Private Equity Parasites and the Lesson of Mervyn’s

Private Equity Parasites and the Lesson of Mervyn’s


This month Mervyn’s, a popular chain of middle-class retail clothing stores, is just about finished with its going-out-of-business sale, its departments so ransacked the hottest deal-making is for their shelves and display tables. We can and must glean economy-wide universal lessons from this unnecessary bankruptcy, lessons with concrete policy implications.

Was Mervyn’s worthless when Cerberus Capital Management bought it from Target in 2004 for $1.2 Billion? Was it a doomed entity in 2005 and 2006 when it had a combined 300 million in profit, even despite being hit by Cerberus’ vastly increased lease payments they forced the retailer to pay for its own buildings?

You see, when the three Private Equity (PE) firms, Cerberus Capital Management, Sun Capital Partners, and Lubert-Adler acquired Mervyn’s, they split it into two entities, the retailer, and the real estate. Then they bled Mervyn’s dry with increased lease payments, debt, and dividend payouts. As an introductory proposition we should expect PE firms to layoff workers when they make an acquisition. But another common practice is to load it with debt.

This is being played out in the Sam Zell-Chicago Tribune parasite-victim relationsip, where that media company was also saddled with disproportionately enormous debt and quickly driven into bacnkruptcy.

To give you some idea of the debt’s disproportionality, “At their peak in 2006 they (PE firms) acquired 667 companies worth $372 billion. But debt levels soared: From 2005 through the third quarter of 2008, private equity firms loaded a staggering $741 billion of debt onto their companies' balance sheets.”

Besides layoffs and debt, the strategy includes high dividend payouts to the acquirer and/or other forms of forced extractive payouts (e.g. the real estate entity in the Mervyn’s deal). According to BusinessWeek, the “private equity firms took a total of $137 million in "distributions" directly from company coffers” in the Mervyn’s deal.

Overall, Mervyn’s charges the PE firms “stripped it of real estate assets, nearly doubled its rent, and saddled it with $800 million in debt while sucking out more than $400 million in cash for themselves.”

And Mervyn’s is not alone: Linens ‘n Things, Sharper Image, Goody’s Value City, and many others went bankrupt shortly after being bought out. “Of the 105 big U.S. companies that have filed for bankruptcy this year, 66 have been owned by buyout shops or been spun off by them.”

So one can safely say that easily half the major corporate bankruptcies are of firms recently bought and owned by PE firms.

So, what gives? Is the PE firm a parasite that buys firms with real products, real customers, profits, employees, and real estate, and systematically shuts them down? In a word, yes. Exactly. They favor short-term gain over long-term viability. Mervyn’s has laid-off 30,000 workers since 2004, when Cerberus acquired the store.

Is there a difference between how Cerberus (who also own Chryler) ran Mervyn’s and how Mervin G. Morris, who founded the company in 1949, ran Mervyn’s? Think about the time periods: Mervyn’s went through lean times and fat for almost six decades before they were fatefully acquired by a crony company that had no intention to run it, only a zeal to gut it for quick personal gain – sending them careening into bankruptcy.

The broadest point is this – in the Public vs. Private sector comparison, we can stipulate that the private sector will run some activities more efficiently than the government, despite infinite case studies to the contrary (Medicare and Social Security program administrative costs being vastly less than their private counterparts, public vs. privately owned prisons, the military vs. the mercenaries, etc).

However, if the laissez-faire/ privatization proponents want to put forward the private sector as a replacement to some government-run activity, they will have to first admit that the private sector can not possibly do a better job than government unles they first actually run the business, as opposed to buying it with the purpose of systematically bleeding it dry as quickly as possible, as if job one was firing all employees and closing all retail branches.

And these PE firms’ business practices are not unique in the narrative of businesses being bought in order for the private sector to destroy them and shut them down as fast as possible. General Motors went around the country in the first half of the last century, bought out and shut down major municipal streetcar systems (in what is known as The Great American Streetcar Scandal) for the purpose of replacing clean efficient public transport with dirty, smelly buses and more importantly, profitable passenger cars. Battery patents key to the electric car have been owned at various times by big car companies and oil companies, both of which just lock away technology so that it never will see the light of day.

Now, what is left of Mervyn’s is suing their former owners, Cerberus. This will be an important case to see if the courts will put curbs on PE firms’ behavior. If they fail to do so, it will be left to Congress and, conceivably, State Attorneys General to quell these destructive parasites.

Is there something else lost in this unnecessary bankruptcy? Mervyn’s was a place middle-class shoppers could pick up clothes that were above the quality you often find in Target or Ross, at prices that were reasonable. In many cities and towns, there is no close replacement. Even here in populous San Jose, I can’t name an interchangeable source. Macy’s is much higher priced, and mall boutique stores are worse. Target and Ross, as mentioned, are, like Marshall’s, hit-and-miss and harder to navigate for what you really want, and Wal-Mart is multiply objectionable.

