decided what information Congress should have about executive functions. Statutory “dual reporting requirements” that executive branch agencies provide Congress the same budget requests and legislative proposals that agencies send within the executive branch constituted an unconstitutional “effort to insert [Congress] into the executive branch decisionmaking process.” Executive branch agencies should interpret any such statutory requirement “as applying only to ‘final’ recommendations that have been reviewed and approved by the appropriate superiors within the executive branch.”

Barr wrote that Congress’s demands for information about “the most sensitive executive branch information … should be resisted … as an unconstitutional encroachment on the President’s constitutional responsibility to protect certain information.” Furthermore, he made this broad claim of power to control information: “The President must retain the authority to withhold in the public interest information whose disclosure might significantly impair the conduct of foreign relations, the national security, the deliberative processes of the executive branch or the performance of its constitutional duties.”

The bread and butter of congressional oversight of the executive branch is to examine executive branch actions and the reasons for those actions. According to Barr, none of that is any of Congress’s business.

TO BARR, THE IRAN-CONTRA scandal was

an executive powers issue. The scandal began in the Reagan administration and consumed much of the Bush 41 administration.

The initial scandal involved the secret sale of weapons to Iran and the use of the proceeds to fund an anti-communist insurgency in Nicaragua, the Contras. Both sales of weapons to Iran and aid to the Contras were forbidden by legislation. Barr regarded the legislation as unconstitutional, describing attempts by Congress to “insert itself in the area of foreign affairs at the expense of the authority traditionally exercised by the President” as an encroachment on the president’s powers.

The House select committee that investigated the transactions issued a scathing bipartisan report. The report found that a “cabal of zealots” with “disdain for the law” violated the statutes that forbade the transactions. The Reagan administration had one important ally in Congress: Representative Dick Cheney from Wyoming. Cheney said that the participants in the Iran-Contra transactions properly

FALL 2019 THE AMERICAN PROSPECT 37

ignored the statutes. “Judgments about the Iran-Contra affair ultimately must rest upon one’s views about the proper roles of Congress and the President in foreign policy,” Cheney wrote in a minority report.

The prosecutions of Iran-Contra defendants were not for violation of the statutes that forbade the transactions, but for the cover-up.

Two of Reagan’s national security advisors, the assistant secretary of state, and high-ranking officials of the Central Intelligence Agency were convicted of charges that included perjury and false statements, destroying or withholding evidence, obstruction of justice, and conspiracy.

Shortly before the 1992 election, the grand jury indicted Caspar Weinberger, Reagan’s secretary of defense, on two counts of perjury and one count of obstruction of justice. On Christmas Eve, with less than a month of his presidency left, Bush pardoned Weinberger and five other participants already convicted in the scandal. Both Bush and Barr, who by then was attorney general, said the pardons were Barr’s idea.

“The Iran-Contra cover-up, which has continued for more than six years, has now been completed,” said the special prosecutor in the Iran-Contra case, Lawrence Walsh. Barr said that “people in this Iran-Contra matter have been prosecuted for the kind of conduct that would not have been considered criminal or prosecutable by the Justice Department.” Neither Barr nor Walsh concealed their mutual animosity.

BARR DID NOT SERVE IN the George W.

Bush administration, but his Iran-Contra ally, Vice President Cheney, carried on the fight for expansive presidential power. The Bush administration claimed the power to ignore hundreds of laws enacted by Congress and signed by the president, in “signing statements” appended to newly enacted legislation, and in OLC opinions for laws already on the books.

Congress could override a veto, but not a signing statement or an OLC opinion.

Bush claimed the power to ignore laws like those that forbade the Iran-Contra transactions. He signed an appropriation to support the government of Colombia in the fight against Marxist guerrillas, but issued a signing statement that he could ignore the provision that forbade combat operations by U.S. troops.

38 WWW.PROSPECT.ORG FALL 2019

He signed an appropriation to combat terrorism, but issued a signing statement that he could ignore the provisions that forbade the diversion of funds from authorized programs to secret programs, such as “black sites” where suspected terrorists were held.

An OLC opinion claimed the power to conduct warrantless wiretaps, despite a 1978 law, and signing statements for new legislation claimed the power to ignore limits on surveillance set by Congress. Bush claimed the power to ignore laws that forbade “enhanced interrogation” techniques, practices regarded in international law as torture.

Bush claimed the power to fire executive branch employees who leaked information to Congress, despite statutory whistle-blower protections. He claimed the power to ignore requirements to provide information and reports to congressional oversight committees.

Oversight provisions of the Patriot Act

DEMOCRATS WON CONTROL OF the House

in the 2006 election and I became the chairman of the House Science Committee’s Investigations and Oversight Subcommittee for the last two years of the Bush presidency. We were much more aggressive than most oversight subcommittees. But when the Bush administration used any means necessary to defeat our oversight, they succeeded.

The Government Accountability Office (GAO), an arm of Congress, issued a report on data mining programs at five federal agencies.

The report found that none of the programs complied with federal legal requirements for privacy safeguards and data security. The programs were initially intended to identify noncitizens with possible ties to terrorist organizations who applied for visas to enter the United States, but they had grown.

The FBI’s program, in particular, sounded suspiciously like the Defense Department’s

The heart of congressional oversight is to examine executive branch actions and the reasons for those actions. According to Barr, none of that is any of Congress’s business. required the president to inform Congress how the FBI used new powers to conduct secret searches and to seize documents held by others, to prevent abuse of the statute. “The executive branch shall construe the provisions … that call for furnishing information to entities outside the executive branch,” a signing statement said of the act’s requirement to provide information to Congress, “… in a manner consistent with the president’s constitutional authority to supervise the unitary executive branch and to withhold information.” Bush said he would withhold information if he thought disclosure would “impair foreign relations, national security, the deliberative process of the executive, or the performance of the executive’s constitutional duties,” language almost identical to Barr’s 1989 OLC memo.

The claim of presidential power to ignore laws enacted by Congress was a considered, systematic effort to expand the power of the president at the expense of the powers of Congress and of the courts. The effort was largely successful.

controversial Total Information Awareness program, for which Congress eliminated funding in 2003. Even in the immediate aftermath of 9/11, the program sounded too Orwellian for Democrats and Republicans alike. The FBI’s program would collect and correlate information to “identify relationships between individuals, locations, and events that may be indicators of terrorist or other activities of interest.” Identifying possible “sleeper cells” of terrorists would undoubtedly be helpful to law enforcement, but security experts outside of government were skeptical of “predictive” data mining. There were concerns about privacy and civil liberties, data security, and whether a flood of false positives would be more distracting to law enforcement than helpful. I was not reflexively opposed to the program, but I wanted to know more.

Jim Sensenbrenner, the ranking Republican on the subcommittee, and I wrote GAO on June 5, 2007, to ask for more information about the FBI’s program. John Tierney, the chair of the

2003

ron edmonds / ap images

As George W. Bush’s vice president, Dick Cheney served in an administration that continued the fight for expansive presidential power. Bush ignored hundreds of laws enacted by Congress, including those that forbade the Iran-Contra transactions.

relevant subcommittee of the House Oversight and Government Reform Committee, joined our request.

We wanted to know what information would be collected. The FBI said that the program would collect approximately six billion “records,” but did not say what kinds. We asked how data would be analyzed to identify suspicious conduct, and what was considered suspicious. We asked if the information collected and analyzed would include information about American citizens, and how the program would meet privacy requirements under federal law. Since the FBI sought $12 million in appropriations for the program, to pay for 90,000 square feet of office space and a total staff of 59, our request was well within congressional oversight power. In addition, federal information technology programs had an abysmal history—an FBI computer consultant had recently hacked into the records of the FBI’s witness protection program—and the FBI’s history of surveillance of civil rights activists, among others, was worse.

DOJ officials ignored repeated requests by GAO to discuss the program. When DOJ officials finally met with GAO investigators, the meeting was brief and belligerent. DOJ officials

claimed that GAO’s request for information involved a national security program, which was “exempt” from GAO’s jurisdiction. That was not true. GAO’s jurisdiction is the same as Congress’s. GAO has employees with the highest security clearances and routinely reviews the most sensitive information on Congress’s behalf. GAO’s capacity to handle national security information was in fact why we asked GAO to conduct the inquiry instead of subcommittee staff. Later, DOJ said that there were no “written plans” that would answer our questions because the program was not yet operational, which was not at all credible.

The power of the purse is Congress’s foundational constitutional power. We wrote Dave Obey, chairman of the House Appropriations Committee, asking to eliminate funding for the program from DOJ’s appropriation. Obey, an inveterate civil libertarian and skeptic of the executive branch, obliged. I expected that DOJ would relent, provide the information that we wanted, and we would restore the program’s funding. Instead, the elimination of the program’s funding went through the House and the Senate without discussion and was signed into law by the president. We never heard about the program again.

Did we really kill the program? Almost certainly not. The Bush administration claimed the power to divert funds appropriated by Congress from approved programs to secret programs not approved or even forbidden by Congress. DOJ almost certainly moved the program to a “dark” part of the FBI’s budget. Executive branch agencies continue to conduct predictive data mining without congressional oversight.

The Savannah River Ecology Lab was established in 1951 to study effects on the environment from the Savannah River nuclear weapons facility, but did other internationally renowned environmental research. The lab was part of the University of Georgia, but the funding was federal. Past research showed that some shortcuts in cleanups were harmless to the environment and saved billions. In 2007, the Department of Energy abruptly eliminated the lab’s funding. The lab had recently released research that toxins in coal-fired power plant emissions contaminated soil and surface water hundreds of miles away. The rumor was that Vice President Cheney ordered the lab’s funding pulled as a favor to the coal industry.

Nick Lampson, chairman of the Science Committee’s Energy and Environment Subcommittee, and I requested that DOE produce documents regarding why they’d pulled the lab’s funding. There were no such documents, DOE responded. There were no emails, no memoranda, no notes from meetings, nothing. They talked among themselves about the funding for the lab, decided to save the money, and moved on to whatever was next. We held a hearing and DOE witnesses testified implausibly that they’d killed the lab’s funding to save money without any bureaucratic analysis of the lab’s work.

DOE’s claim that there were no documents about the decision was as false as anything Rita Lavelle or the Iran-Contra defendants told Congress, but no whistle-blower leaked documents that revealed the truth. We were stymied.

HOUSE DEMOCRATS DID TAKE one over-

sight dispute with the Bush administration to court and won, after a fashion. In 2006, DOJ forced nine U.S. attorneys to resign. The circumstances strongly suggested that the administration fired the U.S. attorneys for bringing prosecutions that hurt Republicans politically and for failing to bring prosecutions

FALL 2019 THE AMERICAN PROSPECT 39

that might hurt Democrats, such as for bogus voter fraud charges. It was fairly clear that the decision was made at the White House. The House Judiciary Committee subpoenaed the president’s chief of staff, Josh Bolten, and the White House counsel, Harriet Miers.

The Bush administration refused to provide subpoenaed documents or to allow Bolten or Miers to testify. The administration argued that the House had no legitimate “legislative purpose” for the investigation, and no authority, because the power to remove executive branch officials was the president’s alone. The administration added that Bolten and Miers were “absolutely immune” from congressional subpoena.

The House filed a civil lawsuit to ask the court to decide whether the House was entitled to the subpoenaed information, and if so, to order the administration to obey the congressional subpoenas. The trial judge ruled that the forced resignations were within Congress’s authority to investigate. The House investigation was “a broader inquiry into whether improper partisan considerations have influenced prosecutorial discretion … It defies both reason and precedent to say that the Committee, which is charged with oversight of DOJ generally, cannot permissibly employ its investigative resources on this subject.”

The trial judge was even less impressed by the argument that Bolten and Miers had absolute immunity from congressional subpoena.

“The Executive cannot identify a single judicial opinion that recognizes absolute immunity for senior presidential advisors in this or any other context,” wrote the trial judge. The only authority the Bush administration could provide for absolute immunity was OLC opinions, a “because I said so” argument. The court said that OLC opinions are “entitled to only as much weight as the force of their reasoning will support,” which was not much at all. One OLC opinion was three pages, had no citation of legal authority, and was “hastily issued on the same day that the President instructed” a senior White House official not to testify.

The administration sought to be “judge of its own privilege through the assertion of absolute immunity,” the trial judge said, an argument that “rests upon a discredited notion of executive power and privilege.”

The case languished on appeal for months,

40 WWW.PROSPECT.ORG FALL 2019

however. The public’s attention turned elsewhere, and when the new Obama administration provided subpoenaed information about the forced resignations, abuses of power by the last administration were old news.

BARR WAS OUT OF GOVERNMENT through the

Clinton, George W. Bush, and Obama presidencies, but remained a constant presence in rightist legal circles. On June 8, 2018, Barr sent an unsolicited memo to Rod Rosenstein, the deputy attorney general to whom Robert Mueller then reported, and to Steve Engel, who headed the OLC, entitled “Re: Mueller’s ‘Obstruction’ Theory.” Trump’s firing of Jim Comey as director of the FBI could not be obstruction of justice regardless of Trump’s motives, Barr argued, because the president’s power to remove executive branch officials is “illimitable.”

Trump’s effort to persuade Comey to “let go” of the investigation of National Security

subpoena power. According to OLC , senior White House officials have “absolute immunity from congressional compulsion to testify about matters that occur during the course of discharging their official duties.” It was the same meager analysis from a decade earlier, still with no legal authority except OLC opinions.

OLC advised that the Treasury Department should not provide the House Ways and Means Committee with Trump’s tax returns, despite a statute that requires Treasury to do so. “The Committee’s authority under [the statute] … may not exceed the constitutional limitations on congressional power, which require that any committee investigation must serve a legitimate legislative purpose … [T]he separation of powers dictates that a congressional request cannot require the agency to close its eyes to overwhelming evidence that a congressional committee’s stated purpose is a pretext for an illegitimate one.” The OLC opinion quoted

Barr’s legal arguments convince no one but Trump’s ardent base. But Barr is committed to presidential power with or without legal authority and with or without public support.

Advisor Michael Flynn was “plainly within his plenary discretion over the prosecutorial function. The Constitution vests all Federal law enforcement power, and hence prosecutorial discretion, in the President” (emphasis in original). The president’s exercise of prosecutorial discretion was “absolute” and “non-reviewable,” even for investigations into the president’s own conduct. “The illimitable nature of the President’s law enforcement discretion stems not just from the Constitution’s plenary grant of those powers to the President, but also from the ‘unitary’ character of the Executive branch itself,” Barr wrote.

Trump liked the sound of “illimitable” power and “plenary discretion.” Or at least, he got the message that Barr would help him do whatever he wanted. Trump appointed Barr to replace Jeff Sessions as attorney general.

Barr turned to OLC for legal authority in the fight against congressional subpoenas. OLC advised that Don McGahn, the former White House counsel, was not subject to Congress’s

from one of Barr’s OLC opinions that Congress must “articulate its need for particular materials” before the executive branch will consider what information, if any, to provide Congress.

There is no remotely credible legal authority for OLC ’s argument that the executive should decide whether Congress has sufficient legislative purpose for an investigation, and whether Congress’s stated purpose is sincere. And for good reason: Congress cannot function as an independent, co-equal branch of government with information rationed by the executive branch. The Trump administration’s real strategy is to delay any disclosures to Congress until after the 2020 election, just as the George W. Bush administration ran out the clock on the U.S. attorney scandal investigation.

OLC argues that Congress’s investigative authority is “merely the power of the Congress to inform itself of the facts needed to carry out legislative affairs,” not to inform the American people, despite many court decisions that quote Wilson on the “informing function” of

2019 As Trump’s attorney general, William Barr stonewalls congressional subpoenas with no legal authority other than the flimsy opinions of his own Office of Legal Counsel. The real strategy is to delay any disclosures until after the 2020 election.

Congress. The Trump administration argues that the president should decide what Americans need to know. Do House Democrats need consultants to tell them that they have the better of that political argument?

alex br andon / ap images

BARR AND OTHERS ON THE RIGHT have

sought relentlessly for four decades to concentrate power in the president and strip power from Congress. Barr’s legal arguments sound haughty and scary to all but the most ardent Trump supporters. But Barr is committed to presidential power with or without legal authority and with or without public support.

And he will advance presidential power by any means necessary, which includes frivolous legal arguments and dilatory tactics forbidden by court rules and canons of legal ethics, and false testimony forbidden by criminal law.

House Democrats have brought or intervened in lawsuits against Trump or the Trump administration over Trump’s tax returns, his accountant’s records, his bank loans, the refusal of subpoenaed witnesses to testify before Congress, Trump’s diversion of appropriated funds for a border wall, and more. Still, House Democrats’ enthusiasm for the fight does not match Barr’s. House Democrats worry that

confrontations with the Trump administration will appear unduly partisan. Elected leaders in a democracy should consider the opinions of their constituents, but the premise of the separation of powers in our Constitution is that members of each branch act vigorously to protect against the concentration of power in the other branches. House Democrats have not acted with the necessary vigor.

Progressives are right to call for the next president to implement progressive policies without new legislation to the extent possible, given the dysfunction of Congress. But it is not that “both sides” favor strong presidential power when their party controls the presidency, and oppose strong presidential power when their party does not, although there is some of that. Progressives want to act openly under the authority of statutes duly passed by Congress. Barr’s view is that the Constitution gives the power to a unitary executive to act with or without Congress’s approval, and to keep secret the executive’s actions.

“The Framers’ idea was that, by placing all discretionary law enforcement authority in the hands of a single ‘Chief Magistrate’ elected by all the People, and by making him politically accountable for all exercises of discretion

by himself or his agents, they were providing the best way of ensuring the ‘faithful exercise’ of these powers,” Barr wrote in his memo to Rosenstein and Engel. “Every four years the people as a whole make a solemn national decision as to the person whom they trust to make these prudential decisions.”

That was not the framers’ idea at all, of course. The framers feared, as Madison wrote in The Federalist Papers, that the “accumulation of powers … in the same hands … whether hereditary, self-appointed, or elected, may justly be pronounced the very definition of tyranny.” The distance is short from an executive with “illimitable” discretionary power, even if “elected by all the People,” and strongman rule. The survival of democracy requires diffusion of power, and Congress is also elected, as I vividly recall.

The special-counsel law in effect in the Reagan and Bush 41 administrations expired in 1999, and now DOJ claims the power to decide whether to prosecute contempt of Congress, perjury or false statements to Congress, or obstruction of congressional investigations. Trump administration officials subpoenaed by Congress show little fear of criminal prosecution for contempt. Barr taunted Nancy Pelosi at a public event by asking if she had brought handcuffs.

But House Democrats should aggressively pursue every means available to hold the Trump administration to account. The Supreme Court recognizes an inherent judicial power to appoint special counsel if DOJ fails to prosecute contempt of court. “If the Judiciary were completely dependent on the Executive Branch to redress direct affronts to its authority,” the Supreme Court said in a 1987 opinion, “it would be powerless to protect itself if that Branch declined prosecution.” The same is true of contempt of Congress. House Democrats should demand that the courts empower a special counsel to prosecute Trump administration officials who defy subpoenas, a special counsel appointed not by DOJ, but by Congress.

House Democrats cannot shrink from this fight.

Brad Miller represented North Carolina in the U.S. House of Representatives from 2003 to 2013. He is now Of Counsel to the law firm of Guttman, Buschner & Brooks.

FALL 2019 THE AMERICAN PROSPECT 41

THE COMING

PRIMARY CHALLENGES TO CORPORATE DEMOCRATS

Is the threat to senior House incumbents a risky distraction or a long overdue exercise of grassroots progressive power— or both?

R

epresentative Richard Neal, chairman of the powerful House Ways and Means Committee, is the poster child for everything that’s wrong about corporate Democrats. His newly announced primary challenger in Massachusetts’s First Congressional District, Alex Morse, epitomizes the grassroots dynamism that is making over the party. Beyond this primary contest is a much larger story involving the unsavory role of the Democratic Congressional Campaign Committee and the creative disruption of a growing wave of challengers to other corporate Democratic incumbents.

Neal, 70, raises large sums of business money and reciprocates by delivering corporate-friendly policies. He was literally elected to Congress before Morse was born. Morse, 30, is in his eighth year serving as mayor of Holyoke, population about 40,000, a onetime thriving mill town.

Holyoke was one of the Northeast’s most depressed cities when Morse was elected mayor in 2011, at age 22. The city’s unemployment rate, 11.2 percent when Morse took charge, is now down to 4.2 percent. The high school graduation rate has increased from 49 percent the year he was elected to 72 percent last year.

According to Morse, some two million square

42 WWW.PROSPECT.ORG FALL 2019

It isn’t Alex Morse’s record as mayor of a small city that makes him a formidable contender against Representative Richard Neal. It’s his skill as an organizer.

feet of empty factory space, in sprawling 19thcentury abandoned brick mills, has gained well over one million square feet of paying tenants, as Holyoke has attracted a new industry of indoor vegetable growers, led by legal cannabis. More on Morse and Holyoke in a moment.

The coming battle for this seat in western

Massachusetts is emblematic of a much broader struggle with multiple reverberations. These include the expanded challenges in 2020 by Justice Democrats, the group that recruited Alexandria Ocasio-Cortez in NY-14 to take on and defeat Joe Crowley, number four in the House Democratic leadership, in 2018.

The only other successful insurgent Democrat who took out a senior incumbent last time was Ayanna Pressley, who beat Michael Capuano in a Boston-area seat once held by Tip O’Neill.

Compared to Richie Neal, Capuano, a leading member of the Congressional Progressive Caucus, was Mother Teresa.

In 2020, as many as ten challengers have a decent chance of unseating corporate Democrat incumbents. So far, Justice Democrats has endorsed six. Besides Morse, whom they endorsed in August, their candidates include: immigration lawyer Jessica Cisneros, who is hoping to displace center-right Texas Democrat Henry Cuellar; Jamaal Bowman, a Bronx educator challenging 16-term veteran Eliot Engel, chair of the Foreign Affairs Committee; Marie Newman in Illinois’s Third District, who narrowly lost in 2018 against Dan Lipinski, one of the most conservative House Democrats; Cori Bush, a working nurse and ordained pastor challenging St. Louis incumbent Lacy

h o a n g ‘l e o n’ n g u y e n / t h e r e p u b l i c a n v i a a p i m a g e s

BY RO BE RT KU T T NE R

tom williams / cq roll call via ap images

Richard Neal (left), chair of the House Ways and Means Committee, had to be dragged kicking and screaming to demand Trump’s tax returns, a delay that played into the president’s hands.

Clay for a second time; and former Consumer Financial Protection Bureau official Morgan Harper, taking on Financial Services Committee member and Wall Street ally Joyce Beatty in Columbus, Ohio.

The threat of these and other possible challenges has already borne fruit, as several Democrats anticipating possible primary fights became sudden converts to the cause of impeachment, including Engel and Massachusetts freshman Lori Trahan, who won her primary last time by just 150 votes.

The coming spate of primary challenges will create headaches for House Speaker Nancy Pelosi, and even more stress for the Democratic Congressional Campaign Committee (DCCC), the fundraising arm of House Democrats. The DCCC is reeling from a self-inflicted crisis that ostensibly involves racial insensitivity, but that more deeply reflects long-standing anger by progressives at several of its practices and habits.