But these are the concerns of real people in the real economy, like the 30,000 Mervyn’s employees tossed aside by Cerberus. People who own and manage Cerberus like Bush I’s VP, Dan Quayle, and Bush II’s former Treasury Secretary John Snow have other concerns: short-term extraction and personal enrichment at the expense of long-term sanity, equity, or widespread economic health.

My most apt analogy to the two roads diverging before us

My most apt analogy to the two roads diverging before us:

We are facing a choice that I think is best described by this story.

You, representing yourself and all Americans, have just seen half your neighborhood burned down by a crazed arsonist.

You must now choose between two agents to solve the crises in flames all around you.

One is the fireman, hose in hand and backed up by a fleet of fire trucks.

The other is the crazed arson, eyes glinting with the imminent power to set more infernos, in his hands a can of gasoline and matchbook.

As half our country looks to the fireman, we also look on the other half, baffled, unable to comprehend how they actually want to turn to the same forces that unleashed our nation's destruction. And all we can think is, are these people crazy? Are they on crack? Are they insane crackheads?

*********************

It is an amazing time we are living in, and all the more so an amazing time to be teaching economics at the college level. Where one year ago, five years, ten, twenty years ago regulation was always a bad word, now everyone regardless of their political-economic leanings calls for more regulation, be they left, right, center, Democrat, Republican, they all say regulation of the financial sector is superior to the anarchic deregulatory environment that has been pressed by the laissez-faire (L-F) crowd. Today I would not be surprised if Ron Paul starting calling for some sort of regulation.

And it is a sign of the times that it was announced today, October 13th 2008, that Paul Krugman, one of my favorite Economists (Sorry Paul I think the illest is still Joseph Stiglitz) was awarded the Economics Nobel Prize. The same award was given in 1976 to Milton Friedman
http://nobelprize.org/nobel_prizes/economics/laureates/.

Friedman is of the "Chicago School" L-F free-market purist school. In fact he was a pillar of that school and much of the inspiration behind Naomi Klein's groundbreaking book and tour about "The Rise of Disaster Capitalism." In other words, Friedman's theories and Krugman's could not be any more diametrically opposed. Krugman's Nobel prize is a pure reflection of the recognition that the "drown the government in the bathtub" philosphy is an abject failure.

I've often said we should try every extreme right wing idea in politics and society short of direct ethnic cleansing. We should try their ideas deregulating the economy, privatizing government out of existence except as a power to enforce authority through military, prisons, and police (the first two of which are already highly privatized as it is).

We should deport all the illegal immigrants, criminalize abortion, put away every offender of a victimless-crime to multiply our prison system by ten. We should do all the things the right-wingers want. Why? To see what type of third-world country we then will become. Privatize education like they do in Nigeria so only the paying rich can attend school. Kids fit well in the mines anyway.

I've often said we should implement their every right-wing policy, just to see how much of a banana republic we can become and realize that we should never ever try any of those ideas again. And I've often hoped we wouldn't have to run such a terrible experiment because we can see how the Washington Consensus (L-F/ right-wing/ destroy government/ privatize/ induce IMF riot) has destroyed every economy and society it has touched, with zero success stories. In other words, can we learn from the the essence of the turning from Friedman-ism to Krugman-ism?

But now I realize I don't have to invest such schadenfreude http://dictionary.reference.com/search?q=schadenfreude
in that risky rightist fantasy proposition. Because we've had the last eight years in which exactly that experiment was being conducted on our society, and we have the disastrous results, the final verdict, burning our economy, safety, and standing in the world, all around us.

Voting Recommendations for CA Propositions - November 4th is Voting Day

Northern Californians and All Americans:

2008 Propositions Voting Recommendations from an Economics Professor

Politically I am very progressive and pro-Obama.


Prop 1 Yes

Prop 2 Yes

Prop 3 Yes

Prop 4 No

Prop 5 Yes

Prop 6 No

Prop 7 No

Prop 8 No

Prop 9 No

Prop 10 Yes

Prop 11 No

Prop 12 No





http://ravenodin.blogspot.com/

Letters to the SJ Mercury News Editor and Congresswoman Lofgren

Thesse four letters were email 9/7/08
I don't know right now if any were published.
By the way, check out my articles at http://www.helium.com/users/410399/show_articles

1
Editor,

I was surprised that Jim McCandless (Monday 9/8/08, letters) gripes about having to see articles by Krugman, Steinem, and (voicing a leftist viewpoint, he claims) the far right extremist Pat Buchanan. How I wish I picked up the paper that day if this is true. Everytime I see the Merc, articles and editorials by right wingers like Hansen and Navarette clog it up and render it unreadable. ON the day McCandless’s letter was printed, I count 7 total letters printed. Four (the majority) were unabashedly pro-GOP. The fifth was largely pro-Palin, with a barely detectable tongue-in-cheek swipe at her. Another was apolitical (on lighting in Los Gatos) and the last appeared leftist, and was conveniently cut off mid sentence very early in the letter, another casualty of media consolidation. Why right-wingers would see the corporate media as advocating anything other than the same failed radical free market purist agenda is a mystery.

2

Margaret Fletcher (9/8/08, letters) blames Democrats for the budget impasse. If the state GOP can find inefficiencies to cut, I’m on board. But the only cuts that come close top budget-balance are to cut education and health. The real sources of the deadlock are: we require a 2/3 vote to pass a budget or a tax, and GOP legislators signed the Grover Norquist no new tax pledge. So it seems the only way out is for Democrats to agree to cut vital life-saving programs. We should pursue this elitist class war the GOP is waging and achieve the GOP cheap labor dream of turning society into the third world. For example, who hires illegal immigrants? Answer: rich right-wing business owners.

3

We should pursue the GOP cheap labor dream of turning America into the third world by trying their most extreme ideas: deport all illegal immigrants. Schools are open only to the wealthy - for them a voucher actually leads to an education since they can afford the rest of their private school tuition. Bleed our country dry with childish whimsical wars of choice, borrowing from the Chinese throughout and throwing off occasional trillions to our wealthiest fraction of one percent. All consumer regulations should dissolve; no one except aristocrats should have health care. No one should pay taxes or expect roads, bridges or FEMA to function. Destroy the lower-income 99% and give everything to the top 1%. Third world, here we come!

4

I would say we should try the GOP dream of changing America into a third-world country, but we already gave them a chance for the last decade. For six years they controlled every aspect of government and drove America into the ground. At the beginning of this reign of willful incompetence I said it will be interesting to see how they blame the left for the problems the right causes while running everything. I was wrong; their strategy is not so much to blame the left for the scandalous disasters of the right. Instead they admit the GOP caused the disasters, yet only the GOP can clean up the mess. With a compliant media, they are getting away with this absurd logical quagmire.

Email to Congresswoman Zoe Lofgren 9/17/08

Thank you for voting yes on 6604.

It is amazing the lengths to which the media will go to trumpet the non solutions of offshore oil and ANWR that might bring down gas a nickel per gallon in more than a decade. At the same time there is a total blackout on communicating to America that many experts believe regulating speculators will lead to a 50% decrease in the price of oil in a matter of weeks.

Let's please try this. I know the veto threat looms - the fight must be won through the media. Someone must use whatever pedestal of notoriety they've achieved to say simply, let's try this solution. Everything else is window dressing in comparison.

If regulating speculators fails to achieve the expected results and takes two months to lower gas prices only 40%, do you think the American people would be dancing in the streets for that type of failure?

Think about this - the only argument I've seen against this is (false) that transportation, airline, trucking compaines need this market to be unregulated to hedge costs. Look who is sponsoring the stopoilspeculationnow.com effort: it is the very transportation, airline, trucking companies these phony free market purists claim to protect. The airline and truckers want oil speculation regulated, and so would the American people if the media gave it one-tenth the attention they give to non solutions, or they did to the arcana of the Iowa Caucus system.

David Moglen

Assoc. Economics Professor
Foothill and Evergreen Valley Colleges

Top MCs

I always saw this as a blog where hip hop, politics & economics could all be discussed, even if overlaps were few and far between. So in the spirit of integrating the overlooked interest, here is a list of my favorite MCs.

Top MC's:


1. Sage Francis
2. Aesop Rock
3. Slug (MC in Atmosphere)
4. Qwel
5 Mikah Nyne
6 Abstract Rude
7. Josh Martinez
8. Gift of Gab (MC in Blackalicious)
9. Sleep
10. Grouch
11. Eligh
12. Busdriver
13. Lateef
14. Mos Def
15. Coley Cole (One of 3 MCs in Lost and Found Generation)
16. Ex-I (one of many MCs in Thunderhut Project)
17. Aceyalone
18. Lyrics Born
19. Common
20. Nas
21. Tupac
22. Redman
23. Eminem
24. Chino XL
25. Promoe
26. RZA


I'm sure there are some omissions and the order may be a bit rough, but it's enough to get you started (obviously you can google any of these names) if you're looking for an answer to the conundrum of monotonous graphic commercial mainstream rap and are willing to experience the artistry of underground hip hop.