Those habits include raising mostly corporate money; spending most of its funds to protect incumbents rather than financing challengers to Republican-held seats; recruit-

ing corporate Dems over progressives even in progressive districts, sometimes embarrassing itself by backing losers in primaries; bypassing winnable races in general elections where the Democratic nominee is progressive; and trying to blacklist campaign professionals who help insurgents. The DCCC ’s current chair, Representative Cheri Bustos of western Illinois, is even worse than many of her predecessors.

Before the 2020 round of primary challenges is over, the tensions within the caucus could force drastic reform of the DCCC, as well as bringing more progressives to Congress.

But we are getting ahead of the story. A good place to begin is with Richie Neal and the Ways and Means Committee.

WAYS AND MEANS IS THE single most pow-

erful committee in the House. Besides taxes, tariffs, and trade policy, Ways and Means has jurisdiction over Social Security, Medicare, Medicaid, and TANF. And since so many other anti-poverty measures are in the form of tax credits, the committee has that jurisdiction, too. Ways and Means also has oversight and

investigative responsibility in all of these areas.

Neal had to be dragged kicking and screaming to demand Trump’s federal tax returns, a delay that played into the president’s hands, since the subpoena and possible contempt citation will ultimately be subject to lengthy litigation. Neal waited months before finally acting, and his request was narrower than what he might have demanded. He has thus far refused to demand Trump’s New York state returns as well.

Reporting from Prospect Executive Editor David Dayen indicates that Neal’s light touch on Trump’s taxes sprang from a desire to get his support for a bill called the SECURE Act that would allow annuities lucrative access to 401(k) retirement accounts. He deliberately timed his formal request for Trump’s taxes until the day after passing the SECURE Act through his committee. The bill would benefit many of Neal’s biggest donors: life insurance companies that manage annuity products. The SECURE Act bogged down in the Senate over an unrelated issue, thwarting Neal’s big plans for a gift to corporations.

Neal also raised eyebrows when he resisted

FALL 2019 THE AMERICAN PROSPECT 43

the urgings of many of his colleagues to request Trump’s New York state tax returns, even after the state legislature enacted legislation authorizing the state to provide the returns. Wellplaced sources say that Neal’s refusal was based on his extremely narrow rationale for asking for the federal tax returns—supposedly he merely wanted to be sure the IRS was properly carrying out audits of Trump. He was afraid to be accused by his Republican friends of investigating Trump’s substantive corruption.

To understand Neal, the first thing to appreciate is that nearly all of his campaign funding comes from business donors, and he goes to great lengths as a congressman to avoid criticizing anything corporate. He often works with Republicans on pet projects. He is as good a friend, Democrat or Republican, as America’s corporate power structure has in Washington.

Neal has been a big backer of corporatesponsored trade deals such as the now defunct Trans-Pacific Partnership (TPP) and NAFTA .

In the epic fight over the 2017 Trump- GOP tax bill, which turned out to be a political loser because its $1.6 trillion in tax cuts mostly went to corporations and their rich CEOs and shareholders, Neal’s preferred strategy was to

44 WWW.PROSPECT.ORG FALL 2019

give the middle class a little more and call it a day. This plan was opposed by the Democratic leadership who understood that this massive giveaway to special interests would result in Republican demands to slash Social Security, Medicare, Medicaid, and other critical services to pay for it. Had Neal prevailed, the political value of the Tax Act as a prime target for Democrats would have been lost.

Neal has refused to hold oversight hearings that could demonstrate the fraudulence of the claims of the Republican Tax Act, except for one single day, March 27, where the witnesses were mostly academic economists and tax experts (though it did include CWA President Chris Shelton and EPI economist Elise Gould). A progressive chair would have held several rounds of investigative hearings on legal corporate larceny, laying out the case for a repeal. Other areas of inquiry, from the shocking reduction in IRS audits of the rich to offshore tax evasion and rampant tax dodging by estate planners, have been ignored.

In a recent Ways and Means committee bill, Neal supported an expansion of the earned income tax credit and the child tax credit over two years, but he objected to paying for it by

increasing the corporate income tax rate by one point. This is a classic example of how Democrats can use the legislative process to contrast their priorities and goals with Republican and corporate ones—and Neal is on the wrong side.

(Neal declined requests for comment.)

Neal’s pattern of campaign funding fits hand in glove with his legislative behavior. Of the 30 corporations identified by The New York Times as the biggest beneficiaries of the Tax Act, 16 were direct donors to Neal. According to reporting by David Daley, Neal collected more money from large pharmaceutical companies than any other congressman of either party. Neal worked hand in glove with H&R Block and Intuit, maker of TurboTax, to block the IRS from developing a free online filing system that would compete with corporate tax-preparers. A measure to that effect actually passed the House, as part of an IRS reform bill. Both companies have been donors to Neal.

While Representative Jim McGovern, chair of the House Rules Committee, in the adjoining Massachusetts Second District, refuses to take any corporate tax money, Neal raised over $500,000 in mostly corporate donations in the first quarter of 2019 alone. He spent more

m a g i c p i a n o / c r e at i v e c o m m o n s

Holyoke, a depressed 19th-century mill town, is being redeveloped as a local green economy.

money on corporate fundraising events, usually in lavish hotels, than the rest of the Massachusetts delegation spent combined.

Neal has long had a safe Democratic seat, built around the city of Springfield, with about a quarter of the First District’s population, where Neal was mayor from 1983 to 1989. The current mayor, Domenic Sarno, in office since 2007, is a close Neal ally. But it would be a gross exaggeration to talk about a Springfield machine, since local politics are in a state of torpor.

In 2018, when Neal faced an underfunded primary fight from a relatively unknown candidate, activist lawyer Tahirah AmatulWadud, she managed to get 29.3 percent of the vote. Neal raised $3.55 million for re-election compared to his challenger’s $145,000. A more telling sign of Neal’s vulnerability is the fact that just 49,696 voters roused themselves to vote for Neal in the 2018 primary, in a heavily Democratic district with over 400,000 registered voters. Neal raises hardly any money in local small donations, another emblem of how he has ignored his district base in favor of a national corporate constituency.

Redistricting in 2012, the result of Massachusetts losing one House seat, moved Neal’s district to the north and the west. His current seat still includes his base in Springfield, but adds very liberal Berkshire County, whose population of 125,000 is close to that of Springfield. Much of that territory was formerly represented in Congress by one of the state’s great progressives, John Olver. The current district has to rank in the top five nationally of progressive constituencies represented by corporate Democrats. Elizabeth Warren was re-elected last year by a statewide margin of about 60-40.

She carried the First District by nearly 70-30.

twit ter

IF YOU WERE TO TRY TO DESIGN the per-

fect anti-Neal, it would be hard to do better than Alex Morse. On a recent visit to Holyoke, I spent a couple of hours with Morse, and observed a panorama of mills along the Connecticut River, some still abandoned and some humming with new enterprise. A century ago, Holyoke, which contained one of America’s largest concentrations of paper mills, was nicknamed Paper City. Morse jokes that he’s changing that to Rolling Paper City.

Morse, a graduate of Holyoke public schools,

as adversarial, he turned around and embraced the state-appointed receiver, Stephen Zrike, a reformer who has worked in Chicago and Boston. Morse has worked closely with Zrike, now Holyoke school superintendent, on a range of reforms, including turning the high school into four campuses and expanding bilingual education. “Middle-class families who would have sent their kids to private schools or schools out of district are now on waiting lists to get into our bilingual programs,” Morse says.

Morse has even managed to restore passenger rail service to Holyoke, which last saw a passenger train in 1967. With a grant from the Obama stimulus package and some state support, Morse oversaw construction of a new station and persuaded Amtrak to add a stop, reversing a plan that had trains on the Vermonter line go through the city but not stop there.

Morse has also built on Holyoke’s location on the Connecticut River and the city’s pub-

Richard Neal’s congressional district has to rank in the top five nationally of progressive constituencies currently represented by corporate Democrats. was the first in his family to attend college, attending Brown on a scholarship. He was very much an activist while in high school.

Coming home in 2011, he decided to run for mayor, challenging a lackluster incumbent.

In the primary balloting, he placed first by one vote. He won the general election by 608.

Morse says he won by going door to door in neighborhoods that had seldom seen a politician. “They advise you to target proven voters who are most likely to turn out, but that has it exactly backwards,” Morse says.

Holyoke is about 42 percent Spanishspeaking, and Morse is f luent in Spanish.

Under his leadership, the city has reached out to immigrants and refugees, welcoming hundreds of Caribbean natives fleeing from Hurricane Maria.

As mayor, Morse inherited a public-school system that Massachusetts education officials branded as failing, triggering a state receivership. Morse initially hoped to keep local control, but rather than viewing the receivership

licly owned dam. Holyoke’s electric company is municipally owned; its energy is 92 percent renewable and cheap, which acts as a magnet for economic development. A consortium of Boston-area universities uses Holyoke as a large-scale green data-processing center.

Morse also worked with local environmental activists to shut down the last Massachusetts coal-fired power plant at nearby Mount Tom, and install the state’s largest array of solar panels on the site, feeding the Holyoke grid.

CBS ran a piece describing Morse as running his own Green New Deal.

But it isn’t Morse’s record as mayor of a small city that makes him a formidable contender against Neal. It’s his skill as an organizer. Morse is organizing volunteer committees in all of the district’s towns. He is raising only small donations. As a champion of such causes as LGBT rights (Morse has been out publicly since high school, founding Holyoke’s first gay prom and the school’s gay-straight alliance), renewable energy, human rights, and protection of refu-

FALL 2019 THE AMERICAN PROSPECT 45

gees, Morse begins with a base of a district honeycombed with vibrant activist communities.

Morse is also assembling a serious staff. His lead campaign consultant is Rebecca Katz, most recently a strategist for Justice Democrats and a savvy onetime aide to former Senate Leader Harry Reid. His chief fundraiser is Gina Christo, previously finance director for Ayanna Pressley. He has begun a series of coffees in each of the district’s 87 cities and towns, building volunteer committees. “When we transition into full campaign mode we want it to be volunteerled,” Morse says. “Relational organizing is the best organizing. People are more responsive to people they have a relationship with.”

Holyoke is a nice metaphor for the Democratic Party: a place of working people of modest income with an underperforming present and great economic and political promise; one that is becoming blacker and browner; is not yet at its full potential politically; and is rep-

one campaign consultant to several congressional challengers.

Massachusetts holds its presidential primary in March, but with a separate primary in September for congressional and state offices, at a time when all eyes will be on the presidential race. In these sparsely attended late primaries, low turnout is the incumbent’s best friend— that’s why legislators refuse to alter the odd timing. So even more than in most races, Morse versus Neal will be a classic test of on-theground organizing versus money and apathy.

A high-profile primary challenge to Massachusetts Senator Ed Markey, 73, could raise the usual primary turnout, as well as spotlight age versus youth, both to Neal’s advantage.

JUSTICE DEMOCRATS IS LOOKING at sev-

eral other races. In New York, besides Engel, four other Democratic incumbents face serious primary opponents, including Appropria-

One of the most salutary effects of these primary challenges could be long overdue reform of the toxic role of the DCCC, for whom corporate cash has long been a priority. resented, anomalously, by a leading corporate congressman.

Despite his obvious strengths, Morse faces an uphill climb. In American politics, money still talks, and Neal has plenty of it—over $3 million in his campaign accounts as of the most recent reports, and his corporate allies will make sure that he has all he needs and more.

Morse has spent his first weeks since declaring mostly on the phone seeking to raise modest sums. He is not likely to match Neal but would be competitive with about $1.5 million.

The battle, like other insurgent challenges, will come down to turnout. And you can argue the impact of mounting a congressional primary challenge in a presidential year either way.

On the one hand, thanks to the mobilizations of the Warren and Sanders campaigns and the urgency of defeating Trump, progressive grassroots activism will be at a high pitch. On the other hand, the presidential race will suck up a lot of oxygen. “Voters may not be paying that much attention to down-ticket races,” says

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tions Committee Chair Nita Lowey and Jerry Nadler, chair of Judiciary. Not all such challenges, of course, have been orchestrated by Justice Democrats, and not all make sense: Nadler is resolutely progressive as well as the point man for a Trump impeachment. Other targets of primary challenges include several members of the Congressional Progressive Caucus, such as Frank Pallone of New Jersey and John Yarmuth of Kentucky.

All this will further stress the House leadership. Speaker Nancy Pelosi reflexively defends incumbents, whose support she needs in her struggles to produce legislative unity in a fractious caucus. The unprecedented number of primary battles will make it even harder for Pelosi and AOC to bury the hatchet, since AOC has previously expressed encouragement for more insurgent challenges.

But as Waleed Shahid of Justice Democrats observes, center-right Democrats like Richie Neal, who resisted demanding Trump’s tax returns and fighting the Trump tax cut, are

actually more of a problem for Pelosi than newly elected progressives. “A generic Democrat or a progressive one replacing Cuellar or Lipinski or Neal would be more supportive of majority caucus positions,” says Shahid.

Next in line to chair Ways and Means is John Lewis, who has other senior committee posts. So the job could well go to the third in line, Lloyd Doggett of Texas, perhaps the committee’s bestinformed and most assertive senior progressive.

One of the most salutary effects of these primary challenges could be long overdue reform of the toxic role of the DCCC. As much as any other factor, the DCCC makes the Democrats far more corporate than they need to be. Ever since California Congressman Tony Coelho chaired the committee from 1981 to 1987, the DCCC formula has been to attract corporate candidates who can either raise lots of business money, or self-fund, or both—often backing them in primary fights against progressives.

The mountain of corporate cash has informed Democratic priorities and damaged the party’s status as the party of the people.

The pattern worsened when Rahm Emanuel headed the committee from 2005 to 2007. He persuaded the caucus to expand the size of the Financial Services Committee to load it up with corporate Democrats who could trade favors with donors in the banking industry.

The tilt got so bad that during the epic battle over the Dodd-Frank bill, liberal Chairman Barney Frank sometimes lacked a working majority on his own committee, as corporate Democrats voted with Republicans in markup sessions to weaken the draft.

Things improved somewhat under Representative Ben Ray Luján, who was DCCC chair going into the 2018 elections. Working with Representative Katherine Clark of Massachusetts, who was a vice chair in charge of candidate recruitment, the DCCC endorsed an unusually large number of Democratic challengers to Republicans in its Red to Blue project—94 in all, compared to only 43 in 2016.

Many were progressive and many of them were longer shots than the DCCC usually backed. A remarkable number rejected corporate PAC dollars, and while this was mostly symbolic, it led to a progressive beachhead on the Financial Services Committee, in contrast to the Emanuel-led past.

bill cl ark / cq roll call via ap images

DCCC chair Cheri Bustos is under fire for intervening in primaries against progressives.

Even so, the DCCC committed many of its usual sins, backing some corporate Democrats over progressives in primaries. In the Houston area, the committee took the rare step of publicly releasing opposition research against Laura Moser to knock her out of a House primary in favor of corporate lawyer Lizzie Pannill Fletcher. (Fletcher eventually flipped the seat.) The DCCC also denied funds to some progressive challengers to Republicans in winnable races, like Kara Eastman in Nebraska.

But several progressives who took Republican seats last November, such as Katie Porter in California and Lauren Underwood in Illinois, benefited from DCCC financial support. And it took a chance on several long shots who lost, such as Richard Ojeda of West Virginia, who earned the largest vote swing from Hillary Clinton’s 2016 performance of any House Democratic challenger in the country. Under Luján, three of the committee’s five regional vice chairs were members of the Progressive Caucus: Joe Kennedy of Massachusetts, Jared Polis of Colorado (now governor), and Ted Lieu of California.

The DCCC reverted to type, and worse, under its current chair. A moderate who won a district carried by Trump, Cheri Bustos was tapped by Pelosi mainly to defend incumbents who flipped seats last time, and was elected by the caucus

after Luján stepped down to seek a New Mexico Senate seat in 2020. Bustos fired several Luján aides who happened to be African American and Hispanic and replaced them with an allwhite staff, creating a major crisis and forcing several resignations of senior staffers.

In addition, seeking to discourage primary challenges to incumbents, Bustos created a blacklist of campaign consultants who work for challengers. This is no small threat, since the lion’s share of DCCC financial help goes not to candidates directly but to campaign consultants. The threat, however, backfired deliciously. Luján criticized the move, and progressives are demanding that the policy be rescinded. Several of the blacklisted firms bought the URL DCCCblacklist.com, and have used it well to advertise their services. And as we are seeing, it failed to stop strong challengers from launching primaries against out-oftouch corporate incumbents.

What’s needed are fundamental reforms to the DCCC. These could begin with a commitment to become a lot less reliant on corporate money, and a pledge to stay out of primaries, so nobody is swamped by corporate cash laundered via the DCCC. One senior member of the Congressional Progressive Caucus told me, “The DCCC should not be involving itself in

Democrat-on-Democrat primaries. It’s up to local voters to pick the strongest candidate for the district.” Progressives go to Congress to fight on issues, not to raise money—but it would be salutary if a progressive were the next DCCC chair.

Those who say that challengers should never take on incumbents of their own party are overstating the value of party unity for its own sake. I confess, I am not without some bias on this issue. My first job in politics was working for Representative William Fitts Ryan, who represented the district now partly held by Jerry Nadler on Manhattan’s West Side. Ryan was one of the leaders of the anti-Tammany Reform Democrats, and the first to knock out a Tammany incumbent, Leonard Farbstein, in 1960. Other ousters of machine Democrats followed. The Reform Democrats of that era were the predecessor of today’s Working Families Party. Ryan went on to be the first member of the House to oppose the Vietnam War. Thomas Jefferson famously said, “A little rebellion now and then is a good thing.” The House Democratic Caucus can surely benefit from some shaking up. Ten or even 15 challenges to incumbents are overdue. But if a hundred Democratic incumbents and their challengers are raising and spending money and enlisting volunteers to contest each other willy-nilly in a crucial presidential year, that may not be the best use of political resources. Justice Democrats seems to get this. Well-placed sources say they will end up endorsing maybe a dozen challengers at most. And of course kingmakers do not get to make these decisions—neither insurgent kingmakers like Justice Democrats nor traditional machine kingmakers, and least of all the DCCC. These decisions belong to the voters.

Some critics of the effort to challenge incumbents contend that Justice Democrats is the Democrats’ destructive version of the Republican House Freedom Caucus, and the Tea Party battle against moderate “RINOs”— Republicans in name only. But that analogy cuts more than one way. The extreme conservatives who took control of the Republican caucus were dead serious about obtaining power and using it. What is loathsome about them is their far-right ideology and contempt for democracy, not their seriousness about building a movement.

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HOW NEOLIBERAL POLICY SHAPED THE INTERNET— UNRESTRAINED DIGITAL MARKETS HAVE GIVEN US MONOPOLY, PERVASIVE SURVEILLANCE, AND POWERFUL VECTORS OF DISINFORMATION. BUT A NEW AGENDA IS EMERGING TO TURN THINGS AROUND. B Y PAUL STA RR

I

n just two decades, digital technology and the internet have gone from exciting the dreams of a revolutionary new era to embodying fears about a world gone deeply wrong. The digital revolution now threatens to undermine values that it was supposed to advance—personal freedom, democracy, trustworthy knowledge, even open competition. It isn’t as though the technology did this to us on its own, or that we stumbled absentmindedly into an alternative dystopian universe. Today’s technological regime grew out of critical choices to ignore lessons of the past and allow private power to go unregulated.

Three problems—monopoly, surveillance, and disinformation—sum up what’s gone wrong and what needs to be fought and fixed in order to have any hope of recovering the promise of the new technology.

The explosive growth of the online economy in the 1990s and early 2000s appeared to validate the idea that markets were best left to themselves. The internet of that era was neoliberalism’s greatest triumph. After the federal government financed key breakthroughs and then opened the internet to commercial development, digital innovation and entrepreneurship created new online means of exchange, new wealth, and new communities. But that online economy now looks altogether different with the rise of platform monopolies. Amazon, Facebook, Google, Apple, and Microsoft control

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whole ecosystems of the digital world, dominating key choke points for commerce and news.

Just as the early internet fostered the illusion that it was inherently supportive of competition, so it fostered the illusion that it was inherently protective of personal autonomy. After all, no one compelled you to disclose your true identity online. Yet the digital world today has made possible the most comprehensive system of surveillance ever created; networked devices track our every movement and communication. A new form of enterprise has emerged that Shoshana Zuboff calls “surveillance capitalism,” as Google, Facebook, and other firms sweep up data about our lives, preferences, personalities, and emotions “for hidden commercial practices of extraction, prediction, and sales.”

The promise of the information age wasn’t that corporations would acquire more information about us; we were supposed to get access to more information about the world and new opportunities for participation in public debate.

The internet, enthusiasts proclaimed, would undermine the power of the mass media and its gatekeepers—the editors, producers, and executives who once controlled public communication. Instead of relying on authority, people would be able to see the facts for themselves in documents and videos from all sides.

The reality has turned out to be less benign.

The online economy has destroyed the traditional business model of journalism, resulting

in a dramatic decline in professional reporting.

And because Google and Facebook dominate digital advertising, no alternative online model has emerged capable of financing the same reporting capacities, particularly at the regional and local level. Meanwhile, social media platforms have replaced the old mass media gatekeepers, shaping the public’s exposure to news and debate through their algorithms. Those algorithms—for example, in Facebook’s news feed, Google’s search and YouTube recommendation engine, and Twitter’s trending topics— now influence which content and viewpoints gain visibility among users. Instead of promoting better-informed public debate, however, social media have become powerful vectors of disinformation, polarization, and hatred.

These problems afflict other countries as well as the United States, but the digital economy has been a distinctly American development. How we arrived at the present crisis and what we can do about it have become urgent political questions.

THE NEOLIBERAL TURN

The growth of the internet and digital economy has been a paradigmatic story of American technology since the Cold War. The digital revolution began under the aegis of the state, moved to the market, and has now become an illustration of all that has gone wrong when the dominant players in markets are unrestrained by law.

af-studio / istock by get t y

AND WHAT TO DO ABOUT IT NOW From the 1940s to the early 1970s, the federal government financed and guided most of the development of computers and electronic communication, largely via the Defense Department. It was a Defense office, the Advanced Research Projects Agency, that funded and supervised the creation of ARPANET, the forerunner to the internet.

During the mid-20th century, the United States also extensively regulated telecommunications. While AT&T had an effective monopoly, regulatory policies constrained telephone rates, promoted universal service, and barred discrimination, requiring telecom companies to act as common carriers. Because of its treatment of capital investment, the regulatory system gave AT&T an incentive to devote ample funds to research, and its research arm, Bell Labs, produced an extraordinary array of advances, including data networking, the transistor, the laser, and cellular telephony. Bell’s advances were subject to compulsory licensing, which meant they were available for others to build on.

Thanks to this mixed economy, the computing and telecommunications industries in the United States developed an enormous lead over their counterparts in other countries, the source of America’s head start and comparative advantage in digital innovation. Later on, the myth would develop that individual geniuses working in garages gave us computers and the internet. But their work would not have been

THE DIGITAL REVOLUTION BEGAN UNDER THE STATE, MOVED TO THE MARKET, AND NOW ILLUSTRATES WHAT GOES WRONG WHEN THE DOMINANT PLAYERS ARE UNRESTRAINED BY LAW. possible without the investments and technical advances that the federal government and regulated telecom industry had already made.