Laissez Faire/Libertarianism: The Cannibalistic System

Full thread at http://pod01.prospero.com/n/pfx/forum.aspx?msg=26093&nav=messages&webtag=mn-comments

	Top of Form The not-so-little state of horrors In California lives the biggest beast in the world, the Taxmonster. The Taxmonster is a humongous animal with insatiable appetite. The only food it eats is money. It does very little for the people who feed it, but mysteriously for some reason it does some favors to those who never give it any food. As the monster grows so does its appetite and so the cycle of feed-grow-feed-grow never stops. When you stop feeding the beast for awhile, it starts threatening the people of California with eating its children and elderly. Most of the people do not understand that the proper way of dealing with the Taxmonster would be a new medical procedure, called weight-loss surgery. If we, Californians, would deny the green feed, the beast would shrink down to a size that we could put it back in a cage and keep it under control. Peter Ligeti San Jose Comments To Mr. Ligeti who rants about the tax monster, of course you realize that without taxes we wouldn't have police, fire fighters, public education, county hospitals, forest rangers, public roads and freeways, public universities, museums and much, much more. I bet your life has been safer and/or greatly enhanced by these services, yet folks like you would rather pretend that all public services should be free. And from the perspective of business, how much commerce do you think we would draw to California if we had lousy universities, freeways, hospitals, etc? Posted by: glenn 1/14/2008 5:24 PM 26093.1 Report as Violation Avg 5.00, 1 vote Thank you to Peter Ligeti for writing in with that simplistic, 100% false and thus illustrative description of taxes as a monster. In Mr. Ligeti's ideal world, there are next to no taxes. This is also called Libertarianism and Laissez-Faire. In his ideal world, no roads are produced or maintained, no public schools, no police or fire or any public safety, no courts or legal system, a purely corporate government, and no regulations. How can I be so sure? Because: what pays for all those things? Taxes. It is amazing that in 2008 we have to connect the dots from point A to point B with some people, but yes, tax money becomes all of these public services. In Mr. Ligeti's world, not only would the poor die in front of the hospitals, he wants your kids to go to private schools where they learn flat-earth intelligent design theories and if you can't afford thousands to send them to private school, they can sit at home and play with whatever the unregulated NRA will make sure they have access to. In his paradise of deregulation and privatization, Enron accounting crises would go unchecked and Enron/energy speculators could cause blackouts and skyrocketing prices as they did during the last round of regulation. Media will speak with one corporate voice more than it already does. We see in Iraq how a low-paid soldier is infinitely more efficient that highly-paid corrupt private military, who number over 100,000 and still cannot complete projects, although they can defraud us and loot our treasury. In Iraq we have a stark side by side contrast of the private and public delivery of goods. On the privatized side you get unaccountable state-terrorists blasting innocents with machine guns in countless incidents that an American study found the contractors started over 80% of the time. You get a Christmas Day- gunshot murder committed by a contractor inside the Green Zone, killing the Iraqi Vice President’s bodyguard, and the punishment was a one-way ticket home. Notoriously those punished in such a fashion return weeks later with another private mercenary firm. I agree our tax system is wildly in need of reform and is wholly unfair. How else can we evaluate a system where 60% of US Companies pay no income tax, tax shelters are rampant and, coupled with taxing the unfathomably richest percent or two, represent enough lost revenue to ease the burden on the middle class. As one of the richest men on the planet, Warren Buffet famously notes, he pays a lower percent of his income in tax than his secretary, who earns wages. If Mr. Ligeti can handle a Pulitzer-Prize winning Investigative Journalist’s inquiry into our unjust tax code, I recommend David Cay Johnston’s book, Perfectly Legal. But I really want to emphasize not just the inequity of how our tax system subsidizes corporate welfare while letting companies of the hook along with the ultra-rich at the expense of the middle and upper-middle class who are sorely in need of relief, but the fact of the public good – in fact, the countless public goods that are known as public infrastructure, roads, bridges, UC, CDC, and DHHS medical research, the public airwaves, all public transportation systems, are all funded by taxes. Does Mr. Ligeti want us to go the way of Texas who sold off their highway to a Spanish firm? Some East Coast bridge and toll systems are in private hands. Do we really want foreign firms buying our infrastructure and do you really count on this government you so despise to get a good price as it sells off the Arctic National Wildlife Refuge for oil drilling, and selling off vital infrastructure, for the firms to charge you to use what you now use free? This administration wanted to let an Arabian, OPEC Government suspected of terrorist assistance manage the ports, a key security vulnerability. Rupert Murdoch, an Australian, will own more and more of the US Media. We will have more Conrad Black’s, the Canadian media baron who acquired half of the country’s media and was convicted of fraud, but with a twist – without courts or law enforcement he would get away with it. And forget about the fired (not a typo) department putting out your house unless you’ve paid a private firm a fee. In Southern California this effectively already happened, except they at least do have a fire department, when those who paid contractors to spray their house with a fire retardant were spared while neighbors who didn’t pay lost everything. And those rent-a-cops will all have to get carry permits, that is, if you can afford to pay them – for everyone else, with no taxes, there’s no money to pay cops. What a softball. David Moglen Assoc. Professor of Economics (at three Colleges) Posted by: David Moglen 1/14/2008 5:37 PM 26093.2 Report as Violation Avg 5.00, 1 vote Of course, all you smart people noticed that he didn't say to kill the "Taxmonster". He said to put it on a diet, let it get smaller, put it in a cage so we control it instead of it controlling us. You are all right, what a "simple" idea. Posted by: js 1/14/2008 7:21 PM 26093.3 Report as Violation Avg 5.00, 1 vote Ligeti doesn't say to kill the monster but he does say "It does very little for the people who feed it..." Really? Mr Ligeti and supporters don't drive on the streets and freeways, don't send their kids to public school, don't exist more safely with police and fire protection, don't enjoy state parks, don't use public libraries, have never needed a court of law? The "tax monster" mainly reflects what we all want. The main difference is that some of us want it for free and others recognize there is a financial cost to having decent living environment. Posted by: glenn 1/14/2008 7:34 PM 26093.4 Report as Violation No rating David Moglen, who teaches at a community college but aspires to be an academic at a real university, fails miserably to understand much of anything about competitiveness in taxation. This past summer, Treasury Secretary Hank Poulson convened a converence on international tax competitiveness, including respected scholars from major research universities and the Vice Presidents of Tax from major corporations. GE pointed out, for example, that they manufacture medical equipment in China, and right across the street their corporate competitor Siemens manufactures medical equipment. Siemens, of course is a German company, while GE is a US company. The US' corporate tax system penalizes GE relative to Siemens. Siemens can sell its medical eqiupment in China for the same price as GE, but GE pays 20% more in taxes to the US Goverment than Siemens does to the German Goverment. This puts GE at a huge disadvantage -- they cannot just charge more to fund the US Gov't tax that Germany wisely does not impose, because the market requies parity. Thus, GE makes less profit, and as a result, in the long-run, has less money to invest in R&D for the future --both for the future of mankind (which do-gooders would like) and for the future of the company (which do-gooders don't like). Similarly, the head of Tax for Intel reported that to build and operate a semiconductor wafer fabrication factory in China costs $1Billion less than in the USA. In contrast to popular opinion, it is not labor that costs less (labor does cost less, but that is an insignificant fraction of the $1 Billion number). The plant & equipment cost the same. The difference: Tax subsidies from the Goverment of China! The goverment of China correctly realizes that corporations are not evil - they are the driver of prosperity for the future. Mr. Moglen, in his on-line rant, sounds like an economist from the 3rd world railing against "evil American imperialism" instead of realizing that increases in GDP and our standard of living will be choked off if he puts such confiscatory taxes on companies who will build the future. [] No one says we should disband all goverment. The Goverment, however, responds to potential cuts in the same way that a mother bear would respond to a threat to its offspring. This is called the "Washington Monument Strategy" among the beltway insiders. Whenever Congress threatens to slow the rate of growth of the budget of the Department of the Interior, does the Dept of the Interior respond by cutting low-value added itmes such as repainting outhouses in the middle of Nebraska that are rarely used? No. The Dept of Interior reponds by saying they will close public access to the Washington Monument to save the money. Why? the DOI knows that families take their kids to Washington DC to see some of America's history, and they expect to be able to see the Washington Monument. If they can't, they complain to their representatives. No one, of course, would complain that an outhouse in the middle of nowhere wasn't painted last year. [] Similarly, California, newspapers, goverments etc when faced with the threat of reduced increases in funding cry "OHMYGOD, they want to cut schools, police, fire departments & libraries!" Never do they talk about cutting useless bloated bureacracies. Why, for example, do our tax dollars go to a California department that researchs and