Nonetheless, the telecom regulatory regime had a serious downside. It gave AT&T the power to control every aspect of the telephone network, including what devices could connect to it. Like any monopoly, AT&T sought to protect its privileged position. After the Defense Department received a proposal in 1964 for a communication network similar to the internet, an AT&T executive said, “Damned if we are going to allow the creation of a competitor to ourselves.” The law at that point was on AT&T ’s side.

The federal government’s involvement in computers and telecommunications began to decline, however, in the late 1970s and 1980s, coinciding with the general neoliberal shift in national policy. Here I am using the term “neoliberal” specifically to refer to ideas and policies that seek to create markets and rely on market forces. The neoliberal arsenal includes such measures as privatization, free-trade agreements, deregulation, tax cuts, and reductions in social spending. What distinguishes neolib-

eralism from 19th-century laissez-faire is that it has arisen after a period of liberal and social democratic state-building. In the standard history, neoliberalism owes its philosophical origins to Friedrich Hayek and his circle in the 1940s and emerged as a political force with Margaret Thatcher and Ronald Reagan in the late 1970s and 1980s.

Politically, however, deregulation differed from other market-oriented measures. Some forms of deregulation attracted support from prominent liberals and progressives—including Senator Ted Kennedy and Ralph Nader— on the grounds that the regulatory agencies had been captured by the industries they were supposed to regulate and were no longer serving the public. Limiting AT&T ’s power enjoyed support across the ideological spectrum.

Although the big step would come in 1984, when a court broke up AT&T, the federal government had already begun loosening the telephone monopoly by that time. In cases in 1956 and 1968, federal authorities reduced AT&T ’s control over devices attached to the telephone network. These early deregulatory steps,

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greg gibson / ap images

together with the subsequent development of any legal or technical requirement (indeed, a general, Democrats opposed it for the internet microcomputers, opened the way for consum- new architecture of control could be built on and the tech industry in particular. The interers and businesses in the late 1970s and ’80s to top of the internet, which is what the online net had flourished seemingly without governobtain modems (enabling computers to talk to platforms would eventually do). ment: Why risk endangering it? Those early each other) and dial-up access to early online The politics of internet policy in the 1990s beliefs about the internet—in line with general bulletin boards and proprietary networks. were less ideological than generational. In 1992, neoliberal premises at the time—left both poliThose proprietary networks—the “big three” when Bill Clinton and Al Gore championed the cymakers and the public unprepared for the were CompuServe, the original leader in the development of a new “information superhigh- rise of platform monopolies and surveillance 1980s; America Online (AOL), which grew rap- way,” they were signaling a generational change capitalism, the devastation to professional idly in the early ’90s; and Prodigy—looked for a in national leadership. As a senator, Gore journalism, and the use of digital communitime as though they would dominate “computer had done more than anyone else in national cations for disinformation. information services.” Each comIf the internet had emerged pany had its own distinct news in a different period, it might sources, discussion groups, email have developed differently. But systems, and rules (for example, the online economy has develAOL restricted its forums to no oped in an era when the three more than 23 people, effectively chief means of keeping corpolimiting the reach of any indirate power in check—antitrust, vidual user). At the time, it was economic regulation, and pubby no means obvious that the lic ownership—have all been in internet—originally limited to retreat. The federal government government use, then expanddid bring one important antitrust ed to universities and research suit when it sought to break up institutes—would emerge as Microsoft during the 1990s, a the framework for electronic case that finally ended with a communication. consent decree in 2002 and probBut the internet had a more ably prevented Microsoft from open architecture, including a squashing Google in its infancy. design principle known as “endSince then, however, the govFor Al Gore and Bill Clinton, a new “information superhighway” symbolized generational change. to-end” that distinguished it from ernment has raised no obstacles They steered clear of any regulation of the emerging online economy. other networks. As Lawrence Lesas online platform companies sig explained it in these pages in 2001, “This politics to open up and expand the internet. have expanded, bought out potential rivals, model regulates where ‘intelligence’ in a network National policy during the Clinton admin- and gained monopoly power. Nor has the govis placed. It counsels that intelligence be placed istration steered clear of any regulation of ernment raised any obstacles to the platforms’ in the applications”—that is, among the users the emerging online economy. Internet ser- accumulation of personal data; unlike the at either end of the network, rather than in the vice providers were even subsidized by being European Union, Congress has enacted no gencenter with the network manager. As a result, exempted from network access charges, and eral legislation protecting consumer privacy unlike the proprietary networks, the internet internet intermediaries received broad immu- online. And despite the collapse of journalwas permission-free: It invited and decentral- nity from liability for user-generated content ism, America has been unwilling to consider ized innovation. under Section 230 of the Communications the level of support for public media widely Opening up the internet to wider access, Decency Act, adopted as part of general tele- accepted in many other liberal democracies. including commercial development, was there- communications legislation in 1996. The best Only in the last few years has serious attention fore simultaneously a move toward the market approach to policy, according to William Ken- focused on changes needed to deal with the new and away from proprietary control of the net- nard, a chairman of the Federal Communica- concentrations of unaccountable power. work itself. That was what happened in the tions Commission (FCC) appointed by Clinton, first half of the 1990s, when rules against com- was to allow the “marketplace to find business TAKING ON MONOPOLY mercial use of the internet were dropped, the solutions … as an alternative to intervention This is not the first time that a communications internet “backbone” was privatized, and a host by government.” revolution has seen a rapid turn from wideof new applications were created, including That general attitude continued to domi- open competition to concentrated control. the World Wide Web. Much of this new soft- nate policy toward the internet under George The same thing happened with the telegraph ware was also developed on a nonproprietary, W. Bush and Barack Obama. While Republi- between the 1840s and 1860s, when Western open-source basis, though that did not reflect cans opposed a broader role for government in Union gained a monopoly. It happened again

with the telephone between the mid-1890s and 1910s, when AT&T took over the industry. And it happened a third time with radio from the early to the late 1920s, when NBC and CBS became the dominant national networks. That monopolies would arise yet again should have surprised nobody. Although the internet changed many things, it did not change the tendency toward monopoly in network communications.

The internet’s effect on economic concentration, however, may be even greater than the effects of the earlier communications media.

Today, Amazon alone has nearly half of online sales, Google and Facebook are taking virtually all the growth in digital advertising, and venture capitalists hesitate to fund some new startups because the big tech companies can so easily drive them under. Instead of diffusing wealth, the digital revolution has been concentrating it in a few giant tech firms and their shareholders.

Antitrust and regulatory policies might have limited the growth of monopolies and abuses of market power. But since the 1980s, the federal government has greatly relaxed antitrust enforcement against big corporations, thanks to the influence of theories holding that corporate dominance of a market is no problem if it improves “consumer welfare,” interpreted largely to mean lower consumer prices. That criterion has made it difficult to prosecute antitrust cases against companies like Facebook and Google, which rely on advertising and user-generated content and charge consumers nothing, or against Amazon, which has sacrificed profits for market domination. Federal authorities have waved through mergers such as Facebook’s acquisition of Instagram and WhatsApp, even though those mergers reduce consumers’ leverage in the marketplace (for example, on privacy policies), and reinforce the monopoly power of the platform giants.

During the struggles against monopoly power in the railroads and other industries in the late 19th and early 20th centuries, Congress and the courts took steps not only against horizontal mergers but also against predatory pricing (cutting prices below costs to drive out competitors), price discrimination (varying prices to individual buyers or sellers according to their characteristics or circumstances), and vertical integration (combining stages of production or distribution normally operated as separate businesses).

In recent decades, however, the courts have tended to dismiss these concerns, failing to anticipate the new potential for monopoly power in digital platforms, which benefit from network effects. The larger a network grows, the more valuable it becomes to each participant it connects and, conversely, the greater the cost of being excluded. As that cost of exclusion rises, so does the market power of a platform company. In the digital world, scale also brings the capacity to extract data from users to train systems of machine intelligence; only the largest companies can compete effectively.

A platform market like Amazon, Lina Khan argues in the Yale Law Journal, has clear incentives to pursue growth over short-term profits, a strategy rewarded by investors that makes predatory pricing “highly rational— even as existing doctrine treats it as irrational

“structurally separate” from businesses participating in the market. Amazon Marketplace, for example, would have to operate separately from Amazon’s own sales. All platforms, above or below the $25 billion level, would have to meet a standard of “fair, reasonable, and nondiscriminatory dealing with users.”

Antitrust investigations of big tech are already under way. The Justice Department Antitrust Division is investigating Apple and Google, while the Federal Trade Commission (FTC) is handling Facebook and Amazon. State attorneys general are investigating Google and Facebook. But even under a President Warren, breaking up big tech might be difficult. Historically, such cases have typically dragged on for years, and the odds of success today are probably not high in view of prevailing judicial doctrine. Federal authorities may

PLATFORM MONOPOLIES POSE A NEW THREAT. BECAUSE OF THE HIGH COST OF EXCLUSION FROM ITS MARKETPLACE, AMAZON HAS OTHER SELLERS AT ITS MERCY. and therefore implausible.” Amazon’s sky-high market capitalization testifies to that logic.

(Enjoy that free delivery for Amazon Prime while you can!) The size of Amazon Marketplace makes it essential for other sellers, even though by participating in it, they provide Amazon with critical data, which it sometimes uses to swoop in and undersell them with its own branded versions of their most lucrative products. As a result of the high cost of exclusion from its marketplace, Amazon has other sellers at its mercy and can impose onerous terms on them.

So how to limit the power of market-dominant platforms? Senator Elizabeth Warren proposes to do two things. As president, she would appoint “regulators committed to reversing illegal and anti-competitive tech mergers” like Facebook’s acquisitions of WhatsApp and Instagram, Google’s acquisitions of Waze and DoubleClick, and Amazon’s acquisitions of Whole Foods and Zappos. And she would seek legislation requiring the biggest tech platforms—those with global revenues of $25 billion or more—to be designated as “platform utilities” and kept

also be reluctant to break up American tech companies at a time when weakening them may indirectly strengthen their Chinese rivals.

That’s not to say the kind of structural change Warren calls for should be off the table. Reducing the market power of platform monopolies may get support from substantial segments of business, not just consumer groups. A new administration hoping to curb predatory pricing and other abuses of market power may have more success, however, going directly after those abuses through new legislation or existing regulatory authority. In fact, new federal legislation may now be likely in one area—privacy rights—though possibly not for good reasons.

THE CHALLENGE OF SURVEILLANCE CAPITALISM

The United States has long been a laggard on data privacy. American law treats privacy mainly as an aspect of individual liberty threatened by the state, not by the market.

Pressure from corporate interests has limited legal protections of personal data collected privately and exchanged in the marketplace.

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While federal law regulates data in some areas like credit reporting and health care, even those statutes mostly predate the rise of the internet. As a result, consumer privacy online has largely depended on corporate selfregulation, and the FTC has been able to act on privacy abuses chiefly when companies have violated their own privacy policies or otherwise deceived consumers.

In contrast, European law has conceived of privacy as an aspect of human dignity threatened by intrusions of all kinds, private as well as governmental. Consistent with that tradition, the European Union has had stronger consumer data protections, a pattern that culminated in 2016 in the EU’s adoption of the General Data Protection Regulation (GDPR).

At least on its face, the GDPR requires companies to give consumers the right to control data

harmless, and indeed many people may even like getting ads that are more “personalized.”

But personalization has rich possibilities for exploitation. In a guide for Australian and New Zealand advertisers, Facebook noted, “By monitoring posts, pictures, interactions, and Internet activity, Facebook can work out when young people feel ‘stressed,’ ‘defeated,’ ‘overwhelmed,’ ‘anxious,’ ‘nervous,’ ‘stupid,’ ‘silly,’ ‘useless,’ and a ‘failure’”—in short, the moments when they are “most vulnerable to a specific configuration of advertising cues and nudges.” A Wall Street Journal investigation of apps that send Facebook highly personal information found that one of them—with 25 million downloads—provided Facebook with estimates of when women were ovulating. Tracking users and stockpiling sensitive data about them inevitably risks abuses.

BEHAVIORAL ADVERTISING MAY SEEM HARMLESS, AND SOME PEOPLE MAY EVEN LIKE GETTING “PERSONALIZED” ADS. BUT IT HAS RICH POSSIBILITIES FOR EXPLOITATION. gathered about them, potentially upending the business model that has turned Google and Facebook into behemoths.

But the politics of data privacy may now have changed in the United States. The Cambridge Analytica scandal and a seemingly endless stream of disclosures about Facebook have helped raise awareness about the limits of corporate self-regulation. Last year, California adopted major new consumer privacy legislation, and several other states are considering bills. After long resisting a federal privacy law, corporate interests are now pushing for it as a way of preempting stronger state measures.

While scandals have provoked public outrage, the financial interests at stake have never been greater. Personal data is now the lifeblood of giant tech firms. Google and Facebook aggregate data from their own sites and other sources on individuals regardless of whether they have accounts with the companies. With that constant and comprehensive stream of data, they are able to target advertising more precisely and efficiently than the mass media.

Some of this “behavioral advertising” is

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(Facebook disowned responsibility for both the advertiser guide and the app once they were exposed.)

One of the things that companies want most, as Phillip Longman explains in the Washington Monthly, is to know the maximum price you’ll pay for whatever they’re selling, whether it’s a ride on Uber or a product on Amazon—and “it’s getting harder and harder to avoid dealing with marketers who can estimate with increasing accuracy just how much you, personally, are willing to pay, and who charge you accordingly.”

In her book The Age of Surveillance Capitalism, Zuboff points out that the surveillance business is fundamentally about creating “prediction products,” which are valuable not just to advertisers who want better predictions of what you’ll buy and how much you’ll pay. Insurance companies, landlords, and employers are also interested in more personalized predictions about potential policyholders, tenants, and workers.

Moreover, surveillance capitalism has now moved from the virtual world into the physical one as our phones, apps, and networked

devices in the “internet of things” report back to the data companies where we are and what we are doing. The companies, Zuboff writes, want to “nudge, tune, herd, manipulate, and modify behavior in specific directions by executing actions as subtle as inserting a specific phrase into your Facebook news feed, timing the appearance of a BUY button on your phone, or shutting down your car engine when an insurance payment is late.” If unregulated, the new technology has an awesome potential for a new social regime, operated in the interests of the dominant companies.

Both the European GDPR and California’s new privacy legislation aim to give consumers more control of their information, but they do it in different ways. The GDPR requires an opt-in, whereas the California law requires companies to give consumers an opt-out. Under the GDPR, companies must get individuals’ consent for their data practices in a “freely given, specific, plainly worded, and unambiguous” agreement.

Among the rights given to consumers are a right of access to information collected about them; a right of “erasure” of data under certain circumstances (more qualified than the earlier “right to be forgotten”); and a “right of explanation” to algorithmic decisions about them.

What these rights mean in practice will depend on regulatory and judicial decisions.

The early results since the GDPR went into effect in 2018 have not been encouraging.

Complying with the GDPR requires a significant investment. Those costs are not a problem for big tech companies like Google, Facebook, and Amazon, which have been able to get consumers to click on consent forms, but the costs are a problem for small firms and startups. The GDPR could therefore end up strengthening the platform monopolies.

In addition, the GDPR delegates regulatory enforcement to the country where a company has its principal facilities and “data controller.” For the major American companies, that country is Ireland, which has long catered to the tech industry it is now supposed to regulate.

Irish officials are now reaching closure on some major enforcement cases, and critics are skeptical about how rigorously they will interpret the GDPR . One key question is whether Facebook can require its users to consent to its data practices as a condition for using Facebook.

jenny k ane / ap images

The California Consumer Privacy Act now provides a framework for reform that has 2016 passed one billion viewing hours a day, (CCPA), which goes into effect in January 2020, considerable public legitimacy. The third chal- close to total viewing time for all television is not as broad as the GDPR and does not require lenge posed by the internet—disinformation— and growing more quickly—has been a prime consumer consent for companies to collect per- is much tougher, conceptually and politically. example of this pattern. A 2018 investigation sonal data. Instead, the CCPA requires large

by The Wall Street Journal found that after firms to post in a “clear and conspicuous” place DISINFORMATION AND detecting the political biases of users, YouTube a simple and specific opt-out: “Do Not Sell My THE DEGRADATION OF THE NEWS typically fed them videos echoing “those biases, Personal Information.” Since the law defines Two effects of the digital revolution have often with more-extreme viewpoints.” large firms as those that have annual revenues degraded the quality of news and information.

For all the limitations of the predigital over $25 million or personal data on 50,000 American journalism has been in free fall as a media, journalistic organizations at least tradior more individuals, it is unlikely to cause the result of the collapse of its traditional business tionally accepted responsibility for the reliabilperverse effects of the GDPR in ity of the news they transmitted. strengthening big tech. The CCPA The digital revolution shifted also explicitly gives consumers a power to social media platforms right to receive equal service and that have disclaimed any such pricing from a business regardresponsibility. If reforms are to less of whether they exercise that rectify that loss of responsible opt-out or other rights. And it editorial judgment, they will defines “selling” personal data have to do two things: first, help broadly to include “disclosing, reconstitute the economic basis disseminating, making availof professional journalism and, able, [or] transferring” that data. second, hold social media platThe internet industry doggedly forms accountable for their role tried to amend the CCPA to get an in shaping exposure to differexception for digital advertising, ent contents, sources, and viewbut they failed in the legislative points. Democratic government session that ended in September. can and should play a role in the The California law effectively first; it is not clear how, if at all, applies to large firms throughout it can play a role in the second, Mark Zuckerberg says he is very sorry about divulging data to Cambridge Analytica. Notwithstanding the country, which are unlikely such apologies, Facebook’s many scandals have helped clarify the limits of corporate self-regulation. except by reducing platform to deny everyone else rights they monopolies and requiring some have to give Californians. Nonetheless, other model. About a fifth of local newspapers have degree of transparency. states have been considering legislation as well. closed, and many of the survivors are ghostly Government support for journalism is wideA proposed New York law, applicable to compa- shadows of what they once were. Whole areas ly regarded as anathema, but it shouldn’t be. nies of any size, would go beyond California’s of the country have become news deserts, with- Many liberal democracies provide substanin creating a private right of action, enabling out any local reporting, leaving many people tial financial support to journalism through consumers individually to sue companies for reliant on social media. mechanisms that protect the integrity of the privacy infringements. It would also treat comBut the social media platforms, freed from press. The BBC has served as a model of taxpanies as “data fiduciaries,” requiring them to any accountability for user-generated content, financed, public-service broadcasting, while act like other kinds of fiduciaries such as phy- have until recently had no incentive to invest the Scandinavian countries have subsidized sicians and lawyers (who have to keep infor- resources to distinguish truth from falsehood, newspapers without impairing press freedom. mation confidential) and put the consumers’ much less to block outright disinformation. Early American democracy would not have had interests first.

They have even taken ads—for example, from its vitality without the subsidies the governBut a proliferation of state laws could boo- the Russians in 2016—in the form of “dark ment provided to the press through below-cost merang. By exposing companies to conflicting posts” in the news feeds of targeted groups, postal rates as well as printing contracts and requirements and the risk of being inundated invisible to the public at large. The platforms’ other means. with litigation, laws beyond California’s would algorithms have been optimized to build scale Since the late 1800s, however, American strengthen the case for federal legislation to and make the sites as “sticky” and ultimately as journalism has existed almost entirely on a override separate state rules, perhaps with profitable as possible. If conspiracy stories and commercial basis. Indeed, during the 20th much weaker national ones. other sensationalist and extreme content had century, newspapers and broadcast networks Still, there is at least positive movement that effect, it was of no concern to the platform made so much money that the best of them on privacy rights. Like antitrust, privacy law companies. Google’s YouTube—which in late amply cross-subsidized areas of coverage that

FALL 2019 THE AMERICAN PROSPECT 53

could not have been justified as contributing to their financial bottom line. Now the profits are disappearing, but a majority of Americans have not registered the significance of the change. According to a survey by the Pew Research Center in 2018, 71 percent think their local news media are doing well financially.

Newspaper publishers would like to get some of the ad revenue now going to the platforms. They’re supporting a bill that would give them a four-year exemption from antitrust laws to enable them to negotiate collectively with Google and Facebook. But even then, the news media would be in a weak bargaining position; they need the traffic from Google and Facebook more than the platforms need them. The antitrust exemption wouldn’t resolve journalism’s crisis.

Coming up with reasonable proposals to

EFFORTS TO CHANGE the policies of social

media are also politically fraught. Resting their hopes on corporate self-regulation, several organizations are trying to promote independent fact-checking for use by platform companies.

Both Facebook and YouTube have announced changes to their algorithms that they say will limit “borderline content.” In Mark Zuckerberg’s description, this is “sensationalist and provocative content” that “can undermine the quality of public discourse and lead to polarization.” Facebook is not blocking these posts, but it is limiting how often they show up in news feeds. In an explanation of how Facebook was preparing for the 2018 elections, Zuckerberg said, “Posts that are rated as false [on the basis of independent fact-checkers] are demoted and lose on average 80% of their future views.”

This kind of power, together with increases

IF YOUR NEWS FEED IS BEING ALTERED BY CHANGES IN A PLATFORM’S ALGORITHM, YOU OUGHT TO HAVE A RIGHT OF EXPLANATION IN ORDINARY LANGUAGE. support journalism is not the problem. One straightforward way would be an earmarked tax on digital platforms to support public-service journalism, with funds to be distributed on the model that the United States already has successfully developed for public broadcasting. Public radio is one of the few success stories in the recent history of the media; its federal structure—a decentralized system mostly of private nonprofit stations, with a mix of public and private funds and competing public-radio networks—helps minimize the risk of control by political incumbents.

But it is hard to imagine a worse time to advocate aid to journalism. When the president calls the media “the enemy of the people” and his party shares that disdain, proposals to support the press will inevitably be taken as partisan. Liberals should continue to think about such ideas—and, unfortunately, there will be plenty of time for reflection. The most that we can expect in the interim is a recognition among foundations and other nonprofit sources of the urgent need to bolster journalism, especially at the local level.

54 WWW.PROSPECT.ORG FALL 2019

in “content moderation,” is both necessary and worrisome. It is necessary because viral falsehoods, deepfake videos, and other forms of deception are a genuine threat to democracy, and social media can serve as a checkpoint. It is worrisome, however, because social media can just as easily serve as a choke point for free speech and do so in ways that those subject to control cannot detect, much less contest.

Relying on independent fact-checking organizations is no escape from politics. According to a Pew survey, 70 percent of Republicans believe fact-checkers are biased, while only 29 percent of Democrats think so. In fact, the right has reason to be concerned about the fact-checking of its news sources. In a recent study of online news, Network Propaganda, Yochai Benkler, Robert Faris, and Hal Roberts find that journalistic norms continue to constrain news organizations running from the center-right (for example, The Wall Street Journal) through the center to the left. But on the right they find an insular media ecosystem skewed toward the extreme, where even the leading news organizations (Fox and Breit-

bart) do not observe norms of truth-seeking.

That is the context for conservative charges that Facebook, Google, and Twitter are biased against them. Ironically, after years of denouncing Democrats for supposedly wanting to bring back the Fairness Doctrine in broadcasting, some conservatives now want a new fairness doctrine for social media. Senator Josh Hawley, a Missouri Republican, has proposed legislation that would require internet intermediaries to demonstrate that they are politically unbiased to obtain the broad freedom from liability for user content conferred by federal law. The measure seems calculated to deter social media platforms from adopting criteria such as news source reliability in their news feeds and other algorithms.