disseminates information about how to remove mustard stains from silk neckties to the dry-cleaning industry? I'm not making this up - you can find it yourself if you look hard enough. But you will have to look hard, because not only do we spend tax money on this, they don't do a very good job at disseminating the information, which of course is part of their core charter. [] No one says we should eliminate all goverment -- we just want to get rid of marginal programs like the mustard stain on silk necties program, and we want our goverment NOT to engage in "Washington Monument Strategies." Posted by: 1/15/2008 7:48 AM 26093.5 Report as Violation Avg 5.00, 2 votes The anonymous writer who criticizes me but hides HIS identity (any adjectives pop into your mind) the ad hominem attacks are not necessary. Frankly, you don't know me, so saying I want to teach at a UC or CSU and somehow community college teaching is dishonorable, is a guess at best. In fact I've been offered jobs at both CSU and UC and chose to stick with community colleges. I don't expect I'll ever teach full-time at CSU or UC, nor do I want to. To the real point of the matter, Mr Anonymous who won't even give his first name is quite right. I agree with almost everything you said, and if you can find a way to cut wasteful spending I'm all for it. If you can stop the Pentagon and State Department from overpaying fraudulent contractors for no-bid, cost-plus contracts, I will be all for your plan. So I agree, let's cut waste. Bur your personal attacks, like saying I sound like a third-world critic of the US, do not add much subatance to the discussion. And I don't think you read my post, since it is dense with facts missed by those who wish Government to be drowned in the bathtub (their words, on record). But I read yours and I think we are in full agreement about cutting waste, just the gratuitous personal attacks seem unnecesary. Maybe I should think twice about being so up front with my identity, since it seems to invite such vitriolic bile, maybe I should take a cue from Mr. Anonymous and throw my verbal javelins while hiding in the shadow behind a computer screen. For reference, here is my post, with some syntax errors cleaned up and a note about Parade magazine's Bhutto story. Original Post: “Thank You…(omitted here – refer to above)….We just had another huge example of the consequence of media consolidation (as if the lies pre-Iraq weren’t enough) when the national weekly Parade magazine paraded Bhutto as the savior in an in-depth cover story published a week and a half after she was assassinated. What a softball.” David Moglen Assoc. Professor of Economics (at three Colleges) Posted by: David Moglen Bottom of Form
When they tell you they just want to nibble around the edges of public spending, not eradicate whole chunks of vital services, just look at what an attractive figure like Huckabee says: eliminate the IRS. No income taxes. Switch to purely sales taxes - which every economist says is hugely regressive and will burden the middle class more, vastly increasing their taxes. So don't believe that they just want to nibble around the edges. Eliminating the tax police (IRS) is a recipe for eliminating vast and vital public services, and an excuse to put more of the burden on the middle and upper middle class, and less burden on the ultra-rich. That's a key point; all these folks who want to live in a dream world with a healthy country with some level of vital social fabric and no taxes: you people are acting/voting against your own economic interest. If you are middle or upper middle class, the Republican privatize-at-all-costs/loot the treasury for corporate cronies philosophy is hurting you and helping only the ultra rich. Now I know you think you will one day be in that category, with hundreds of millions of dollars, but the fact is most of us won't win the lottery. So unless you are in that fraction of 1% of highest-earning people (usually all that income is unearned, dividend/capital gains income) the right wing is robbing you. Everyone in the middle and upper middle class needs to stop voting for the cowboy/ Chuck Norris Identity (Republican) and start voting their own economic interest (Democrat). Read Perfectly Legal, you can see the many ways, one being the AMT, how the middle and upper middle class are being robbed for the ultra-rich (and notice simultaneously pitted against the weakest, most vulnerable, the demonized blue-collar backbone of society, the working poor). In closing, if people want a simplicity like Ligeti serves up, here's one. Latin American Countries collect very little as a % of income in taxes. Nordic Countries collect a lot. The result is, in Latin America, total poverty and misery. In the Nordic countries, there is great wealth, poverty is basically eliminated, the environment is protected, and there is a complete social fabric/safety net. Where would you rather live, Latin America or Sweden? I'll take Sweden. Apparently our leaders are intent on turning America into a third-world country, and will not rest until the only taxes are those levied against the middle, upper-middle, and lower classes. Just remember what Warren Buffet says about how his secretary pays a higher % of income to taxes than he (one of the richest people in the world) pays in taxes. You're being fleeced people. Wake up.
Posted by: David