The Hawley proposal ought to serve as a cautionary signal about any kind of government content regulation of social media. But transparency is one function that government could usefully advance. Legislation could require that social media and other digital platforms regularly disclose how their algorithms work, including how they affect different kinds of content and viewpoints. If your news feed is being altered by changes in a platform’s algorithm, you ought to have a right of explanation in ordinary language. Greater transparency would be a step toward what has come to be known as “algorithmic accountability.”

When the internet and digital economy were first emerging in the 1990s and early 2000s, it was unclear what shape they would take.

The speed of change and its novelty were dazzling; a sober, historically informed analysis could not compete with dreams of a libertarian playground. But no one should continue to be under any illusions about the benign consequences of relying entirely on the market “as an alternative to intervention by government.”

The neoliberal internet era is over. A new wave of intervention is coming. Yet the tech firms have now grown so large and powerful, and the Trumpian right wing so opposed to journalism and its norms, that the shape of things to come is unclear again. The question now is whose interests and values will prevail in the digital world that politics will shape. Monopoly, surveillance, and disinformation are the immediate stakes; the ultimate issue is what kind of society we want to live in.

Stephen Smith at the United Mine Workers Labor Day picnic

The New Uprising on a Country Road

kenny kemp / charleston ga zet te-mail via ap images

Y

MARLINTON, WEST VIRGINIA ou enter this part of West Virginia under an enveloping green canopy. Known as “Nature’s Mountain Playground,” Pocahontas County is made up of 62 percent state or federal land, dominated by the Monongahela National Forest and the headwaters of eight separate rivers. While a gorgeous backdrop and a delight for tourists (and the timber industry), just 8,414 people live here.

It’s the kind of sleepy, empty place that politicians don’t see much value in paying attention to. Stephen Noble Smith has been here twice.

On this August evening, around 50 Pocahontas County residents have met at the public library in Marlinton, the county seat. Smith, a 39-year-old Democratic candidate for governor, is holding his 108th town hall, 15 months out from the 2020 election. And during a two-hour event that features a potluck dinner, breakout discussion groups, and an interactive game, he says something I’ve never heard from a U.S. politician.

An older man, who informed the crowd that he hadn’t attended a political event since seeing John F. Kennedy walk off a plane in “19 and 60,” had just compared Smith to the charismatic former president. Smith’s response opened some eyes in the room. “One thing I can tell you is I will disappoint you,” he said. “I hope

Stephen Smith has brought an organizer’s mentality to his campaign for governor of West Virginia.

He’s not just trying to win an election, but build a movement.

B Y D AVID D AYEN we’re doing something much bigger than me.”

Stranger yet, Smith’s name does not appear on most of his campaign literature. His skeleton-crew paid staff didn’t organize this event; volunteers in Pocahontas County did. Smith does not see himself as merely running for office, but building a movement called West Virginia Can’t Wait. Most of the army of volunteers and candidates who’ve been attracted to the effort have never participated in a political campaign before.

What unites them is a belief that West Virginia’s abundance has been stolen by a corporate and political oligarchy, which extracts from its people as surely as from its land. These

activists seek to wake up the fighting spirit that looms over West Virginia’s history, from the Mine Wars a century ago to the #RedforEd teachers strikes last year. They think of West Virginia as a place where people take care of each other, and they want to bring that impulse back to its government, by taking it over.

Smith, a first-time candidate who comes out of community organizing, is promoting this mission by putting his campaign in the people’s hands. He’s assembled a slate of more than 50 other candidates, who are running for everything from U.S. Congress to city councils, on a pledge to reject corporate money, stand behind unions, and never duck a debate. At a convention this fall, West Virginia Can’t Wait members will debate and write Smith’s campaign platform. If he wins, they will choose his cabinet, and help set his budget.

The campaign, one of the most unusual and thrilling in recent memory, is a vehicle, a means to build lasting, long-term grassroots infrastructure, in a state habitually bulldozed by small oligopolies carrying big money. “Never in American history has change happened from one politician,” Smith tells me. “The more of us who sign on, the more we’re able to tell the next candidate, ‘You’re not alone, we can do this together. You don’t have to be rich, you don’t need political connections. We have our own machine.’”

FALL 2019 THE AMERICAN PROSPECT 55

ple’s lives didn’t improve and the political leadstory about West Virginia through a half-cen- ership grew cozier with corporate interests. tury of presidential outcomes. As recently as The state’s economy relies to an uncomfortable 1996, West Virginia was a fairly reliable blue degree on plundering the land: coal, timber, state, having voted Democratic in 14 of the and now fracking companies chop trees, polprevious 17 elections. Residual appreciation for lute rivers and streams, puncture holes in the New Deal and Great Society programs and a earth, and blow the tops clear off of mountains. heavily unionized mining sector explained this Most of these companies are headquartered loyalty. Finally, George W. Bush took 52 per- outside the state, so their profits end up outside cent of the vote in 2000, and the gap gradually the state as well. widened until Donald Trump’s 69 percent to 26 Constant tax breaks for coal companies and percent blowout over Hillary Clinton in 2016. out-of-state businesses also drain resources for It was Trump’s second-largest state margin of public services. “We always let outsiders take victory, after Wyoming. all the profit out of the state,” says Terry Steele, But framing West Virginia as conservative a retired coal miner. “We ended up with all the Trump country shouldn’t be clear-cut. The spoils, miners with black lung and bad roads.” state hasn’t elected a Republican governor since 1996. (Jim Justice, the current governor and the state’s richest man, won the office in 2016 as a Democrat and then switched parties to ally with Trump.)

It hasn’t had two Republican senators simultaneously since 1958. The state legislature was in Democratic hands from 1931 to 2014. Richard Ojeda and Talley Sergent, two Democratic congressional candidates in 2018, improved on Clinton’s 2016 numbers by 36 and 25 points, respectively, the largest vote swing for non-incumbents in the country.

As Stephen Smith explains, the real political divide in West Virginia isn’t A street in downtown Marlinton, in Pocahontas County, population 8,414 between right and left, but between the corporate and political bigwigs (his movement The Smith campaign estimates that just getcalls them “the good ol’ boys”) and everyone ting the wealthy and corporations to pay the else. “It’s a contest for power,” he says. same tax rate as everyone else would yield $525 He sketches this out for me on a napkin at a million a year in revenue. diner in Los Angeles, where we first met while A stunning number of state politicians either he was holding a couple of fundraisers. (All own, work for, or hold investments in fossil fuel of Smith’s out-of-state fundraisers have been companies, or get slathered with donations chaired by West Virginia expats.) In 1996, West from them. One activist who pointed this out in Virginia’s voter registration was about 65 per- public testimony in 2018 got forcibly removed cent Democratic, 30 percent Republican, and 5 from the state legislature. The establishment percent other. By 2016, the Democratic number transcends the party structure, as evidenced by had dropped to 45 percent, but the Republican Justice, a billionaire coal magnate who owns number stayed virtually the same. “They became over 100 companies, who ran as a Democrat independents,” he says. “In West Virginia, the only to change effortlessly to a Republican. way we talk about it is, ‘I vote for the person.’

Stories of political graft predominate. A What they mean is, ‘I don’t trust either party.’” recently signed tax break bailed out a coal West Virginia Democrats’ registration col- plant that had accused one of Justice’s comlapse came mostly while their party held the panies of owing it $3.1 million; critics called it governor’s mansion—during which time, peo- a political favor. State Supreme Court Justice

56 WWW.PROSPECT.ORG FALL 2019

Allen Loughry, who wrote a book decrying political corruption, was hit with a 32-count indictment for self-dealing and ultimately removed from office.

Meanwhile, ordinary residents struggle with decaying towns and palpable despair. Median household income is almost $17,000 below the national average. West Virginia is ground zero for an opioid epidemic that has claimed thousands of lives. Millions of pills were shipped into tiny towns, with predictable and tragic results.

Trump’s appeal can be explained by his rejection of the national political establishment, and attacks on a cultural elite who seek to board up coal mines and put Mountaineers out of work.

But the establishment inside West Virginia has consigned ordinary citizens to misery while the rich profit. And even with Trump, more people stayed home in 2016 than voted for him. “People are fed up with corruption and the good ol’ boy system,” says James McCormick, a veteran who earned three Purple Hearts serving in Iraq. “The people that preach the loudest about lazy people on welfare, they are the biggest entitlement suckers in the world.”

In his Marlinton town hall, Smith dramatizes the state’s power relationships in a striking way. He assembles six chairs and brings up five volunteers from the audience. “The chairs represent the natural resources and wealth for this state, enough for each one of our people to live with dignity,” he says. Indeed, measured by real gross domestic product adjusted for inflation, this is the wealthiest time in West Virginia history. Its GDP growth in the first quarter of 2019 was tops in the nation, at 5.2 percent.

Then, Smith calls up Phil Rolleston, who helped organize the town hall, to play an outof-state landowner. “Phil saw this bounty and said, ‘I’m going to take care of myself,’” Smith says, directing him to spread himself out on two chairs. The situation is precarious for Phil, so he hires one of the other volunteers to be his governor, to protect his chairs and take two of his own. “If you’re a politician in West Virginia long enough, you get paid,” Smith explains.

So now there are two chairs and four people left, and Smith tells them, “Find a place to sit.”

What happens next is kind of a remarkable psychological experiment. The four volunteers

d av i d d ay e n

CASUAL POLITICAL OBSERVERS tell an easy

position themselves so everyone gets a share of the chair, an analogue to poorer West Virginians making room for one another: multiple families living under one roof, churches setting up food pantries. But this cycle of living with less also creates tension. “We end up fighting each other for a corner while the people that have enough get theirs,” one of the volunteers says.

Indeed, Smith tells me, desperate West Virginians, under the thumb of corporate robber barons and corrupt politicians for so long, react in one of two ways. “It can go towards the worst strands of American history, where that desperation gets turned into the most virulent racism and criminal levels of exploitation and nationalism,” he says, “or it can go towards the greatest moments in our history.”

STEPHEN SMITH HAS BEEN trying to build

those historic moments in West Virginia since 2012, when he moved back to the place where he

$5.1 million and $2.8 million, respectively, on the race. Justice financed most of his spending out of his own pocket. As Smith describes it, Justice and Cole each had a tiny staff, maybe 20 advisers, and just threw a bunch of money at advertising. “That [type of] campaign will be safe, not brave,” Smith told supporters on a national organizing call in August. “It’s going to be run to the benefit of the interests that paid for it, the lobbyists and corporate backers … They’re not going to give a damn about people power.”

In town halls, Smith talks about those campaigns by holding up his index finger; he describes West Virginia Can’t Wait as having fists.

West Virginia Can’t Wait begins with captains in each of the state’s 55 counties. As of September, the campaign boasted 270 county captains, with each county building an independent political organization that, by the 2020 election, will match the size of a typical statewide gubernatorial campaign. The coun-

Kayla McCoy, a former professional chef who founded the nonprofit to assist people affected by the devastating 2016 flood, heads up Greenbrier County Can’t Wait. “When we started I was the only person in the county,” she says.

“I live a mile and a half from Jim Justice, it’s probably one of the more difficult counties to be campaigning in. I now have three co-captains, and I’m having as many conversations as I can.”

The conversations are part of a strategy to mine the collected knowledge of West Virginians, listening to people’s concerns instead of dictating solutions to them. West Virginia Can’t Wait set a goal of holding 10,000 such conversations throughout the summer, all of them logged through an app called Reach.

Not only does this raise campaign awareness and gather intelligence about pressing issues, but it also breaks down walls constructed for a polarized age. The sample script, borrowing a technique from labor organizing in working-

As Stephen Smith explains, the political divide in West Virginia isn’t between right and left, but between the “good ol’ boys” and everyone else. was born. As head of the West Virginia Healthy Kids and Families Coalition for six years, he built campaigns that came out of ideas solicited from within local communities. One of them, called Our Children Our Future, produced 28 legislative victories, including raising the minimum wage and expanding the school breakfast and lunch program. Another, Try This, has delivered 257 micro-grants (around $1,500 each) across the state to improve communities through local gardens, boat ramps, bike lanes, and walking trails. After the 2016 flooding that killed 23 people and destroyed 1,200 homes, Smith took part in a shoestring nonprofit coalition that he says rebuilt 100 homes in its first year; the state government had nearly $150 million in federal grants and only built 50.

“We learned that the people of the state are ten times smarter and more passionate and more courageous than the lobbyists who run our government,” Smith says.

By contrast, a typical gubernatorial campaign in West Virginia is driven by money, not people.

In 2016, Justice and his millionaire auto dealer Republican opponent, Bill Cole, spent about

ty captains plan and organize the town halls that Smith attends, which thereby become a leadership development moment for new or inexperienced organizers thrown into the fire.

“We want to meet the people feeling the most pain,” said Sarah Hutson, West Virginia Can’t Wait’s field director, who works closely with the captains. Every county team comes up with different events, and learns from one another through internal Facebook groups and twicemonthly conference calls. Everyone contributes their talents. Phil Rolleston, the Pocahontas County captain, does online database work, and designed a program to organize volunteers.

Smith tells me about an older couple in Fayette County, who for one town hall picked a black church in a lower-income area. Intent to represent a cross-section of the community, they went door to door in housing complexes, bringing voter registration cards and an invite to the coming event. In the end, 86 people showed up. “We never said, ‘You need to go door to door in a low-income community,’” Smith says. “It was just by giving people the problem of, how are we going to organize this.”

class communities, begins not by asking people whom they will vote for, but what they want to see in a better West Virginia: “What’s concerning you right now? What do you care about that’s impacting your life or someone you love?

What are you hoping for?”

McCoy tells me about a conversation she had with a diehard Republican, a business owner she knew but never talked with about politics.

“The commonality we found was on the legalization of pot,” she says. “It brings in tax revenue and it’s a great way to combat the opioid epidemic. By the end of the conversation he was at ease.” The business owner isn’t a surefire vote for Smith, but for that moment, McCoy says, they shared a common purpose. “We both live here, we want to see the area and the state thrive, and we care about our friends and neighbors.”

WEST VIRGINIA CAN’T WAIT also has constitu-

ency captains, organized across 39 different issue areas, from Coal Miners Can’t Wait to Social Workers Can’t Wait to Students Can’t Wait to People in Recovery Can’t Wait. “None of those teams has anybody’s name on it,”

FALL 2019 THE AMERICAN PROSPECT 57

Smith says. “What our state needs is not 1,000 veterans who believe in one guy. We need 1,000 veterans who will fight like hell for veterans no matter who is in office.”

James McCormick is part of Veterans Can’t Wait. An ex-Republican turned independent, he describes himself as “not a fan” of partisan politics. “Me being a veteran, I can’t keep the politicians off me during election time—but after that, you can’t find them.” McCormick wants adequate health care for senior-citizen veterans, the construction of a new state veteran’s nursing home, and direct licensing certification for military police and medics to fill state jobs as police officers and EMTs. He wants to revive a “troops to teachers” program that has withered.

Polla Rumberg, a 71-year-old retired psychiatrist and school counselor, runs Seniors Can’t Wait. She eschewed politics most of her life, considering it distasteful. “I was happily retired until I met this man [Smith]. He has

“Most of them agree that corporate America and contract agriculture is the wrong way to go,” he says. He wants more opportunity within West Virginia for its many local farmers, like markets for their goods in schools and state hospitals.

The idea generation that the campaign is producing goes beyond a mere exercise. Each county and constituency team must reach a goal of 55 conversations, which earns them a ticket into a platform convention meeting in November. This meeting will create the platform that Smith will carry into the election, taking input from his core volunteers and really from thousands of opinions they’ve solicited across the state. It’s hard to think of another major candidate for higher office who crowdsourced the ideas behind their campaign.

Should he get elected, Smith has promised to create people’s councils to help choose heads of state agencies, and budget and policy priorities, in a similar democratic fashion. “Stephen

he says. “What I personally believe and learned from the trail is: That lie is what keeps people home. The thing about mass politics, it’s far more life-giving for everybody involved. Our liberation is tied up in each other.”

THE COUNTY AND constituency teams offer

the promise of a giant army to drown out the typical money power of top-down campaigns.

But it also improves communication to voters, eschewing most campaigns’ reliance on paid advertising and canvassers with no connection to the community. The campaign plans to borrow a relational organizing idea used in 2018 to great effect in Jefferson County, West Virginia, called “100×35.”

The county party, which wanted to flip two state legislative seats, identified 3500 lowturnout Democrats and found 100 volunteers, giving them each responsibility for 35 voters.

They could text message, email, call, write a

In town halls, Smith talks about typical gubernatorial campaigns by holding up his index FInger; he describes West Virginia Can’t Wait as having FIsts. set us on fire,” she says. “It’s daunting for people who are inexperienced, but that’s offset by being exhilarated.”

Rumberg has lived all over the state, and has already assembled 200 senior volunteers to help identify and promote a senior-focused platform.

“I have generated a questionnaire, where people tell me what their experience has been and what interests they have in making the state better for seniors,” Rumberg says. “I’ll call and say, I know you have experience in music, I need you to do this event. I have a 90-plus year old member canvassing door to door.”

Mike Weaver, a Trump voter and former chicken farmer from Pendleton County, quit the business in disgust with exploitation by out-of-state processing companies, who keep farmers on contract and dictate all the terms.

He now grows industrial hemp. “They’re shamefully abusive to farmers, it should be illegal,” said Weaver, a past president of the Organization for Competitive Markets, which seeks to tame Big Ag monopolies.

Weaver signed up with Farmers Can’t Wait, recruiting colleagues from across the state.

58 WWW.PROSPECT.ORG FALL 2019

Smith gives every group of citizens a seat at the table,” adds James McCormick. “Not a dang one of us have been promised a job, just [the opportunity] to fix the horrible stuff in our state.”

It’s not that Smith doesn’t have ideas of his own. He wants to initiate an anti-corruption unit within the state police, punishing those who loot West Virginia’s people. He favors single-payer health care and direct negotiations for state-purchased prescription drugs. He supports ending tax giveaways for giant outof-state landowners and monopolies, diverting the money to infrastructure investment and support for small businesses and co-ops. He wants to use the state’s small-town atmosphere as an asset, rather than paying dearly to attract big business. “Then you make the market work in your favor,” he tells me, “by saying, if you are a family farm, if you’re a family-owned business, if you’re a union shop, if you’re a co-op, come to West Virginia: We’re the only economy that’s rigged in your favor.”

But it’s Smith’s inquisitiveness that defines the campaign. “The foundational lie of modern politics is: Here I am, I can fix it, vote for me,”

postcard or letter, door-knock, do whatever it took to get out those 35 voters. And when early voting began, the party published rankings for each volunteer, creating a friendly competition. Turnout doubled within this universe of Democrats, and the two seats flipped.

With the exponentially larger universe of volunteers for West Virginia Can’t Wait, replicating 100×35 could pay real dividends. “With this infrastructure, we can make it so that every single voter we need will have heard about the campaign, one-on-one, face-to-face from someone they know,” Smith says. “If we’re at a Narcotics Anonymous meeting and I come up to you afterwards and I say, ‘I’m part of this group, People in Recovery Can’t Wait. And we’ve spent the last year talking to people like you and me and we’ve even got people like you and me running for office. If I give you a ride to the polls next week, will you come with me?’ That’s just fundamentally different than some stranger leaving a piece of trash on your front doorstep.”

West Virginia Can’t Wait kicked off its campaign in Matewan, a sacred site in the coaldominant southern section of the state. In

r i c m a c d o w e l l / a p pa l a c h i a n p h o t o g r a p h y

Smith speaks at the kickoff of his West Virginia Can’t Wait campaign in Matewan, a sacred site in the coal-dominant southern section of the state.

1921, ten thousand miners, a multiracial coalition including newly arrived European immigrants and Southern blacks, confronted three thousand state and local police and hired-gun detective agents at Blair Mountain. It was the culmination of a decade of violence between mine bosses and union workers, including a shoot-out in Matewan the year before that left ten dead and amped up tensions. For five days, police deployed machine guns and even commissioned private planes to drop homemade explosives on the mine workers at Blair Mountain. President Harding sent in federal troops to break up the skirmish, the largest domestic uprising since the Civil War. The miners wore red bandanas to signify themselves in battle. “The mine bosses tied it into ‘Russian, communist, union organizers, these people are outsiders, these people are communists,’” says Wilma Steele, founder of the West Virginia Mine Wars Museum in Matewan, which still sports bullet holes from the 1920 massacre. “But when the miners tied that bandana and marched to Blair,

they said, ‘We are workers, we are rednecks, we are marching together to fight for each other.’ The term redneck is about solidarity between brothers.”

Steele, in front of a crowd clad in red bandanas, told that story nearly 100 years later at the campaign kickoff, describing how miners from disparate backgrounds struggled as one.

Stephen Smith spoke about having the courage to wear the bandana, the weight of that symbol. “It was something special, like a gathering or a calling,” Steele tells me. “People traveled from every part of this state to come together.”

While West Virginia Can’t Wait isn’t using guns and ammunition to take on corporate rule, its members know the history and are animated by it. “I think a lot of people hearken back to those roots,” says Brittney Barlett, a teacher and movement organizer who was active in the 2018 #RedforEd strikes.

Across the state, teachers were fed up with some of the lowest salaries in the nation, everincreasing health insurance premiums, and a wellness app that forced them to track steps and

reduce their body mass index or incur fees of up to $300 a year. Despite a state law preventing public-employee strikes, teachers walked out in February 2018, wearing bright red as they picketed. Other unions, including the United Mine Workers, bused people to the protests. Smith also got involved, helping a grassroots coalition raise $332,000 in a week for a strike fund.

After a nine-day walkout and countless demonstrations at the state capitol, teachers received a 5 percent raise and triggered a wave of other teachers strikes across the nation. But Brittney Barlett had unfinished business in the House of Delegates. “The incumbent in my area was not supporting education,” she says. “Someone had to take him out. Why not a teacher?”

THE 94 COUNTY AND constituency teams of

West Virginia Can’t Wait are joined by a third component: candidates. West Virginia Can’t Wait fashioned a pledge that political hopefuls could sign on to, with five core elements: rejecting contributions from corporate PACs or executives of large corporations; standing with

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working people and never crossing a picket Not all Can’t Wait candidates are challeng- ing with daylong candidate training events. line; meeting with constituents at least once ers. Danielle Walker, an incumbent delegate “We’ve been championing a movementa month; engaging in at least 25 face-to-face from Morgantown, is also running on the slate. based politics,” says Maurice Mitchell, national town hall meetings; and promising “to remem- She’s an African American single parent who director of the Working Families Party. “If you ber that our fight is with the Good Old Boys moved to the state from Louisiana nine years want to organize people, you need to inspire and not with each other.” ago, depending initially on food pantries and them with a politics deeply aligned with their So far, 53 candidates have taken the pledge, health care clinics. She still works two jobs; the needs, that meets the scale of their problems including Democrats, Republicans, Moun- first starts at 3 a.m. every day. She was asked with structural solutions. That’s the heart of tain Party people (West Virginia’s version of to run for office after speaking at a vigil for the what is happening in West Virginia.” the Green Party), and independents. In some activist who died in Charlottesville. “I want To Mitchell, none of it could work without sense, it’s kind of a throwback to the political equality and equity for every single Mountain- a candidate at the top of the ticket generous machines of yesteryear, which would run can- eer,” she says. “I truly believe everyone deserves enough to believe in a politics bigger than himdidates as a slate. Only this time, the machine a second chance. West Virginia is my second self. “Stephen is an organizer, he’s running is allied with the people, over the powerful. chance state.” like it’s a grassroots organizing campaign,” Brittney Barlett is one of those canMitchell says. “He’s a true believer of the didates. Running for delegate in Lewis politics he’s trying to introduce you to.

County in the center of the state, she It’s very infectious.” has been holding Facebook Live events to survey her constituents on what they STEPHEN SMITH WAS born in Charleswant out of government. “People tell ton; his father started a homeless advome it’s not the smartest way of doing cacy group and the family took in foster things,” she laughs. “But people can get kids. (Smith and his wife are now also to know the ins and outs of how I feel foster parents.) The family moved to rather than a five-second soundbite.”

Texas when he was nine; he subsePaula Jean Swearengin, an anti– quently attended Harvard. “I think for mountaintop removal activist who chalthe first 18 years of my life I sort of felt lenged Joe Manchin in the Democratic like the world basically worked,” he tells Senate primary in 2018 and took 30 perme. “And I got to school and the first cent of the vote despite having no money real fight I was part of was a studentand little name recognition, has taken labor solidarity fight for a living wage Smith is the candidate, but he acts more like a recruiter. He gives out his own the pledge for her second run for Senate, contact information at town halls, and promises to respond to constituents. at Harvard, [for] janitors, food service, this time against Republican Shelley security guards.”

Moore Capito. Cathy Kunkel, a congressional Having the candidates run together allows Smith spent three years doing what he says candidate, also took the pledge, stating on her them to share volunteer resources, with con- were all the right things to build support, holdwebsite that “it will take all of us to build a stituency and county teams joining forces ing rallies and engaging the student body. And West Virginia that works for all of us.” behind the candidates. LGBT leaders and the university responded insultingly, by offerCan’t Wait candidates are vying for seats at Kanawha County Can’t Wait teamed up for a ing the workers museum passes. “We said we all levels of politics, and come from all walks fundraiser to support Mercer County delegate have to escalate,” Smith explains. “So that of life. Rosemary Ketchum of Wheeling, a civil candidate Tina Russell, who entered the race meant 52 of us taking over the president’s office rights activist, would be the first transgender after her opponent, Eric Porterfield, intimated for three weeks.” The high-profile occupation city councilmember in West Virginia history. he would drown his children if he learned they got those workers a living wage.

Ketchum is running to end a growing home- were gay, weeks after he’d likened the LGBT “It was the most clear moment of my life less problem in Wheeling, to fight the opioid community to the KKK . where I realized not only that the world and epidemic (her mother and father are addictRussell, a black social worker and first-time the economy is fundamentally broken,” he says. ed), and to engage the community to aid in candidate, is a co-chair of the West Virginia “It was the moment I learned that you don’t get decision-making.

Working Families Party, the progressive grass- power to concede anything unless you have “I think it’s a movement of the people, much roots organization that recruits and trains can- more power than them.” more than a campaign,” Ketchum says. “The didates. The state WFP made news by sweeping After graduation, Smith moved to Chicago, values of the community are not reflective in the entire Morgantown City Council in April. helped start a bakery run by formerly homeless the actions of its leadership. I honestly believe The national party leadership has formed people, and ran an immigrant rights organizathat change is most possible where ground has a deep partnership with Smith’s campaign, tion. But he felt the pull back to West Virginia, already broken, and we’ve broken ground.” highlighting him to its members and assist- the desire to raise his kids there.

Smith’s main role is obviously as the candidate, but he approaches it more like a recruiter.

Every day, his campaign blocks out three hours when he takes calls from curious potential voters and volunteers. He gives out his personal email address at town halls, and promises to respond. In Pocahontas County, Smith asked residents if they wanted to run for office, or if they knew anyone who did. He texted random people he didn’t know, based on rumors that they might want to run. “He’s putting himself in the midst of everything,” says Danielle Walker.

So far, this people-powered campaign, launched in January 2019, has legs. In the first half of the year, Smith raised more money than the other three candidates in the race, combined.

He received 2,449 small-dollar donations; Jim Justice had 13, and Justice’s main Republican primary opponent, Woody Thrasher (formerly Justice’s commerce secretary), had eight.

Smith has announced that 10 percent of all

in the campaign because of the movementbuilding potential,” she says. Johnna Bailey, the finance director, met Smith in a coffee shop. “I was thinking of leaving West Virginia,” she tells me at a fundraiser in Santa Monica.

Avery Thrush, a campaign intern, had a similar reaction. “I told [Smith] that I didn’t feel West Virginians leave the state because they want to,” she says. “Their families are here, their roots are here. It’s a beautiful state that’s been held hostage by the extraction industry.

But by coming together, we can take it back.”

THE EVENTS IN MARLINTON included a sit-

down with local Democratic committee members; a few one-on-one conversations with some local teachers; a potluck with sandwiches, homemade salads, and lemonade; and a town hall. The 50 people in the room represented almost 1 percent of the total registered voters in Pocahontas County.

to wrap up. Asked how the experience went, one participant says she wished they had more time. “I find it so energizing to hear from people,” says another. “It’s a gift.”

At the end of the night, as he does at all these events, Smith asks those assembled to commit to engage in more conversations with friends and neighbors, or donate dollars, or both. Each person offers their commitment out loud, and the rest of the room is instructed to respond, “Thank you.” A woman and her husband became the 1,000th and 1,001st recurring monthly contributor. Overall, the campaign took in $1,300 and got commitments for more than 100 conversations.

Smith doesn’t sugarcoat the enormity of the task they’re undertaking, warning that the good ol’ boys won’t give up without a fight. He asks people to raise their hand if they think politics is dirty, and every hand shoots up.

But in the worst-case scenario, he says, 15 or

“Stephen is an organizer, he’s running like it’s a grassroots organizing campaign. He’s a true believer of the politics he’s trying to introduce you to.” his donations will go back into communities in West Virginia, through events and actions that assist people. “You guys will be the ones who decide” what events to do, Smith told the town hall in Marlinton, but he suggested ideas like busing people across the border to Canada to buy prescription drugs, or running a naloxone training (it’s a nasal spray that reverses the effects of opioids during an overdose).

Senator Joe Manchin, a good ol’ boy icon of the political establishment, flirted with a run for governor (an office he’d already held) but ultimately opted out, ceding the Democratic field to Smith. In early September, Smith’s campaign was bolstered by an endorsement from senator and presidential candidate Elizabeth Warren. “West Virginia can’t wait any longer for big, structural change,” she said in her statement, echoing the movement’s moniker.

None of Smith’s staff, the first political campaign to unionize in state history, came out of politics. None of them even live in the same part of the state; they keep in touch online.

Campaign manager Katey Lauer did issuebased work at the grassroots. “I was interested

Dane Sizemore, a county captain wearing a trademark red bandana, greeted the crowd.

“Maybe we don’t agree on some things, but there’s 80 percent of stuff that everybody in the state wants to see,” he says. “Better jobs for families, good schools, good roads, clean water.”

Smith’s approach at these town halls is both pedagogical and participatory. He walks people through his story, through the story of how the state faltered, and how it can renew itself.

He asks participants to fill in the blanks. “We may have the worst leaders but we have the best people,” he says, ticking off the areas where West Virginia ranks high among the states: time spent with neighbors, charitable giving, volunteer service.

The chair game is just one of his teaching tools. Once it’s done, he splits everyone in the room off into groups of two, to engage in conversations about what kind of state they want to have, and record the exchange on paper. As I stroll around the room, the conversations are real, and sometimes deep. People are talking about their families, their communities, and their fears. It’s difficult for Smith to get them

20 of his slate will get into office, and a thousand new leaders will be trained (“A thousand leaders, not one” is a major campaign slogan).

After the 2020 election, the participants can build their own campaigns or run for office or organize their communities. The movement was always intended to outlast the election cycle, to build a generation of leaders in the Mountain State. “We’re trying to get people to buy into themselves,” says Katey Lauer. “We keep helping people believe it’s possible, while doing the work to make it possible.”

As people stack chairs and clean up, I walk up to Dane Sizemore, one of the county captains. He tells me that he didn’t know if five people would show up when he was driving in from work. “I want us to remember that we’re a community: That defines us more than who we voted for in the last election,” he says. I ask him about his red bandana, about West Virginia’s ancient spirit. “I come back to Matewan. That’s where West Virginia stood up. The whole state is built on that. People stood up to out-of-state coal bosses and said we’re not going to take it anymore.”

FALL 2019 THE AMERICAN PROSPECT 61

How Private Equity Makes You Sicker Investment firms have created consolidated hospital empires across America, leading to closures, higher prices, and suffering.

BY E ILE E N AP P E LBAU M

I

‘‘

t’s just so messed up that this is all happening,” Lauren McHugh, a registered nurse for 17 years with Hahnemann University Hospital, said at a July rally protesting its closure. “The city needs this hospital. We have frequent patients that have cried, ‘Where am I going to go?’ They don’t know. No one knows.”

Hahnemann, a 171-year-old institution in Center City Philadelphia that serves primarily low-income patients of color, closed on September 6 in one of the more egregious cases of private equity wealth extraction. In 2018, Paladin Healthcare, an entity owned by private equity baron Joel Freedman, bought Hahnemann as part of a small hospital portfolio.

He made no improvements for 18 months, and then closed the facility with the intention of selling the real estate, which is set in a “gateway location” for gentrification.

“This seems to have been [Freedman’s] plan all along, to buy this place, let it fail, and shut it down.” McHugh said. Local politicians in Philadelphia and even presidential candidate Bernie Sanders spoke out, savaging Freedman as an avatar of greed. But the condemnations did nothing to stop the closure. Freedman’s lucrative scheme could become a trend, where private equity firms find hospitals in urban areas attractive to developers and strip the assets.

The Hahnemann tragedy represents a new wrinkle in the concentration of the hospital industry: the emergence of private equity as a driving force. Private equity firms are using borrowed money to assemble medical empires across the country. Not only do consolidated hospitals harm patients with higher prices and worse outcomes, but the shaky financial pictures

62 WWW.PROSPECT.ORG FALL 2019

that result habitually lead to massive cost-cutting and closures of unprofitable facilities, which put entire communities at risk of losing access to medical care. It’s the same value-extraction strategy private equity specializes in, only this time it’s quite literally a matter of life or death.

EVEN BEFORE PRIVATE EQUITY entered the

picture, hospital networks experienced the same kind of monopolization that has reached into nearly every nook and cranny of everyday life. By 2016, hospital concentration was high in 90 percent of hospital markets. The typical geographic region had three to five consolidated health systems. In 2017, hospitals announced 115 deals.

Hospital executives argue that merging systems will allow them to better coordinate patient care across doctors and facilities, and create efficiencies that reduce health care costs. These arguments have generally persuaded antitrust regulators. In reality, declines in competition when hospitals merge mean that, even if there is a decline in costs, it won’t translate into lower prices or health insurance premiums. Indeed, there is considerable evidence that mergers enable hospitals to pad profit margins by negotiating higher prices for procedures with insurance companies.

Merger activity in California, for example, led to a surge in supersizing hospital systems between 2004 and 2013. According to Blue Shield data, prices across California hospitals were similar in 2004, approximately $9,200 per patient admission. By 2013, prices in the largest hospital systems had increased 113 percent, compared to 70 percent at all other hospitals, a difference of almost $4,000 per

admission. While the evidence is less clear-cut, studies also find worse health outcomes for patients and greater variability in the quality of care when hospitals face less competition.

Private equity has taken a different path to profiting from the hospital sector. Typically, firms begin by acquiring a small hospital system, referred to as a platform company, in a leveraged buyout. Then they add smaller hospitals in geographically dispersed regions, creating a national, multistate hospital chain.

The purchases are all financed with borrowed money, and the private equity firms transfer the debt load onto the hospitals.

Unlike traditionally managed hospitals, whose shareholders are committed to their continued operation, private equity owners plan to exit investments in companies they acquire in three to five years. The short time horizons make it impractical for firms buying hospitals to invest in technology, workers’ skills, and quality improvements, all of which require a longer time frame to pay off. Instead, PE-owned hospital systems focus on growing the system by adding on hospitals.

These acquisitions usually fall below the deal size that triggers review by antitrust regulators, allowing them to go unchallenged. In net, however, PE-owned hospital systems can cobble together significant market power by making a series of smaller deals—what health economist Thomas Wollmann terms “stealth consolidation.” Even if the mergers happen to be larger, the hospitals are rarely in geographic proximity to each other, instead serving distinct patient populations. Antitrust regulators see no reason to oppose them.

The acquisition in 2006 of Hospital Cor-

m at t r o u r k e / a p i m a g e s

When applied to hospitals, the value-extraction strategy that private equity specializes in can lead to terrible outcomes for patients, medical staff, and communities.

poration of America, Inc. (HCA), by a consortium of private equity firms led by Bain Capital Partners represented a turning point. HCA was a for-profit hospital system that, at the time it was acquired, included 176 hospitals and 92 outpatient surgery centers with a total of 41,850 beds. The consortium acquired HCA for $21 billion, funding 80 percent of the purchase price (approximately $17 billion) with debt.

During 2010, HCA paid investors a dividend of $4.25 billion, which virtually covered the original private equity investment. The consortium turned HCA public on March 9, 2011, raising another $3.79 billion. In the 2006 buyout, Bain Capital invested about $64 million in HCA . By the time it went public, Bain had received about $750 million—equal to roughly ten times its initial investment.

The financial success of the HCA deal spurred other private equity funds to acquire hospitals, an undertaking facilitated by access to lowcost debt in the mid-2000s. By 2011, private equity owned many of the largest hospitals and hospital chains operating at that time, including Community Health Systems (Forstmann

Little), Vanguard Health Systems (Blackstone), LHP Hospital Group (CCMP Capital Advisors), Steward Health Care System (Cerberus Capital Management), Capella Health Care (GTCR Golden Rauner), IASIS Health Care (TPG Capital), RegionalCare Hospital Partners (Warburg Pincus LLC), and Ardent Health Services (Welsh, Carson, Anderson and Stowe).

While hospitals in PE-owned health systems do not compete for the same patients, they nevertheless have the potential to disrupt access to health services in local hospital markets. They struggle with high debt loads, and more important, with owners who help themselves to much-needed financial resources. Dividend recapitalizations (where hospitals sell junk bonds and use the proceeds for dividend payments), monitoring agreements (where hospitals pay the PE firm to monitor them), and asset stripping (where the firm sells off hospital real estate and pockets the proceeds) transfer funds from the hospitals to the PE firm and its investors.

PE owners would prefer their portfolio companies avoid bankruptcy, but they typically

recover their initial equity investments and make a profit regardless. Therefore they may have less reason to focus on the hospital system’s long-term success. The hospitals themselves must employ cost-cutting measures to meet debt obligations, like reductions in staff, closing departments that provide low-margin services, such as obstetrics and gynecology, and selling resource-starved hospitals.

Ultimately, the overhang of debt and the transfer of financial resources to PE owners can threaten the viability of the hospitals. Most recently, long-term care hospital chain New Life­Care Hospitals, which operates 17 facilities in nine states, filed for bankruptcy protection on May 6, 2019. Owned by a consortium of PE firms led by BlueMountain Capital, the chain had previously shut several of its hospitals.

This situation is especially troubling when a PE firm owns a system of rural hospitals in many states, which may simultaneously face disruption, with cascading effects on patients and providers. Dr. Barbara McAneny, former president of the American Medical Association, sounded the alarm: “We have to decide whether

FALL 2019 THE AMERICAN PROSPECT 63

IN 1996, PRIVATE EQUITY firm Forstmann Lit-

By June 2015, about a year after the HMA deal closed, CHS’s total long-term liabilities had increased dramatically to $19.7 billion and its debt/equity ratio had nearly tripled to 401.5 percent. CHS struggled to meet these debt obligations. Its share price, which had risen following the HMA merger to $65 a share in July 2015, fell to $13.96 by February 2016.

Stuck in financial trouble, CHS began divesting facilities to pay down debt and avoid default. In April 2016, CHS spun off 38 small, mostly rural hospitals into Quorum Health

roughly $1 billion in debt, which it needed to raise and pay off on its own. The debt was “speculative grade,” meaning Quorum was financing its spin-off from CHS with junk bonds.

In the three years following the spin-off, Quorum sold or shuttered 11 rural hospitals in markets with few to no alternative acute-care facilities. The sales yielded $86.5 million in net proceeds to Quorum, which used nearly all of it to pay down debt, not improve the quality of care. Quorum closed Affinity Medical Center, a 156-bed hospital in Massillon, Ohio, in 2018. In April 2019, Quorum sold Scenic Mountain Medical Center, a 146-bed hospital in Big Spring, Texas, to Steward Health Care System. Nearly one-third of Quorum’s initial slate of hospitals have now been sold off.

Divesting the Quorum hospitals did not return CHS to financial stability, either. In August 2019, its shares traded at just $1.81 and the health care system was still selling off hospitals to stave off default on its debt. The private equity assembly of a hospital empire has led to chronic financial struggles and communities threatened with lack of access to care.

tle & Co. acquired Community Health Systems (CHS) for $1.63 billion and took the company private. Forstmann used CHS as a platform, and subsequently added on other health care companies. In keeping with PE practice, Forstmann returned CHS to the public markets in 2000 via an IPO, although it continued to own a majority stake.

At that time, CHS had $1.2 billion in long-term liabilities and a high debt/ equity ratio of 161.2 percent. In 2004, Forstmann sold its remaining stake in CHS, and CHS borrowed approximately $260 million to buy about half of the shares. Forstmann still played a role with CHS by financing CHS’s continuing acquisitions of other health care organizations.

Between 2000 and 2017, CHS acquired 66 health care companies.

For a time, it was the largest for-profit chain in the U.S. by number of hospiSTEWARD HEALTH CARE SYSTEM, tals. While CHS was no longer owned owned by private equity firm Cerberus by private equity, it continued to operate In September, a private equity owner closed this busy Center City Philadelphia Capital Management, was created in using the private equity business model, hospital in order to profit on the sale of its valuable real estate.

November 2010, when the PE firm including the use of leveraged buyouts acquired the financially troubled Carito add on smaller health care companies and Corp., a newly created public company, appar- tas Christi system and assumed its debt and loading CHS with dangerous amounts of debt. ently without FTC oversight. Later that year, it pension liabilities. Caritas Christi, the largest Not all of CHS’s acquisitions were small. In sold eight more hospitals to Steward Health community-based health care system in New 2007, CHS acquired hospital system Triad for Care System. In 2018, CHS divested 11 hospi- England, employed 10,000 workers and served $5.1 billion, plus the assumption of $1.7 billion tals; in the first quarter of 2019, it sold seven more than half a million patients annually. of debt. This nearly doubled CHS’s hospitals to more. In 2018, Tennova, a subsidiary of CHS, Steward quickly added five more hospitals in 130. FTC approval was required, but it does not said it would cut staff and “reconfigure” health 2011 and 2012—two of which it acquired from appear that the agency raised questions about services at three Knoxville-area hospitals, private equity–owned Essent Healthcare, Inc. the merger. In 2013, CHS made a bid to take reducing patient access to some acute-care By 2012, Steward was a $1.8 billion company, publicly traded Health Management Associ- services. CHS also closed two of Tennova’s hos- with 17,000 employees (making it the thirdates (HMA) private in a leveraged buyout. As pitals; and in Missouri, CHS closed a 116-bed largest employer in Massachusetts); it cared a condition of approving the merger, the FTC hospital, leaving local physicians struggling to for 1.2 million patients annually. According required that CHS divest just two hospitals fill the health care gap. to Steward’s CEO, Cerberus planned to refine and related facilities in Alabama and South The CHS spin-off to Quorum Health Corp. its approach to making hospitals profitable, Carolina. It should not have been difficult to created a monopoly provider across rural Amer- expand it to other states, and then sell Steward anticipate that a heavily indebted hospital ica: According to trade publication Modern or exit via an IPO. chain acquiring a large, heavily indebted and Healthcare, “in 84% of the markets, the hosThings did not go as planned. Cerberus struggling rival would introduce unacceptable pital is the sole provider of acute-care hospital funded the system’s operating losses and levels of instability. services.” Quorum, however, was loaded with acquisitions by monetizing some of Steward’s

64 WWW.PROSPECT.ORG FALL 2019

m at t r o u r k e / a p i m a g e s

the goal of a healthcare system is to increase profits, because private equity firms are selecting those parts of healthcare where they can see a profit because their goal is to make profit.”

Some case studies amply illustrate these concerns.

assets via sale-leaseback deals for its medicaloffice buildings, and by loading up the system with junk bonds and other debt. As the Massachusetts attorney general reported, “The solvency position of the system declined as debt increased, while operating losses and pension fund charges eroded equity.”

Steward lost money in its first four years of operation; its $131 million profit in 2015 was due to a $132 million pension settlement. Steward’s financial position since then has been unclear, as the system has refused to submit legally required financial information to the Massachusetts Health Policy Commission. It’s impossible to assess Steward’s financial health, or its claim that it has “turned around” the struggling chain.

Cerberus’s investment was rescued in 2016, when Medical Properties Trust, Inc. (MPT) agreed to buy all of the system’s hospital properties. MPT agreed to pay $1.2 billion for the properties and a further $50 million for a 5 percent equity stake in the health care system. Steward now leases back the properties for its hospitals and other facilities, paying rent to MPT. The deal was especially favorable for Cerberus, paying back the initial investment in Steward and more, although the total amount reaped has not been revealed. The deal will also pay down all of the company’s more than $400 million in debt and provide a payoff for top executives.

Within months of receiving the MPT stake, Steward embarked on an aggressive campaign to expand beyond Massachusetts. It capitalized on CHS’s financial instability, acquiring eight hospitals and 7,000 employees in Ohio, Pennsylvania, and Florida in 2017. It does not appear that the FTC performed a detailed review of these acquisitions, despite the fact that the hospital system’s PE owners no longer had any skin in the game, and the valuable hospital real estate would pass to MPT and not be available as a buffer against bankruptcy.

Later in 2017, Steward announced a $1.9 billion purchase of 18 hospitals in Utah, Arizona, Colorado, Texas, Arkansas, and Louisiana from IASIS Healthcare, owned by private equity firm TPG. IASIS had been created as a health care platform company in 1999 by a different private equity firm, JLL . The hospital system grew through hospital add-ons in widely separated markets. In 2004, TPG acquired a majority stake in IASIS via a leveraged buyout.

IASIS failed to go public twice, likely due to IASIS’s extensive junk bond debt. In 2011, IASIS

had sold more than $450 million in junk bonds rated five steps below investment grade, and increased its debt burden from 4.9 to 6.5 times earnings, putting it at high risk of bankruptcy.

As much as $230 million of the junk bond sale was paid out to IASIS’s PE owners. This was the third IASIS payout to TPG, enabling the PE firm to recoup the last of its $434 million investment.

The merger of Steward and IASIS was subject to regulatory approval by the FTC, which chose to impose no conditions on either party.

When the deal closed, it created a network of 36 hospitals across ten states and made Steward the largest private hospital system in the U.S. in both revenue and number of hospitals.

The combined system, with 38,000 employees, was expected to generate almost $8 billion in revenue in its first year of operation.