Our nation is facing a life or death choice

Soundbyte:

Private Health Care = Death

Public Health Care = Life

Our nation is facing a life or death choice and it rushes in to choose death.

1. Soon to be 50 million uninsured

2. US pays more than anyone and receives less than more than 35 other countries (World Health Organization statistics)

3. US pays 82% more for the same pharmaceuticals as the other developed countries

4. The US is the only developed country to create an unnecessary middleman of health insurance companies who serve no role whatsoever but to stand between the services a doctor and hospital can offer and the patient who needs them.

While their staff get bonuses based on their ability to deny claims, we pay for their wholly unnecessary advertising costs, bloated corporate beurocracy, and lets not forget their profits.

In a civilized country the hospital never has to hear that a prescribed surgery is experimental or too costly & therefore denied.

People don’t have to pay for services or prescriptions, except in some cases a small copay. And they never have to worry that a paid agent of the insurance company is employed to conjure reasons why they should have to pay back any major payouts the insurance company reluctantly does make. The typical reasons are any prior complaint of pain indicates a preexisting condition that exempts the company and requires the patient to repay their medical costs.

And let’s not forget the many millions who have been denied coverage at least once, often across the board with no one who will insure them even if they might be able to afford it.

This is a letter I wrote to a San Jose Mercury News columnist, Sue Hutchison, in response to her 2/5/08 column describing some local folks who had their lives saved by area hospitals and arguing that funding shouldn’t be cut.

Hi Sue,

My sincere thanks for your piece today. There is much more that needs to be said, some obvious logical extensions, but I don't know if you are at liberty to say such things. The obvious answer is some version of single-payer (doesn't Sheila Kuehl have such a proposal?). We need this on a national level.

When will the US finally join every other civilized nation on earth in viewing health care as a right? When will the fiscal conservatives realize that uninsured folks don't get preventive care and end up in the ER and cost everyone much more than if we did provide public health care? Or do they want to see people dying on the streets? Between our hyper-militarized national image and the apparent desire to see the uninsured perishing in front of hospitals reserved for the rich, I can hardly believe how bloodthirsty these warmongering anti-health people are.

I'm sure you've seen Sicko; it is a useful and comparative microcosm. I wish our messengers of progressivity could all look like George Clooney, Brad Pitt, and Gary Webb (and not the slovenly Moore) but the undeniable fact is he is delivering a truth that right wingers and the Wolf Blitzers/Sanjay Guptas of the world cannot refute (though it is ludicrous and painfully entertaining to watch them try). We pay more than everyone, and we get less than every civilized country. And we need to hear everyday on every media outlet (currently we hear this absolutley nowhere and never) that in France THE DOCTOR WILL COME TO YOUR HOUSE. Forget about waiting in a waiting room. So the hated French have a system that is incomparably and infinitely better and more humane than ours. No wonder they live longer despite their fatty pastries and incessant wine-drinking.

As a personal note, being a professional with a graduate degree and working two jobs (sometimes, as recently, up to five jobs) I cannot afford health care for myself, my wife, or my 10-month-old daughter. This is a revolting state of affairs that should not be tolerated in a civilized country. This is an outrage. I asked at the shiny new hospital next door to my apartment complex (where at least 1000 other families with young kids also reside) where I would go if there was an emergency. I told them I live right next to the Tully Medical Center. They said that's an urgent care facility which doesn't handle emergencies. So if my baby has an emergency, I can't go to the shiny new hospital full of doctors next door; I have to drive 20-30 minutes to O'Connor.

Our nation is facing a life or death choice and it rushes in to choose death.

Notice we are always warned how taxes will go up if we have a nationalized health system and cut out the unnecessary middleman - health insurance companies - whose only purpose is to stand in the way between doctors and patients. In other countries health care is given if you are sick - here it is given only if you can pay. Doctors in civilized countries NEVER have to clear a procedure with the middleman. They never have to deal with money issues at all vis a vis the patient. They are free to provide health care, with, in effect, infinitely LESS RED TAPE AND BEUROCRACY. So we are always warned how taxes will go up if we have a nationalized health system - yet taxes didn't go up, in fact they fell for the ultra-rich, when we spend what will be in the trillions of our treasure to kill foreigners in Iraq.

In fact, relative to what we pay for private insurance, if we even do a half-assed mimic of the best part of the English/French/ etc. health systems, the tax increase should be much less than we pay private insurers now, so it would feel like an expenditure decrease. The market power of the government as a single buyer would guarantee this. And if the program was scaled to be paid for by a progressive tax that would be even better. We have some, ineffectual, progressive taxes on income; notice there is virtually no attempt at all at progressivity with regard to WEALTH (assets) which is different than income. So there is a source right there. Ask Bill Gates' father if he thinks the Estate Tax is robbing him (hint - he doesn't - he's promotes the idea that the rich actually have some social responsibility). And ask Warren Buffet who pays a higher tax rate, him or his secretary (he's famously said it's the secretary).

In Canada, the CBC held a huge six week poll to determine who is the greatest Canadian. Over a million people voted. Wayne Gretzky was #10 on the list. Tommy Douglas, the politician who brought national health care to Canada, was voted #1. So whoever it is that gets the credit for bringing this to the US (if Canada is any indication at all - and we have more cultural similarities with Canada than any other country), that person will be lionized and elevated to the level of Michael Jordan, Jackie Robinson, our greatest sports heroes; it will be Washington, Lincoln, and whoever that brave soul is who improves US health care.