On the same day that it closed the deal for

PE firm and its investors if there’s a successful resale of the company. But it creates a high-risk situation for the company, its workers, and its customers, raising the risk of default and bankruptcy. Paladin Healthcare’s successful closure of Hahnemann Hospital as a real estate–play adds another potential profit-taking strategy that can severely hurt patients.

Antitrust regulators, who expect consumers to continue to have access to the same or an expanded array of health services following a merger, need to be concerned about the extent of leverage on the hospital systems, and the risk that debt poses to their ability to continue to provide services that patients and communities depend on. Mergers between struggling over-indebted hospital systems should be subject to careful scrutiny.

The “buy and build” strategy of platform companies consistently acquiring smaller rivals is now ubiquitous. This has proven more effec-

Dr. Barbara McAneny, former president of the American Medical Association: “We have to decide whether the goal of a healthcare system is to increase profits.” the 18 IASIS hospitals, Steward sold the real estate of 11 of them to Medical Properties Trust (MPT) for $1.4 billion in a sale-leaseback deal that returned nearly three-quarters (74 percent) of the purchase price of IASIS to Steward’s PE owners, but burdened the hospitals with rent payments. In addition, MPT invested $100 million in Steward.

Cerberus’s investment in Steward has already been repaid, likely with a profit. Only the hospital system’s 38,000 employees and the 36 communities its hospitals serve are at risk, should Steward reduce services or shutter hospitals to manage its burden of junk-grade debt. With its most valuable asset—the real estate—no longer available to stave off bankruptcy, Steward’s high debt burden is a clear and present danger to health markets in ten states.

THE LOW-RISK/HIGH-REWARD nature of the

PE business model provides incentives to load excessive amounts of debt on the companies acquired. Debt increases the returns to the

tive for investors than investing in the original company and allowing it to grow organically.

PE investors are impatient and plan to exit their investments in three to five years.

In health care, this has meant acquiring smaller hospitals serving suburbs, towns, and rural areas. It’s been an effective way for the hospital system to consolidate ownership and market power on a national scale without coming under scrutiny by antitrust agencies. But multiple hospitals can be threatened if the parent company experiences financial trouble, and can face curtailed services or shuttered hospitals that leave these communities with few or no alternative sources of health care.

These should be important considerations for antitrust regulators.

Eileen Appelbaum is a senior economist at the Center for Economic and Policy Research.

David Dayen contributed reporting. Research was partially funded by the Institute for New Economic Thinking (INET).

FALL 2019 THE AMERICAN PROSPECT 65

On Summer Vacation, and Hungry

I

t’s a muggy August afternoon as I meander through a maze of apartment homes in Ypsilanti, Michigan, to find where a group of kids will be eating a free meal.

Near the leasing office of the apartment complex, Sycamore Meadows, I spy a small tent. Bright orange yoga mats, trimmed to fit children, lie under it. Some of the children those mats are intended for are riding tiny bikes in the parking lot, mostly spinning in circles. This is one of thousands of sites in communities across the country where children can eat for free during the summer.

Hunger during the school year has largely (though not entirely) been addressed thanks to the National School Lunch Program (NSLP).

But summer vacation is a different matter.

The program that provides meals at Sycamore Meadows, the federal Summer Food Service Program (SFSP, or Summer Meals) was started as a pilot in the late 1960s and officially established in 1975, to ensure that children who ate free or reduced-price meals during the school year remained fed during the summer months.

At an “open” site like Sycamore Meadows, any child under the age of 18 can come and receive a free meal.

In order to attract kids to sites, most program sponsors lean into the joy of summer vacation, offering fun programming or at least activities like jump rope or sidewalk chalkdrawing. Today, besides the chalk, it’s story

66 WWW.PROSPECT.ORG FALL 2019

time with a librarian from the Ypsilanti District Library across the street, and then a singalong.

Sentra Brownlee, a mother of four who lives in the area and who helps coordinate this site for the Michigan-based anti-hunger nonprofit Food Gatherers, has made it her mission to publicize this program and get children to it.

It’s helpful for her as a parent—four lunches she doesn’t have to worry about many days during the summer—and for most of the families who live at Sycamore Meadows, which is subsidized housing. Today, about 16 kids gather on the yoga mats, but earlier in the summer, at the height of the program, they served as many as 100 kids for lunch or snacks.

As Brownlee and I are talking, another woman walks toward the leasing office.

Brownlee pauses midsentence and turns to the woman: “Hey, you have any kids? They can come here to get free meals during the summer.” The woman nods: She knows. Her kids have eaten there.

But Brownlee’s efforts at this site both mask and illustrate the problem with SFSP. For all she has done to publicize Summer Meals, knocking on doors and handing out flyers, there are kids in other areas who need a program like this and have never participated. Energy like Brownlee’s is necessary for the program to succeed, but that commitment—which certainly exists across the country in many communities—is a finite resource.

Of the 22 million students who receive free or reduced-price lunch at school, only 14.1 percent—one in seven—are served summer meals.

In other words, the program has not satisfied its intention of replacing the NSLP during school break: Summer remains the worst time for children’s hunger. And despite efforts to ramp up access to summer meals during the Obama administration, the number of kids served has fallen since 2016.

According to a recent report by the Food Research and Action Center (FRAC), in July 2018 (July is the most popular month of the program), almost 2.9 million lunch meals were served in the nutrition programs operating during the summer—the Summer Food Service Program, and for those few students in summer school, the National School Lunch Program. That’s a decrease of about 171,000 meals as compared to July 2017.

You may assume that this program is another casualty of a Trump administration bent on destroying the social safety net in the name of personal responsibility. The truth is a little like the program itself—complex.

The Summer Meals program, which is not well known across the country and rarely covered in the media, is not a major legislative priority, and while that generally keeps it out of the crosshairs of conservative budget-cutters, it’s also a problem. Food Gatherers may serve meals at more than 30 sites across Washtenaw County

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The school lunch program has gone a long way to reduce childhood hunger across the country. What happens during the summer? BY KALENA THOMHAVE

in Southeastern Michigan, but the federal program model at large is outdated and ineffective.

Nonprofits, schools, and Food and Nutrition Service career staff may come up with creative work-arounds, but the program’s structure limits them from serving all the kids who need food during the summer. Compared with the school meal program, Summer Meals is largely failing.

“What we’re doing now is not enough,” says Kevin Concannon, who was undersecretary of food, nutrition, and consumer services for the U.S. Department of Agriculture’s Food and Nutrition Service (USDA FNS) during the Obama administration. “[T]he collective efforts of the federal government, state government, nonprofit sector, and schools are not enough to address the issue of food insecurity for children, particularly in the summer months.”

The good news is Congress can do something about it.

from farmers—supporting American agriculture and American kids. Today, most kids from low-income families eat free or reduced-price lunches at school, ensuring that kids are fed each day and that their families have smaller food expenses. (School breakfast, a less popular program, is offered too.)

One mark of a successful program is that its existence is not really challenged. Most of the time, when school lunch as a program is attacked from the right, it’s due to its strict nutrition standards (case in point: the Trump administration has already loosened many of them), not the program itself. For most of the year, kids can reliably get fed at school for two meals a day.

But what about the rest of the year? The United States, of course, for the past century has had a system of giving children the summers off school, originally to allow wealthier children to join their families on vacation, and to account for the lack of air conditioning in

Of the 22 million students who receive free or reduced-price lunch at school, only 14.1 percent are served summer meals. Summer remains the worst time for children’s hunger.

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THE NATIONAL SCHOOL LUNCH Program was

enshrined into law in 1946 as both a response to the malnutrition seen in potential soldiers during World War II and a way to prop up farmers, who were producing more food than the country needed. Many young men were rejected from the military as a result of hunger; therefore keeping kids fed was “a measure of national security.” Congress figured they could address this problem by feeding kids agricultural excess that the government purchased

is generally stronger for lower-income kids than higher-income ones. One reason could be discrepancies (or lack thereof) in summer programming for kids based on income. And food insecurity and hunger probably play roles in this “summer slide” for kids who rely on NSLP throughout the school year, too. So if SFSP is clearly needed … why does it reach so few kids?

There are numerous reasons. Besides the fact that kids at school are a captive population, Summer Meals suffers from the program’s extremely complicated structure.

“It is a pretty intense program to run—and communities restart them every summer,” says Crystal FitzSimons, director of school and outof-school time programs at FRAC. In order to serve meals, a meal site must have a sponsor, which can be schools or nonprofits. Every year, the sponsor must re-apply to the state child nutrition agency (typically the education department) to serve meals at its sites. It is then reimbursed

The Sycamore Meadows apartment complex in Ypsilanti, Michigan, has a summer meals program for kids.

classrooms. With school no longer in session, there was no clear and easy national distribution program in operation to ensure lowincome kids were fed during those months.

There’s been a lot of research on summer learning loss in between school years, which

for each meal that’s correctly served to a child.

That “correctly” bit is important, because a site has some complicated requirements too.

Most significant is what’s called “congregate feeding,” which means children must eat at the site and they must all eat together—no picking up a meal and taking it home, no delivering meals to kids at home. This requires that children travel to the site itself to eat. If a child takes a meal and runs off with it, the site cannot claim that meal for reimbursement.

There were good intentions on the part of this policy. For one, it’s good for kids to all eat together, form social bonds, maybe participate in a summer activity. And allowing kids to take fresh food off-site could spell problems—what if the kid waits to eat their meal, and it goes bad? Better to ensure the kid eats their food under the watchful eye of an adult.

But this requirement also severely limits the reach of the program, given that children must physically reach a site. Rural areas with limited public transportation are particular-

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tion. Rural rates of poverty have always been higher than poverty rates in metro areas. But implementing summer nutrition programs in rural areas runs into roadblock after roadblock.

BECAUSE OF THE LIMITATIONS of SFSP,

and in the absence of legislation that would ease them, the sponsors that run the programs, the state agencies that implement them, and the federal staff that guide all of it must be extremely creative. Local organizations have always looked to new strategies

Sentra Brownlee’s four children, including Mark (above), participate in the summer meals program at Sycamore Meadows.

to reach kids, but federal support is also key.

“Summer requires a pretty intensive call to action every year … there really needs to be an aggressive outreach campaign to let families know where meals are available,” says FitzSimons.

Under the Obama administration, USDA FNS outlined an ambitious strategy to expand Summer Meals, and ended up serving more than 80,000 sites, Concannon tells me. But he adds a qualifier. During the school year, nearly 100,000 schools in the U.S. participate in the school lunch program—for about 180 days a year. Some summer sites are open all summer, but others are open for just a few weeks, or even just one day.

“Just the number of [summer] sites alone would have you believe we’re doing a better job,” Concannon says. “But because many of them

are counted as one of those sites but only open for a short period, it doesn’t do much to predictably address hunger or food security for kids.”

Still, the increase in sites led to an increase in children fed.

For Markell Miller, director of community food programs at Food Gatherers, SFSP “requires us to find existing [places] where we know kids are already congregating,” because they must eat their meals on-site. “We are not able to reach all of the kids because of the congregate requirement,” she says, “particularly in communities without public transit.”

The school buses many kids rely on during the school year are absent during the summer.

Concannon tells me that the administration identified libraries and health centers as areas where low-income kids were spending their time, and therefore as perfect places to focus collaboration on serving summer meals.

FNS career staff and state staff were essential in developing these partnerships—something I am well aware of because, full disclosure, I briefly worked at FNS. According to the FRAC report, the state with the highest amount of participation—besides the District of Columbia, which is an urban area better suited for the program—is Vermont. One in three children who eat free or reduced-price school meals during the school year are served via SFSP in the state. I spoke with Becca Mitchell, child nutrition initiatives manager at Hunger Free Vermont, to try and learn some of the state’s secrets. Their challenges are similar to other states with rural and suburban areas (that is, every state).

Hunger Free Vermont has focused on overcoming the difficulties that lie in transporting kids to sites as well as the stigma inherent in assistance programs like SFSP. Some cities have sites that kids can walk to, like parks in Burlington. But other areas are spread out, and sites might be miles from one another. Mitchell’s organization has worked to overcome this challenge by utilizing mobile feeding sites—bringing the food to the kids instead of the other way around. A bus with meals may have a set route each day, and drive around to several sites, dropping off meals and staying with the kids for half an hour, then moving on. Sometimes these sites are at places like libraries, where built-in programming might be available.

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ly affected. The eligibility requirements for “open” sites, where any child can come to the site and eat, also disproportionately affect rural areas. In order for an open site to even be eligible to serve meals, at least 50 percent of children in a given geographical area must be eligible for free or reduced-price school meals during the school year. This makes serving meals much harder for those children who live in poverty where it is not as concentrated—like rural areas. In 2003, a comprehensive study of SFSP found that just about a quarter of sites were located in rural areas; there is no strong evidence to assume that this percentage has since changed significantly.

At Sycamore Meadows, I ask LeRonica Roberts, the community food programs coordinator at Food Gatherers, if most of the kids’ parents have any idea that these meals are funded by SFSP. She doesn’t think so—though they probably have an idea that it has something to do with school lunch. Of course, they don’t really need to know about the ins and outs of the program: One benefit of the design is that parents don’t need to be there. Children are not required to check in or write their names down, allowing the program to be part of the infrastructure of summer events and programs without parents and children realizing it’s targeted toward lowincome kids. Any child can come and eat.

But this also means that families are less likely to know about the program at all, realize that it’s the government helping them, and point to the Summer Meals program as a positive benefit in their lives. This political buy-in is important for any program to succeed and to be a legislative priority.

Established in 1975, Summer Meals seems to have been designed with a very specific idea of economic need in mind: urban poverty. In urban areas, kids can more easily walk or take the bus to a site, and there is more infrastructure—more summer programs, more churches, more schools. Poverty is more likely to be concentrated, because the people are concentrated.

In the 1970s—and continuing today—often when people think of a stereotypical family in poverty, they think of a black family in an inner city. The Summer Food Service Program seems to have been designed according to stereotype, even though today poverty in all its varied forms looks quite different from that racist assump-

Mitchell does not believe that her state’s high success rate with SFSP should be celebrated without reservation. “Compared to most other states in the nation we’re doing well,” she says. “But we’re still only reaching a handful of the kids we should be reaching.”

Fun programming attracts kids on their summer vacation, but fun programming can be pricey. It’s especially difficult for smaller towns lacking huge budgets for summer camps.

FitzSimons, of FRAC, tells me that during the Great Recession, participation in Summer Meals actually went down despite heightened need for anti-hunger programs, because state and local budgets couldn’t afford the summer programming that’s often concomitant with SFSP. This stands in contrast to programs like SNAP, as well as school lunch and school breakfast, that expand when need increases.

Unlike smaller nonprofits, Food Gatherers is able to use a good amount of external funding to improve their summer programs. This funding allows them to do things like send kids home with backpacks filled with food over the weekend, or utilize local foods in their menus. Those meals, served off-site, are not paid for by the federal government, but by outside donations.

Another benefit to adding programming to sites is that summer programs are a normal part of communities. SFSP, then, becomes an expected and necessary program that fits into the structure of the season, and reduces the stigma attached to getting a free lunch from the government. It attracts kids who might not need the meals and makes the kids who do need the meals feel more welcome. Building relationships with organizations that can offer enrichment activities for kids not only gets them fed but helps them learn, too.

Hunger Free Vermont “ha[s] been working to make [SFSP] a program that feels inclusive and welcoming to everyone,” Mitchell says.

“You get a free meal, but it’s also a place where kids can go to be safe and socialize, [and there are] also enrichment opportunities,” she says.

The universality makes it “feel like a community resource and not just something that lowincome families have to go to.”

UNDER THE OBAMA administration, expansion was the outright goal of FNS. The agency

website read in 2016 (accessed via the Inter-

net Archive): “Increasing access to summer meals for children in low-income areas is an important priority for USDA .” But today, after describing the expansion efforts from years before, FNS is clear about their current direction: “Moving forward in 2017 and beyond, FNS is focused on maintaining continuity of program operations and access.”

That doesn’t necessarily signal an assault on Summer Meals. The Trump administration has, without much fanfare, slowly cut back on the nutrition gains made in the school lunch program (perhaps in a handout to the agribusiness that will benefit from, for example, fewer restrictions on milk served). But SFSP has more or less been left alone. There have not been any significant threats to the program on the federal level; it’s hard to attack a program exclusively focused on feeding kids. As Fitz­Simons notes, the program “hasn’t been as much of a focus under the current administration.”

rity as a major priority to Concannon, he is noticeably uncomfortable. “Of course you want programs to comply with the general federal regulations,” he says. Indeed, his administration too worked to reduce fraud in the nutrition assistance programs (as part of an Obama initiative called the Campaign to Cut Waste).

Though program fraud is quite rare, preserving “program integrity” is often pointed to as a necessary objective in order to keep political support for programs intact. But even so, says Concannon, “you first and foremost want to promote the effectiveness and impact on the lives of children and households.”

Even if it’s just messaging, Mitchell is wary. An intentional focus on “fraud” and “self-sufficiency” (they’re kids!) could, she says, “re-stigmatize some of these programs,” after all the work done to make them feel warm and inclusive.

At best, it seems like promoting continuity is promoting the status quo, because the complex-

Rural rates of poverty have always been higher than urban poverty rates. But implementing summer nutrition programs in rural areas constantly runs into roadblocks.

However, the language used to describe the program, and the messaging surrounding it, has changed. There’s “just a different approach [to] talking about the program,” says Mitchell.

She feels that, in lieu of a focus on expanded access, there’s more focus on “program integrity,” which in legislative speak means reducing fraud. Mitchell argues that fraud isn’t really a prominent issue in the program.

In an April hearing before the Senate Committee on Agriculture, then-FNS administrator and acting deputy undersecretary (and now deputy undersecretary) Brandon Lipps outlined the priorities for the child nutrition programs, stating the agency was aiming “to improve customer service for our partners and participants, to protect and enhance integrity, and to strengthen the bonds between FNS programs and self-sufficiency” (emphasis mine). He also called the participants of child nutrition programs “student customers,” in a nod to the run-the-government-as-a-business framework.

When I mention the focus on program integ-

ities and limitations inherent to Summer Meals require aggressive intervention and focus.

Though the approach of the political appointees at FNS could have had an effect on falling participation, one cannot point to merely one reason. Another explanation is simple: Weather is becoming more extreme. The Summer Meals program was designed in 1975, but we live in an ever-warming world. Many sites, by virtue of necessity, require kids to sit outside together in the summer. Sometimes the heat is too much, especially in Southern states. Even rain will keep kids away. FNS allows heat waivers for some sponsors to let kids eat meals off-site if the temperature gets too high, but that’s more paperwork for a site to fill out. Sometimes, it could just be easier to close for the day.

In addition to the actual weather, the Trump administration has also created a climate of fear with its immigration policies. This has had a palpable effect on use of public-assistance programs like SNAP and Medicaid. It is reasonable to assume that this “chilling effect” also

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extends to SFSP. Especially in immigrant communities, there is a fear of public spaces, and the ICE agents that could disrupt them. To avoid ICE , or the ire of immigration officials who can decide who stays and who goes, parents could intentionally be keeping their children from any place where the government is providing a benefit, even though all children should ostensibly be welcome at Summer Meals sites.

FOR ALL ITS LIKELY AMBIVALENCE about

the program, the Trump administration has continued a demonstration project that many advocates see as vital, and perhaps as the future of the program. In 2011, FNS began testing a new method of feeding kids over the summer, the Summer Electronic Benefit Transfer program (Summer EBT). Instead of kids needing to travel to a site and eat meals there, their families were provided with an EBT card, like what’s used in the Supplemental Nutrition

the next two summers. Some lawmakers representing states that lost out on funding to implement the program were upset, but as it’s a demonstration program with a focus of gathering data, the new, streamlined focus does seem fair. Strangely though, FNS has stopped announcing the Summer EBT grantees over the past two years, letting the program continue to fly under the radar.

Summer EBT is only a demonstration project now. It could be expanded in a coming child nutrition reauthorization and become a permanent piece of summer nutrition programs.

THOUGH THERE ARE DISTINCT complications and challenges baked into SFSP, there is a

way to loosen the rules. Congress is in charge of reauthorizing the statutes that govern the child nutrition programs, including Summer Meals.

The last time they did this was in 2010 with the passage of the Healthy, Hunger-Free Kids

For all its likely ambivalence about the lunch program, the Trump administration has continued a demonstration project that many advocates see as vital.

Assistance Program (SNAP, commonly called food stamps), to use at grocery stores. Available to small populations in a handful of states, the options tested by FNS include both a SNAP model of benefits (benefits can be exchanged for almost any food item) as well as a Women, Infants, and Children (WIC) model (benefits translated into an approved food package that families could buy at the store).

The results have been promising. FNS commissioned a 2016 report on the demonstration by Abt Associates, Mathematica Policy Research, and Maximus. They found that, among child recipients of Summer EBT, the most severe food insecurity was cut by one-third. Food insecurity in general dropped by one-fifth.

A handful of states had been participating in the demonstration project, but it’s scaled back on the number of states to serve more children in fewer states. This summer, Michigan, Wisconsin, the Chickasaw Nation, and the Inter Tribal Council of Arizona participated, and will continue to do so for at least

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Act. That expired in 2015 (though of course, the programs continue to operate). Child nutrition reauthorization (CNR) failed to pass in 2016 due to partisan disagreements, though before 2010, reauthorizing the nutrition programs for children had typically been bipartisan.

Some signs point to a 2019 Congress ready to pass a new CNR . When the Senate returns in the fall, it could be ready to mark up a bill.

Several bipartisan marker bills have already been introduced.

Some of the elements of these marker bills are exciting. There could be real opportunities to open up flexibilities for Summer Meals— maybe loosening the congregate feeding requirement, easing the eligibility requirements for sites, or expanding Summer EBT. That’s what advocates are gunning for.

The Stop Child Summer Hunger Act, sponsored by Democratic Senator Patty Murray of Washington, would expand the Summer EBT program nationwide to all children who receive free or reduced-price lunch at school; their

families would receive an EBT card with $150 per child for the summer. Its cost is entirely offset by closing a business tax loophole.

The Hunger-Free Summer for Kids Act is another marker bill, co-sponsored by Republican Senator John Boozman of Arkansas and Democratic Senator Patrick Leahy of Vermont.

It would allow states flexibility on the congregate feeding requirement or allow them to implement some version of Summer EBT (though details are vague; the Stop Child Summer Hunger Act is definitely more aggressive on the Summer EBT front).

FitzSimons says that FRAC also supports lowering the eligibility requirement for summer sites from 50 percent free and reducedprice lunch participation to 40 percent. This would expand the number of sites able to serve kids, especially in rural areas where just one family moving out of the district could completely change access for hundreds of kids.

To ensure that kids actually get adequate nutrition, FRAC recommends that sites be allowed to serve three meals a day—right now, sites can only serve two. That seems unlikely to get past lawmakers obsessed with “self-sufficiency,” but it would go a long way to fight hunger. The Summer Meals Act of 2019, marker bills introduced by Democratic Senator Kirsten Gillibrand of New York and Republican Senator Lisa Murkowski of Alaska in the Senate and Republican Representative Don Young of Alaska and Democratic Representative Rick Larsen of Washington in the House, would lower the eligibility threshold from 50 percent to 40 percent and also allow sites to serve three meals a day.

If the content of these bills makes it into the final CNR—and it actually passes—the summer meal programs could be well on their way to serving their mission. Eliminating red tape and funding effective alternatives like Summer EBT challenges the bureaucracy and paperwork that get in the way of ensuring that children are adequately fed.

“The concept of feeding kids seems so simple,” Mitchell says. “And it should be.”

Kalena Thomhave is a former Prospect writing fellow. She is currently working toward a master’s degree at the Ford School of Public Policy at the University of Michigan.

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Customs and Border Patrol migrant detention center in McAllen, Texas, during a visit by Vice President Mike Pence in July 2019

Never Again, Except for Right Now By arguing that “the left” represents as dangerous a threat as mass shooters and right-wing terrorists, Times writer Bari Weiss cheapens the crisis facing America, one that she has witnessed firsthand. BY JONATHAN GUYER

j o s h d aw s e y / wa s h i n g t o n post pool via ap images

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pon a recent visit to the United States Holocaust Memorial Museum in Washington, D.C., I was startled to see, between the remembrances, plaques, and flags, a group of elementary school students in the lobby in red MAGA hats.

To me, Trump’s ubiquitous slogan is above all a message of whiteness, a call for violent exclusion all too familiar to scholars

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of fascism and genocide. This is a man who came to the political stage by perpetuating a nativist conspiracy against the first African American president.

Trump’s policies are bigoted and his words anti-Semitic, Islamophobic, and misogynistic, often all at once. The torch-bearing white supremacists who marched on Charlottesville chanted, “Jews will not replace us,” among other

slogans. This isn’t the background to today’s story; it is the story.

Yet in a recent statement, the Holocaust Museum categorically “rejected” any comparison between Nazi concentration camps and ICE camps at the U.S. southern border. In my view, it’s impossible not to draw connections to the Shoah when seeing the separation of families, the abuse of young children, the deaths of

those fleeing violence and instability, and the intentionally cruel policies of first Steve Bannon and now Stephen Miller. It’s little wonder that young Jewish activists have taken up the moniker Never Again Action in their multigenerational demonstrations against the Department of Homeland Security and the Trump administration.

The lesson I take from the Shoah is that the dehumanization of a people sets the stage for inhumane policies and a slippery slope. Anyone who cares about the message of “Never again” should be advocating for just and humane immigration policies right now, alongside an end to a politics that mainstreams and indeed marinates in hate.

But in How to Fight AntiSemitism, the book by buzzy

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conservative New York Times writer and popularizer of the term “Intellectual Dark Web” Bari Weiss, the connection between today’s immigration crisis and the earlier immigration crisis provoked by fleeing the Nazis is never once mentioned. Weiss writes early on about how Jews must “never allow others to become slaves, because we know the bitterness of slavery, ancient and modern.” Hers is such a narrow definition of “slavery,” however, that she fails to notice the systemized tyranny of Trump’s border policies—and how they fit into a bigger authoritarian project.

By underplaying Trump’s bigoted rants, making him a footnote and not a headline, Weiss has chosen to disconnect white supremacy and the KKK , the rising number of hate crimes in the U.S., and the racist digital revolution of sites such as Stormfront from the real threat of anti-Semitism.

In these pages, there is no reckoning with the root causes of today’s scariest trend: that someone like Trump could capture our democracy and use it to promote a racist, white-first worldview that galvanizes mass shooters and terrorists, while imprisoning immigrants and deporting citizens.

Hired by Times editorial page director James Bennet in 2017, Weiss, 35, comes from The Wall Street Journal and the right-wing-friendly Jewish magazine Tablet. She has staked out a position as a free-speech defender—that is, whenever the speech is conservative, or advocating for Israel’s impunity on the global stage.

It’s not surprising then that Weiss focuses on the likes of Representatives Ilhan Omar and Rashida Tlaib, slandering them without analyzing their records. But by arguing that “the left” represents as dangerous a threat as mass shooters and rightwing terrorists, Weiss cheapens the crisis facing America. She witnessed it firsthand but came away with a flawed conclusion.

ON SATURDAY, October 27, 2018,

a gunman entered the Tree of Life synagogue in Pittsburgh and murdered 11 Jews during the Shabbat service. This is the scene described in the opening chapter of How to Fight

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Weiss’s background does not give her license to attempt to explain the origins of the Tree of Life synagogue attack without delivering the reader any context or history.

HOW TO FIGHT ANTI-SEMITISM

BY BARI WEISS

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Anti-Semitism—and an urgent one.

It’s an unthinkable crime, and Weiss, who hails from the community and was actually bat mitzvahed in that very sanctuary, is uniquely equipped to return to the neighborhood of Squirrel Hill to convey the tragedy.

Yet her background does not give her license to attempt to explain the origins of the attack without delivering the reader any context or history.

Of what value is it that Trump delivered a strong statement about the Tree of Life killings, as Weiss highlights?

She doesn’t mention Trump’s pandering to Second Amendment Republicans, or Senator Mitch McConnell’s decades of closeness with the gun industry. Where is the discussion of federal law enforcement’s failure to stop white supremacists, not to mention the Trump administration’s drastic cuts to such programs. These enablers of white supremacy are material to this story.

Rather than grappling with the dark nexus of online hate and easily obtainable automatic firearms, Weiss has offered a treatise on why anti-Zionism, including any act of BDS (boycott, divestment, and sanctions), is tantamount to anti-Semitism. So much of the book is devoted to conflating Jewishness and Zionism, American diasporic Jews and Israel, that she is able to easily transition from discussions of the Tree of Life shooter to those who express any criticism of Israel.

She is especially sloppy in the “Radical Islam” chapter, citing MEMRI, Ayaan Hirsi Ali, Bernard Lewis, and the late Fouad Ajami as chapter and verse. The latter might be remembered for his prognosis that Iraqis were “sure to erupt in joy” upon welcoming an American invasion, not for his keen reading of the so-called Arab Street.

Her examples from the Arab world are dated, and throughout the book her use of the word “Islamist” is intentionally malleable for the sake of muddying the waters. Her selective narrative jumps from the 9th century to the 19th century, only to conclude that Hamas mixes “Nazism, Soviet communism, and a radical interpretation of Islam,” an “alchemy” that gives the reader a false sense of anti-Semitic continuity in the Middle East.

Using this questionable source material, she draws a pernicious connection, blaming “journalists, intellectuals, commentators, professors, feminists, gay rights activists, and so on” for turning a blind eye to “Islamist violence” and a rise in anti-Semitic thought among Muslim immigrant communities. She goes on for several pages about the terror and security threats posed by Muslim Americans, Muslim immigrants, and travelers to the U.S. (even though she notes earlier that Trump is wrong that there’s a Muslim demographic threat in America). But these examples allow Weiss to take this roller coaster of a chapter in a particularly slimy direction, veering to Ilhan Omar and her tweets.

If she had the intellectual heft, Weiss might have bracketed the congresswoman’s regrettable social media blunders and contended with her actual positions. Omar has challenged Elliott Abrams’s record in Latin America, taken a firm line against Saudi Arabia and the Emirates, and advocated for—wait for it—the two-state solution for Israel and Palestine (even though the headlines have focused on her expressing support for the right to boycott as a tactic).

Omar does not belong in this chapter, and I’m not sure much of this chapter belongs in a book on how to fight anti-Semitism that’s framed around a mass shooting by a white man in a Pittsburgh synagogue.

I too struggle with the meaning of anti-Semitism, but I have never experienced Weiss’s dark imaginary of the left. “In order to be welcomed as a Jew in a growing number of progressive groups, you have to disavow a list of things that grows longer every day,” she writes. “Whereas once it was enough to criticize Israeli government policy, specifically its treatment of Palestinians, now Israel’s very existence must be denounced … This bargain, which is really an ultimatum, explains so much.”

Having traveled the Arab world for the past decade and traded in progressive, liberal, activist, and academic circles—the very spaces for which Weiss reserves her harshest invective—I can say there’s no there there. I haven’t come across much

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anti-Semitism among my day-to-day interactions. My research focuses on Arab political cartoons, a field that has been caricatured by right-wing advocacy groups as unabashedly antiSemitic. But among young journalists and independent cartoonists in Cairo and other Arab capitals, there is no anti-Semitism to be detected.

Sustained critical treatment of Israel and Prime Minister Benjamin

Netanyahu, most frequently during what Weiss describes as “Israel’s periodic wars with Hamas in Gaza,” is not anti-Semitism. Rather, most Arab cartoons about Israeli policy, which inevitably include the Israeli flag and thus the Star of David, are rooted in principled resistance to Israeli violence against Palestinians and Arabs.

More interesting from my perspective is the willingness of many Arab readers to grapple with antiSemitism. Art Spiegelman’s Maus, the innovative and Pulitzer-winning graphic novel about the Shoah, for example, is available at Beirut bookstores—but in Weiss’s narrative there is no space for complexity.

And when I have seen anti-Semitic tendencies in Arabic mass media, political speech, and protests, I found that those presenting such tropes had much in common with the Rush Limbaughs, Sean Hannitys, and Tucker Carlsons who weaponize bigotry for political ends.

The anti-Semitic images I have

At the State Capitol in St. Paul, Minnesota, Representatives Rashida Tlaib and Ilhan Omar talk about Israel’s refusal to allow them to visit the country, August 19, 2019.

collected from years of archival research fit into a small file, and have mostly been produced by two divergent strains: on the one hand, Egyptian state news publishers (as in, the regime), and on the other, Islamist outlets. As a student of the Arabic press, I found that none of Weiss’s examples resonated.

In fact I was left with the conviction that, rather than grapple with the merits of progressives’ and leftward politicians’ critiques of Israel, Weiss has instead chosen to malign them as anti-Semitic. Having watched Israel murder thousands of Palestinians, having watched it bomb Gaza to the edge time and time again, I find myself much closer to Omar than to Weiss. Am I antiSemitic for standing by the congresswoman?

The FBI is concerned about white supremacists meeting in hotel conference rooms across America or hosting public demonstrations. The FBI is monitoring threats against Ilhan Omar from these very card-carrying anti-Semites. To not offer any humility or sensitivity toward the anti-Arab and Islamophobic vitriol that the congresswoman faces shows that Weiss hasn’t learned the lesson of solidarity from centuries of anti-Semitism and of the Holocaust itself. It wasn’t just the Jews who have been targets of violent hate. It has never been just the Jews.

I HOPE THAT ALL MAGA hat wearers visit the Holocaust Museum’s downstairs exhibit about American antiSemitism, where Charles Lindbergh and the America First Committee are analyzed. Looking at how Jews were treated before and during World War II is an instructive reminder of the rawness and proximity of anti-Semitism, notably in the State Department, which denied visas to thousands upon thousands of Jews fleeing Europe. The story is too familiar.

But where is the American Jewish establishment? Yes, organizations have made some statements about

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the president’s racist remarks and have pushed back about brutal policies that are killing children in search of refuge. But the leadership of these major Jewish community groups would rather work quietly on the sidelines with the Trump administration and revel in its radically dangerous pro-Israel policies. None of the leaders of the major mainstream American Jewish organizations—powerful grassroots, community-driven bodies with massive constituencies and budgets—want to be the leaders who challenge Trump. No figure today would hold the potential to be the next Rabbi Abraham Joshua Heschel, who marched with Martin Luther King Jr. to Selma.

I admire Weiss’s chutzpah to speak on behalf of my entire generation.

But someone who, for much of her transpiring career, has laid the accusation of anti-Semitism against many a critic of Israel may not be the right messenger.

And what tactics does she suggest as the way to fight anti-Semitism? We see them in the headers of the final chapter: “Tell the truth”; “Trust your discomfort”; “Call it out. Especially when it’s hard”; “Don’t trust people who seek to divide Jews. Even if they are Jews”; “Allow for the possibility of change”; “Notice your enemies.

But even more, notice your friends,” among others. Even the most noble aspects of those prescriptions fall flat in the face of systematized right-wing anti-Semitism advanced at the highest levels of U.S. government.

In the end, this op-ed sermon of a book tells us exactly what we knew: that Weiss is auditioning for David Brooks’s column. She leaves the reader with a cursory history of the phenomenon of anti-Semitism and some tips for self-care to keep one afloat. It’s frightening to consider that someone with so much power, occupying opinion journalism’s premier perch, is unable to see what’s before her eyes. The U.S. is home to internment camps and brutal immigration policies, on top of rampant violent acts of anti-Semitism. The two national crises share a cause. And any effort to combat anti-Semitism shouldn’t let the American president get away with murder.

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Monopoly and Its Discontents Matt Stoller’s Goliath seeks to recover and explain the anti-monopoly tradition of the 20th century, at a time when it is urgently needed in the 21st. BY GERALD BERK B

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n 1974, the Watergate babies swept into Congress to clean house and revolutionize government. This new generation of Democrats rewrote presidential nominating and committee appointment rules, and transformed the party’s economic agenda from equality to national competitiveness, innovation, and entrepreneurship.

Among the displaced was the longtime chair of the House Banking and Currency Committee, Wright Patman. It made no difference that Patman initiated the Watergate investigation, or that he had led the fight to rein in corporate power since the New Deal. The New Democrats saw an anachronism who deified small business, the family farm, and restrictive labor unions in an age of global competition, stagflation, and technological change.

The deposing of Chairman Patman is a pivotal moment for Matt Stoller, author of Goliath: The 100-Year War Between Monopoly Power and Democracy. It signaled not only the Democratic Party’s abandonment of anti-monopolism; it ushered in an era of political amnesia that makes Americans unable to understand the relationship between financial oligarchy, commercial monopoly, and authoritarian politics in our own time.

A history of and for the present, Goliath seeks to recover and explain the anti-monopoly tradition of the 20th century. Wright Patman is center stage. Anti-monopolism, Stoller explains, is much more than an ideology. As Patman—and Louis Brandeis before him—teaches us, anti-monopoly is a mode of democratic inquiry, necessary for political and economic agency. For anti-monopolists, democracy and markets are fragile, easily undermined by concentrations of power and a people insufficiently independent from oligarchy to shoulder the burdens of positive liberty and democratic citizenship. Democracy and markets necessitate vigilant

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inquiry: How is monopoly power acquired, consolidated, concealed, abused? How is it unmasked, taken down, and prevented? Anti-monopolists are not, as is so often charged, anti-intellectual. Committed as they are to democratic agency, they are hell-bent on unmasking academic obscurantism, false necessity, and apologetics for power.

There is no greater way to entrench power, Patman said, than to convince plain people that finance is too hard for them to understand. For Patman, as for populists before him, democratic government was a schoolroom. He used congressional committees to study and publicize the techniques of monopoly power. With Patman as his guide, Stoller explains with great clarity how bankers took control of industry and politics in the 1920s and the 1970s by inventing byzantine financial instruments to hide double-dealing, circumvent regulation, monopolize industry, and mobilize a broad constituency for their anti-democratic project.

While Goliath begins with Woodrow Wilson’s efforts to dismantle the House of Morgan’s vast network of monopolies in oil, manufacturing, and transportation, Stoller’s most original contributions involve the revolt against Andrew Mellon’s empire in the New Deal, the role of anti-monopolism in the New Deal order, and the formation of financial oligarchy and commercial monopoly since 1960.

Andrew Mellon learned his trade from J.P. Morgan. By the time he became Secretary of the Treasury for three straight Republican presidents in the 1920s, Mellon owned a network of 99 banks through which he controlled critical junctures in the economy—coal, steel, aluminum, electricity, chemicals, and rails. Though Mellon’s empire paled in comparison to Morgan’s, he developed an asset Morgan lacked: control over the administrative state. Harding appointed Mellon

GOLIATH: THE 100-YEAR WAR BETWEEN MONOPOLY POWER AND DEMOCRACY

BY MATT STOLLER

Simon & Schuster

Secretary of the Treasury in 1921, a job he held until 1932. As progressive Senator George Norris said, three presidents served under Secretary Mellon.

Stoller imaginatively reconstructs “Mellonism” and Patman’s revolt against it. The stock market crash of 1929 unleashed a series of public investigations and lawsuits, which elicited a detailed record of financial manipulation, predatory competition, self-dealing, and political corruption.

Stoller mines those archives to explain how Mellonism worked, how Patman led anti-monopolists in his party to dismantle it, and how the Democrats created institutions to prevent it from reconsolidating. Anti-monopolism became a keystone of the New Deal order, turning banking into a quasipublic utility, fragmenting industrial power, nurturing independent farming and commerce, and reining in employer power over unions.

By the end of the 1980s, the anti-monopoly tradition had disappeared—its institutions turned instead to reconsolidating financial oligarchy and commercial monopoly and bailing them out when they failed.

There was nothing inevitable in this process. No scientific laws of modernization, capitalist development, globalization, technological change, or industrial economics explain the consolidation of economic power and corruption of democracy. Three deliberate projects, begun in the 1950s, had to converge: the Chicago school’s law and economics movement, the creation of an unregulated market in hot money, and the consumer movement.

Initially favorably devoted to antitrust, Chicago school economists had to rethink competition and convince lawyers that monopoly was unproblematic, as long as it didn’t raise prices. Similarly, it took a great deal of work for Citibank’s CEO, Walter Wriston, and his allies to build a market for tradable financial instruments that could enable industrial mergers and circumvent regulation. Consumer advocates, led by Ralph Nader, had to square their support for the new social regulation with their opposition to antitrust. Different as they were, economists, financiers, and consumerists worked independently and

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together to reconfigure legal pedagogy and indoctrinate politicians. They succeeded in enacting legislation and making judicial and administrative appointments to dismantle New Deal financial regulation and antitrust. By 1992, antitrust had disappeared from the Democratic Party platform and an active market for mergers, acquisitions, and short-term stock gains held the whip hand over corporate management. With anti-monopoly a distant memory, it became harder and harder for Americans to understand the rise of monopoly power in retail and the tech platform economy, why the crash of 2007 entrenched those who caused it, and the victory of authoritarian politics.

Goliath delivers. By carefully recounting anti-monopoly’s contributions to liberty, democracy, and prosperity in the 20th century, Stoller teaches his readers how to perform anti-monopoly inquiry themselves. We learn how to see and analyze economic power—how it’s created, circulates, and corrupts—and how to oppose, disentrench, and prevent it from returning. These are invaluable and timely lessons, as the center-left mobilizes to reverse authoritarianism.

This is a lot to accomplish. Even so, Goliath has two blind spots, which limit its ambitions: race and liberal corporatism. Both warrant historical criticism, so anti-monopoly’s teachings can be more relevant today.

Wright Patman represented a Texas district with a proud populist and a segregationist legacy. Stoller says Patman walked the line between them.

He fought the Klan in the 1920s and cultivated black electoral support throughout his career. But segregationists supported him, and he signed the 1956 Southern Manifesto against Brown v. Board of Education in order to be re-elected. Influenced by Southerners like Patman, the New Deal was a mixed bag for civil rights. In Stoller’s

Anti-monopolism became a keystone of the New Deal thanks to the efforts of Democrats like Senator Wright Patman, shown here at center, beaming down at FDR in 1942.

view, it locked African Americans out of social provision and housing markets, but provided the civil rights movement with constitutional resources and organizing models critical to its success. Anti-monopolism and segregation, in short, were tragic, but fundamentally incompatible, partners.

Perhaps. We need to know a lot more about the context and consequences of Patman’s actions to assess whether anti-monopolism and racism were incompatible. Given the state of knowledge about anti-monopoly and racism, those who want to revitalize the anti-monopoly tradition (myself included) must probe more deeply.

The historical record is mixed. On the one hand, Michael Kazin, Chip Berlet and Matthew Lyons, Daniel HoSang and Joseph Lowndes, and Sarah Jaffe show how anti-monopoly’s producerist ideology can look down as readily as up to identify adversaries. When it does, immigrants, African Americans, and women are coded as nonproducers

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alongside bankers and monopolists, equally worthy of vilification, regulation, and exclusion. On the other hand, studies of black chapters of the Farmers’ Alliance by Lawrence Goodwyn, Gretchen Ritter, and Omar Ali; the importance of antitrust in protecting black businesses which supported the civil rights movement by Brian Feldman; and anti-monopoly support for Native Americans in Portland, Oregon, by Robert Johnston show how anti-monopoly and racial movements work together toward interracial freedom from economic oppression.

The debate over these contradictory findings is productive when it empowers us to ask how economic power works and how movements for racial and economic justice work at odds and together; it becomes unproductive when it turns into a doctrinaire fight over whether the white middle class is inherently racist. In Patman’s case, we need to know how segregationists in his district understood the association between producerism and racism and whether Patman’s actions put light between that relationship. Did anti-monopolism reinforce or loosen paternalism in his relations with black constituents? Answering these sorts of questions will teach us a lot about how to break the ties between producerism and racism today and how to turn the anti-monopoly tradition toward racial justice instead.

Goliath’s second blind spot is liberal corporatism. Best conceptualized at mid-century by John Kenneth Galbraith, this is the idea that we ought not worry about monopoly, because it is inevitable, efficient, and naturally spawns countervailing powers in unions, consumer groups, and the state. In Stoller’s grand narrative, corporatism—whether Hamiltonian, fascist, or liberal—always clashes with anti-monopolism. While this frame illuminates the conflicts between Roosevelt and Wilson in 1912, the National Recovery Administration and antitrust in the 1930s, and the New Democrats and Patman in the 1970s, the relationship between antimonopolism and liberal corporatism was much more diverse in practice. It needs careful conceptualization.

By Stoller’s own lights, anti-­

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monopoly cleared the way for a variety of projects in the New Deal order, including countervailing powers.

Under pressure from antitrust enforcement and the anti–chain store movement, once-dominant supermarket A&P incorporated unions, a retail clerks association, and consumer groups into its organizational structure. Similarly, it was not antitrusters alone who broke up Mellon’s aluminum monopoly in the 1940s. Military planners directed state investment into new competitors. Or consider Tom McCraw’s account of securities regulation. Although anti-monopolists were responsible for the Securities Exchange Act of 1934, the SEC became successful because it organized countervailing powers to investment banks in the American Institute of Accountants, the National Association of Security Dealers, and the New York Stock Exchange’s regulatory mechanisms.

It may be that anti-monopoly served two purposes in the New Deal order. By dismantling Mellonism and fragmenting industrial monopoly, it opened the way to countervailing powers inside and outside of corporate enterprise. Once in place, the ongoing threat of antitrust action acted as a penalty default for corporations that were tempted to amass power by oppressing workers, small investors, subcontractors, communities, and less powerful competitors. Galbraith was right about countervailing powers, but wrong that they were inevitable and that antitrust was anachronistic. The opposite, Stoller shows, is closer to the truth: Antitrust was necessary for the emergence and effectiveness of countervailing powers. But although antimonopoly was a necessary condition for regulation, collective bargaining, and welfare provision, other traditions had a say in their design and execution.

Taking care to conceptualize the relationship between anti-monopolism and other ideological traditions isn’t just an academic or historical exercise. It is a pressing political problem, because anti-monopolism has returned to public debate at a moment when the Democrats are more divided ideologically than they have been since the 1960s. Seen as an epilogue to Goliath, the current Democratic

presidential primary looks a lot like the election of 1912—a battle between socialists (Eugene Debs then, Sanders now), anti-monopolists (Wilson then, Warren now), and liberal corporatists (Theodore Roosevelt then, Biden now).

But Democrats of all stripes speak the language of anti-monopoly now, whether they acknowledge it or not. Some, like Warren, speak it in a pure form. Others combine antimonopoly inquiry with rival forms of analysis, which look incompatible at first glance. Sanders’s plan for rural America combines anti-monopoly and class analysis to explain how corporate monopolies turned independent farmers into an impoverished proletariat through an oppressive subcontracting system. His solution is antitrust and price supports, not public ownership. Neoliberal corporatists Hillary Clinton, Mark Warner, and Amy Klobuchar, who once saw government regulation as the primary obstacle to technological innovation and entrepreneurship, now place tech monopolies atop their list.

Imagine this epilogue to Goliath has a happy ending and an antimonopolist like Warren wins the presidency. While wielding the power of the executive branch and its antitrust authorities is considerable, it’s unlikely she will be able to fully dislodge democratic socialists or neoliberal corporatists without undermining the vitality they bring to the party. As in the New Deal, anti-monopoly will do its best political and institutional work in combination with other traditions. A party at war with itself, which fashions new and effective ways to use the anti-monopoly tradition, may have a future. Democrats who seek to revitalize their party would do well to study Matt Stoller’s Goliath and incorporate—in a complex and thoughtful manner—its central teachings.

Gerald Berk teaches political science at the University of Oregon. He is the author of Alternative Tracks: The Constitution of American Industrial Order, 1865–1917; Louis D. Brandeis and the Making of Regulated Competition, 1900–1932; and co-editor of Political Creativity: Reconfiguring Institutional Order and Change.

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The Crash of Austerity Economics Reality keeps contradicting the sponsors of economic pain, but they keep dispensing their perverse advice. BY ARJUN JAYADEV AND J.W. MASON B

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decade ago, Alberto Alesina was one of the most influential economists in the world. His theory of “expansionary austerity”—the paradoxical notion that reducing public expenditure would lead to an increase in economic activity—was one of the hottest ideas in macroeconomics. He claimed to have shown that government surpluses could actually boost growth, but only if they were achieved via spending cuts rather than tax increases. At a moment when many governments were seeking Keynesian remedies to a global recession, his work (along with fellow Harvard economist Silvia Ardagna) reassured conservatives that there was no conflict between keeping up demand in a crisis and the longer-term goal of reining in the public sector. Not surprisingly, his ideas were taken up by right-wing politicians both in Europe and in the U.S., where he was widely cited by the Republicans who took control of the House in 2010. Along with the work of Carmen Reinhart and Kenneth Rogoff on the supposed dangers of excessive government debt, Alesina’s work provided one of the key intellectual props for the shift among elite policymakers toward fiscal consolidation and austerity.

Right from the outset, other economists pointed to serious flaws in the case for expansionary austerity, and challenged almost every aspect of the statistical exercises underlying it.

A partial list of criticisms includes: using inappropriate measures of fiscal balance; misapplying lessons from boom times to periods of crisis; misclassifying episodes of fiscal expansion as austerity; and generalizing from the special conditions of small open economies, where exchange rate moves could cushion the effects of austerity. The central claim—that austerity based on spending cuts worked better than tax-based austerity—was effectively debunked.

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In 2009, Alesina suggested that Europe was likely to see faster growth because it was cutting public spending in response to the crisis, while the U.S. had embraced conventional Keynesian stimulus. But while the U.S. recovery was weak, in Europe there was hardly any recovery at all.

In the countries that cut public spending the most, such as Spain, Portugal, and Ireland, GDP remained below its 2008 peak four, five, even six years after the crisis. By 2013, the financial journalist Jim Tankersley could offer an unequivocal verdict: “No advanced economy has proved Alesina correct in the wake of the Great Recession.”

Macroeconomic debates have moved on since then. A large new empirical literature on fiscal policy has emerged over the past decade, the great majority of it confirming the old Keynesian wisdom that in a depressed economy, increased public spending can raise output by perhaps $1.50 for each dollar spent. New questions have been raised about central banks’ ability to stabilize the economy, whether with conventional monetary policy or with new tools like forward guidance and quantitative easing. The seemingly permanent reality of low interest rates has changed the debate over the sustainability of government finances, with prominent mainstream economists suggesting that public debt no longer poses the dangers it was once thought to. The revived idea of secular stagnation has suggested that economic stimulus may not be a problem for occasional downturns, but an ongoing necessity. And the urgency of climate change has created big new tasks for the public sector.

It’s a very different conversation from a decade ago. Can Alesina’s ideas adapt to this new environment?

That’s the challenge for his new book, Austerity: When It Works and When It Doesn’t, which brings together work on government budgets that

AUSTERITY: WHEN IT WORKS AND WHEN IT DOESN’T

BY ALBERTO ALESINA, CARLO FAVERO, AND FRANCESCO GIAVAZZI

Princeton University Press

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goes back now almost three decades.

Through the years, Alesina has had a rotating cast of co-authors, often from Bocconi University; this book is co-authored with Carlo Favero and Francesco Giavazzi, both professors there. Given how the book has been advertised and promoted (“towering,” a “counterblast”), one might expect a thorough response to the new arguments that have developed over the past decade about aggregate demand management and the appropriate size of the public sector, not to mention the failure of Alesina’s past predictions.

Disappointingly, this is not the case. There has been no marking of beliefs to market. For the most part, the book restates the same arguments that were made a decade ago: Countries with high public debt must adopt austerity, and this will not hurt growth if it takes the form of spending cuts rather than tax increases. Alesina et al. do make some effort to respond to specific methodological criticisms of the earlier work. But they don’t engage with—or even acknowledge— the larger shifts in the landscape. Tellingly, all the book’s formal analysis and almost all of its text (as well as the online data appendix) stop in 2014.

For what is supposed to be a definitive statement, it’s an odd choice.

Why ignore everything we might learn about austerity and government budgets over the past five years?

The book also operates at an odd mix of registers, which makes it hard to understand who the audience is. Exoteric chapters seemingly intended for a broad readership are interspersed with math-heavy esoteric chapters that will be read only by professional economists. You get the feeling this is mostly material that sat in a drawer for a long time before being fished out and stapled together into a book.

To be fair, there are some advances from the previous iterations. Instead of relying on purely statistical measures of association between fiscal positions and growth, the book offers some case studies, and makes use of a “narrative” approach in which periods of austerity are defined by the stated intentions of policymakers and not just by changes in the budget. But this is no substitute for a real historical analysis, and

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the great bulk of the argument is still based on statistical exercises.

Those who are not convinced by the econometrics in Alesina’s earlier work will not be convinced here either. Even people who share the authors’ commitment to rolling back the public sector will soon suspect that they are in the presence of what is politely called motivated reasoning.

For Alesina and colleagues, austerity episodes almost always reflect countries persistently spending beyond their means, with debt rising until a tipping point is reached. But in Europe—surely ground zero in any discussion of contemporary austerity—this story lacks even superficial plausibility. On the eve of their crises, Ireland, Spain, and even Portugal had debt/GDP ratios below that of unscathed France; Spain and Ireland were well below Germany. (The fact that Germany consistently ran large deficits in the decade before the crisis is not mentioned.) Indeed, until 2011 Ireland, now an austerity poster child, had the lowest debt ratio of any major Western European country.

The crisis came first, then the turn to austerity; big deficits were a response to the downturn, not precursors to it; the rising debt ratios came last, driven mainly by falling GDP. Even Greece, perhaps the one country where public finances were a genuine problem before the crisis, is a case in point: From 2010 to 2015, deep cutbacks in public services successfully reduced public debt by about 15 billion euros, or 5 percent—but the debt/GDP ratio still rose by 30 points, thanks to a collapse in GDP. It would be easy to debate the book point by point. But it’s more useful to take a step back and think about the larger argument. While the book shifts erratically in tone and subject, underlying all of its arguments—and the larger pro-austerity case—is a rigid logical skeleton. First, a government’s fiscal balance (surplus or deficit) over time determines its debt/ GDP ratio. If a country has a high debt to GDP, that is “almost always … the result of overspending relative to tax revenues.” Second, the debt ratio leads to market confidence in the government’s debt; private investors do not

In a world of chronically low interest rates and active central banks, government debt just isn’t a problem.

want to buy the debt of a country that has already issued too much. Third, the state of market confidence determines the interest rate the government faces, or whether it can borrow at all. Fourth, there is a clear line where high debt and high interest rates make debt unsustainable; austerity is the unavoidable requirement once that line is passed. And finally, when austerity restores debt sustainability, that contributes to economic growth, especially if the austerity involves spending cuts.

If you accept the premises, the conclusions follow logically. Even better, they offer the satisfying spectacle of public-sector hubris meeting its nemesis. But real-world debt dynamics don’t run along such well-oiled tracks.

First of all, as a historical matter, differences in growth, inflation, and interest rates are at least as important as the fiscal position in determining the evolution of the debt ratio over time. Where debt is already high, moderately slower growth or higher interest rates can easily raise the debt ratio faster than even very large surpluses can reduce it—as many countries subject to austerity have discovered. Conversely, rapid economic growth and low interest rates can lead to very large reductions in the debt ratio without the government ever running surpluses, as in the U.S. and U.K. after World War II. More recently, Ireland reduced its debt/GDP ratio by 20 points in just five years in the mid-1990s while continuing to run substantial deficits, thanks to the very fast growth of the “Celtic Tiger” period. In situations like the European crisis, extraordinary actions like public assumptions of private debt or writedowns by creditors (as in Cyprus and Greece) can also produce large changes in the stock of debt, without any changes in spending or taxes.

Ireland again is an example: The decision to assume the liabilities of private banks catapulted its debt/GDP ratio from 27 percent to over 100 percent practically overnight. Cases like this make a mockery of the book’s claim that a country’s debt burden reliably reflects its past fiscal choices.

At the second step, market demand for government debt clearly is not an

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“objective” assessment of the fiscal position, but reflects crowd psychology, selfconfirming conventional expectations, and all the other pathologies of speculative markets. The claim that interest rates reflect the soundness or otherwise of public budgets runs up against a glaring problem: The financial markets that recoil from a country’s bonds one day were usually buying them eagerly the day before. The same markets that sent interest rates on Spanish, Portuguese, and Greek bonds soaring in 2010 were the ones snapping up their public and private debt at rock-bottom rates in the mid-2000s. And they’re the same markets that are setting interest rates for those countries at historical low levels today (Greece now pays less to borrow than the U.S.!), even as their debt ratios, in many cases, remain extremely high. Alesina and colleagues get hopelessly tangled on this point. They want to insist both that post-crisis interest rates reflect the true state of public finances, and that the low rates before the crisis were the result of a speculative bubble. But they can’t have it both ways: If low rates in 2005 were not a sign that the state of public finances was sound, then high rates in 2010 can’t be a sign that they were unsound.

If the authors had extended their analysis significantly beyond 2014, this problem would only have gotten worse. What’s really striking about interest rates in Europe in recent years is how uniformly they have declined. Ireland, which has managed to reduce its debt ratio by 50 points since 2010, today borrows at less than 1 percent. But so does Spain, whose debt ratio increased by almost 40 points over the same period. The claim that interest rates are mainly a function of a country’s fiscal position just doesn’t fit the historical experience. It’s hard to exaggerate how critical this is for the whole argument.

Rising interest rates are the only cost ever mentioned for high debt, and hence the only reason for austerity; and reducing interest costs is the only intelligible mechanism on offer for the supposed growth-boosting effects of austerity—vague invocations of “confidence” don’t count.

And this brings us to the third step.

One of the clearest macroeconomic

lessons of the past decade is that market confidence doesn’t matter: A determined central bank can set interest rates on public borrowing at whatever level it chooses. In the years before 2007, there were endless warnings that if the U.S. did not get its fiscal house in order, it would be faced with rising interest rates, a flight from the dollar, and eventually the prospect of default. (In 2005, Nouriel Roubini and Brad Setser were bold enough to predict that unsustainable deficits would lead to a collapse in the dollar within the next two years.) Today, with the debt ratio much higher than even the pessimistic forecasts of that period, the federal government borrows more cheaply than ever. And there hasn’t been even a hint of the Fed losing control of interest rates. Similar stories apply around the world. Perhaps the clearest illustration of central banks’ power over financial markets came in 2011–2012, when a series of interventions by the European Central Bank—culminating in Mario Draghi’s famous “whatever it takes” moment— stopped the sharp spike in southern European interest rates in its tracks.

With an implicit guarantee from their central banks—which other developed countries like the U.S. and U.K. also enjoy—governments simply don’t need to worry about losing access to credit. To the extent that governments like Greece remained locked out of the markets after Draghi’s announcement, this was a policy choice by the ECB, not a market outcome.

If countries can face financial crises even when their debt ratio is low,

Londoners demonstrate against the British government’s austerity measures, April 2016.

U

L

T

U

R

E

and can enjoy ultra-low interest rates even when they are high, then it’s hard to see why the debt ratio should be a major object of policy. Alesina’s central question—whether expenditure-based or tax-based austerity is better for growth—is irrelevant, since there’s no good reason for austerity at all.

In a world of chronically low interest rates and active central banks, government debt just isn’t a problem.

At one point, this was a fringe position, but today it’s been accepted by economists with as impeccable mainstream credentials as Olivier Blanchard, Lawrence Summers, and Jason Furman—the former chief economist of the IMF, Treasury secretary, and chair of the Council of Economic Advisers, respectively. But not

by Alesina and colleagues, who just go on singing their same old songs.

“Sound finance” is no longer the pillar of elite opinion it once was. As we write this, Christine Lagarde, the new head of the European Central Bank, is calling for European governments to spend more during downturns— something hard to imagine when Alesina’s ideas were in vogue. In the U.S., meanwhile, concerns about the federal debt seem almost passé.

This is progress, from our point of view. The intellectual case for austerity has collapsed, and this book will do little to rebuild it. But that has not yet led to an expansion of public spending—let alone one large enough to restore genuine full employment and meet the challenge of climate change and other urgent social needs. The austerity machinery of the euro system and IMF still churns away, grinding out misery and unemployment across southern Europe and elsewhere, even if it no longer commands the general assent that it once did. At the level of ideas, Keynesian economists can point to real gains in the decade since the crisis. At the level of concrete policy, the work has barely begun.

Arjun Jayadev is professor of economics at Azim Premji University and senior economist at the Institute for New Economic Thinking. J.W. Mason is assistant professor of economics at John Jay College, CUNY and a fellow at the Roosevelt Institute.

FALL 2019 THE AMERICAN PROSPECT 79

Parting shot

And Now, Another Word From a Fanatic On September 5, The New York Times’ David Brooks published a communiqué from an internet extremist. On the same day, the Prospect also received a message from this same individual. We have chosen to publish it below.

I

am alone. I am in a basement. I am in a house. I am alt-right. I am alt-left. I am left yet wrong. I am wrong yet right. I hate myself even though I listen to Eckhart Tolle all day long in my car with avocado toast points and freshly squeezed orange juice.

I have a loaded shotgun pointed at any website I choose to comment on. I do jigsaw puzzles of hate while watching 60 Minutes. I only watch 60 Minutes for 10 minutes. I have no concentration: per my generation. I take Adderall to tie my shoes. I take Molly before watching This Is Us. I am prone to bouts of Nutella while watching Ballers.

I am alone. Did I say that? I have no moral center but I do have caramel swirls of viciousness with regard to my enemies. My enemies are mostly sea creatures like Moby and his veganism, which is so extreme it makes me cry for the human race. I seek out vengeance in a terry cloth robe and a Red Bull. I have shotgun casings and copies of The New York Times strewn across my cardboard box underneath the overpass that I live under.

I define everything politically and see everything through the lens of a lonely old man in a gray suit swiveling in a leather chair on

a moral descent into hell, I mean America. I am a narcissist who bellows loudly when my cupcake store has a prohibitive line out the door and I have to come back later.

I am a disenchanted connoisseur of the white wine of polarization. I lash out at the people who brought me up for they are dead and can’t help little old me. I don’t coddle the homeless, I play tennis with them. I have a golfing partner, a sewer I swim in, a tub full of blood, and a PlayStation.

I am confused. I am alone. Did I say that?

I need validation. Not just parking. I need it from my boss who I reduce to an evil entity by not doing background work on him. I need to see everything as good and evil. Häagen-Dazs is good. Hard work in the blistering sun that builds character is bad. This world I see is a carnival of disappointment because I need to see things as black-and-white. The carnival barker turns out to be myself and I’m telling myself to step right up

and guess my weight.

I’d rather not as I put a lot of weight on railing about the injustices on my computer from a place of moral purity. I use Flonase yet I don’t know why or even what it is. I have a heating pad that I inherited from a father who disapproved of me, yet my back is hurting from a lack of love in my binary universe. I do not see the complexities of economics as I have cataracts of the soul.

A soul nurtured on a divisiveness so strong that I won a two-week vacation to Hawaii from a game show because it was so divisive.

I am split like a split-level house, like a split lip, like a split doubleheader, like a banana split.

I am divided into two because it’s easy and gives me comfort as I rail against men of wealth who have tremendous problems that I know nothing of. Men of great character who find themselves with billions of dollars while the rest of the world is envious and lousy with poverty of pocket and spirit.

Most poor people I find repugnant, with their love of sport, their affection for their pets and vile vitriol for the captains of industry.

After all, when one can reduce an entire category of billionaires, who have the lion’s share of the world’s wealth, into heartless pricks then one can proceed to the ballgame or dog park or All You Can Eat contest or Las Vegas for a night of lowlevel debauchery involving small

amounts of methamphetamine and ladies of ill repute.

I feel so alone. Did I say that?

Women ignore me even though I’ve taken to using Axe body spray and doing a New York Times crossword in front of attractive people.

I am at loggerheads with my sexuality because I cannot be intimate (except when coaxed with a bottle of a robust Beaujolais and hot body oil that I get at Target).

My inability to get close to anyone mirrors my lack of selfesteem, ironically created by being a malignant presence wherever I go in order to build a wall. Ah, the Wall! I’m for it! I’m against it! I’m from the Left! I’m from the Right!

I’m ready to lock up anybody who doesn’t look and speak like me.

I’m ready to defend anybody who comes over the border.

I recently bought a new shirt with a logo of Sisyphus pushing a bottle of pills into his mouth. That is who I am. I am meds that numb me and eventually lead to rage.

Morally, spiritually, and financially challenged, I peer into the abyss with a telescope, a rifle, and a thunder shirt.

I am ruin. I am hypocrisy. I am America. I am alone. Did I say that?

I am happy, contented and sated.

I am America.

Divided.

Eddie Pepitone is a stand-up comedian and actor based in L.A. He has toured all over the world and continues to speak truth to power even though he doesn’t feel well.

VOLUME 30, NUMBER 4. The American Prospect (ISSN 1049-7285) is published quarterly by The American Prospect, Inc., 1225 Eye Street NW, Suite 600, Washington, DC 20005. Periodicals-class postage paid at Washington, DC, and additional mailing offices. Copyright © 2019 by The American Prospect, Inc. All rights reserved. No part of this periodical may be reproduced without the consent of The American Prospect, Inc. The American Prospect ® is a registered trademark of The American Prospect, Inc. Postmaster: Please send address changes to The American Prospect, P.O. Box 421087, Palm Coast, FL 32142. PRINTED IN THE U.S.A.

80 WWW.PROSPECT.ORG FALL 2019

mandee johnson photogr aphy

BY EDDIE PEPITONE

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Reviving Rural America

By Randi Weingarten, President AMERICAN FEDERATION OF TEACHERS ome of my fondest childhood memories are of strolling down Main Street in Nyack, N.Y., with my grandfather. From his dress shop, we’d run errands at stores that lined the street. He would greet everyone by name as we made our way to our final stop—the soda fountain in Koblin’s Pharmacy.

Nyack was a small town, but it brimmed with vitality.

I walked down another Main Street recently, in Welch, W.Va. Welch is the county seat of McDowell County, a rugged and beautiful mountain community where, for decades, coal miners toiled deep underground, earning a decent living for their families and making huge fortunes for coal companies. Welch’s Main Street tells the story of the town’s glory days, and of the difficult decades that followed. Block after block is lined with storefronts that once bustled with activity, but today are empty. As mining ebbed and coal companies left, so too did the shops, cafes, theaters and doctors’ offices that sustained daily life in McDowell County.

Some will say this is simply the harsh inevitability of change. But the real tragedy is that nothing replaced the coal economy, and so into this vacuum came widespread unemployment, hardship and despair.

Almost 10 years ago, Gayle Manchin, then the first lady of West Virginia, asked me to visit McDowell County, which had become the eighth-poorest county in America. Out of that visit grew a partnership called Reconnecting McDowell, which focuses on bringing together unions, government, business, nonprofit organizations and the people of McDowell around economic and educational renewal. Today, every student has access to medical and dental care. The AFT and our partners are helping teachers and administrators strengthen children’s education. We have brought high-speed internet to the county. And, last week, we broke ground on Renaissance Village in Welch, which will provide apartments for teachers so they don’t have to live more than an hour away because of the lack of housing. We hope this housing and its commercial and community space will provide a long-overdue spark to Welch’s Main Street.

McDowell’s story reflects the plight of so many small towns and rural communities. As industries abandon these locations, the internet and big box corporations snuff out local businesses, and family farms get squeezed out by giant conglomerates (and now President Trump’s tariff war), these communities pay the price. The tax base shrinks, services are cut, and many young people feel that opportunity exists only elsewhere. Therein lies a downward spiral—less economic activity and tax

revenue lead to the closure of schools, hospitals, and the shops and other centers of community.

The AFT and the One Country Project recently released a poll of residents in rural and small towns. The results reflect what I hear in McDowell, St. Lawrence County, N.Y., and Lordstown, Ohio: Americans in rural and small towns feel betrayed.

They feel like their way of life has been kicked away and the American dream is slipping further out of reach.

More than 70 percent of rural voters say Main Street is in decline in small towns across America. Nearly half of all respondents say their income is falling behind the cost of living. They universally agree that towns suffer when hospitals, post offices, grocery stores and other small shops shut down. They love their public schools and yearn for investment in their communities to sustain their way of life. When asked how local governments could spend $10 million in their communities, the top responses were roads and bridges and public schools.

Recent elections have shown a widening divide between rural and metropolitan America. The teachers, public employees and healthcare professionals who belong to the AFT can play a key role in bridging this divide. As we have done in McDowell, we will

work with partners to ensure that rural communities and small towns have equal access to high-quality education; up-to-date roads, bridges, energy and other infrastructure; affordable healthcare; reliable public services; and places where people can gather and forge community. Not one more school, hospital, post office or grocery store should close on our watch.

Our path in McDowell shows that communities that have been left behind can move beyond despair to hope. High school graduation rates in the county are soaring, and dropout rates have plunged.

Community schools offer students everything from counseling to healthcare to computer coding classes.

Recreational tourism and the unionized jobs for construction workers building Renaissance Village are seeds of economic development. Reconnecting McDowell is about the path to a better life.

We are hoping our work in McDowell and St. Lawrence County, N.Y., can spark similar efforts in other rural areas and small towns—so young people don’t have to move away in order to get by and so the businesses and policymakers that have abandoned these areas see reason to invest in them. The rural way of life is worth fighting for.

Not one more school, hospital, post office or grocery store should close on our watch.

Photo: Ronnie Lee Bailey

Weingarten (center) and Reconnecting McDowell partners at the groundbreaking of apartments to house educators in rural McDowell County, W. Va. Follow AFT President Randi Weingarten: www.twitter.com/RWeingarten

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