Every humane citizen should be outraged. I want to hear these right-wing millionaires (and their middle class companions who falsely believe they will one day be millionaires, and therefore vote and advocate against their own economic interest in favor of identity politics) tell me why almost 50 million people shouldn't have health care. Let them tell me why it's a great thing that I can't afford health care for myself or my wife who is ill. We should all demand that the US becomes a civilized country.

David Moglen

Economics Instructor

Black Emergence

Somebody has got to tip the Blacks off on how to get their shit together - as every other subculture who came to America or who lives in America has done: 1. Buy your goods & services from other Blacks. Studies show that in most subcultures (Greek, Jewish, Chinese, etc) every dollar earned is recycled within the community an average of 6 or 7 times before it is spent outside the community. Blacks recycle the dollar just once within their own community. 2. Men need to live with and raise their kids. They need to persevere as partners to the mothers of their children. Kids need 2 adults to raise them. One can do it, but two is better 3. Blacks need to rise above the victim game. As long as somebody else is responsible for your condition (ie. Whites) the best you can hope for is the booby prize: welfare. Whites will let you live & procreate in abject poverty forever. Only you can pull yourself out. Take responsibility for your condition.
The best thing the Whites can do to relieve the Blacks of their gang violence problem is to hire the gangs to police the neighborhoods. That's how we tamed the Hooligans back in the 1800's. We pinned a badge on them and gave them a salary. Offer a gang member a regular salary; a good chance to survive; and a pension plan. You'll be amazed at how fast they sign up.

My missives to letters@mercurynews.com & FCC

My missives to letters@mercurynews.com

11/28/07

Letter to the Editor,

Re: Story 11/27/07 Page 4B

How important are the “other causes that Howie Rich is involved in”? While these dots are not connected by the article about these powerful organizations with their “drown it in a bathtub” approach to government, the briefly mentioned eminent domain proposal, California’s Prop. 90, is a perfect example of this strategy to eliminate and bankrupt State and Local governments. In this disastrous proposal that would have gone down in history as the most expensive corporate welfare pork our state has ever seen, companies could sue for lost profits to whatever extent they could claim a regulation or property seizure cost them future profits. There would be an avalanche of lawsuits slowly bleeding the citizen taxpayers for firms, especially developers.

David Moglen

Economics Professor

San Jose

For this topic I sent 2 versions:

Editor:

In the first line of George Will’s “Treatise on Obama” (Dec 30, 23A) he calls Shelby Steele “America’s foremost black intellectual.” Steele, he tells us, is of the Hoover Institution, one of the many (he doesn’t tell us) right-wing think tanks who dominate every major facet of our media and our government.

I’m sure he also has in his top ten (for this honor of “foremost black intellectual”) Alan Keyes and Ward Connerly. It sounds like for George Will to call you by such a title, you must advocate stripping back measures for equality. To be the foremost black intellectual in George Will’s view, you must stab your people in the back. If you can’t find progressive blacks who will run circles around these intellectual Uncle Toms, you’re not looking hard enough. And don’t try finding them in the mainstream media (eg TV or print news). They only elevate to visibility minorities who are willing to kick the ladder out from under them.

David Moglen, Economics Professor

San Jose

Editor:

In George Will’s “Treatise on Obama” (Dec 30, 23A) he is almost able to articulate the philosophical truism Obama presents to our society. It does have to do with absolution – whites need Obama for absolution. It’s not that he opts out of the absolution transaction Steele and George Will both agree exists, the one where whites gain it for giving blacks a slice of success. This transaction has been completed countless times and whites feel either more guilty because it can’t erase the sins of slavery, and/or they feel embittered because they never wanted to ield any such affirmative action in the first place. But Obama presents a deal that will achieve absolution for whites – if he’s elected, they can say, see, we elected a black president! All those racial issues are behind us (read: end affirmative action now). And the real irony is neither of his parents descended from slaves. So now we can feel we gave back without ever allowing into the highest office someone who’s family was directly abused by slavery. So it gives us a feel-good deal, without having to face the black candidate (like Jesse Jackson) who really is owed some equity. All that said if he gets the nomination, I really hope he wins and it will be the brightest day in America if he does win.

David Moglen, Economics Professor

San Jose

Editor:

In “Art of Fib” (Dec 30, 6A) Michael Dobbs, in the media’s usual game of false balance, includes John Edwards statement that NAFTA cost millions of jobs in his list of major candidate falsehoods. He says this, like his other examples fom the other candidates, is “demonstrably false.” Then he gives absolutely zero evidence to support this. Not one word. In other words, it is, we are to believe “demonstrably false,” just on Mr. Dobbs’ say so. Have we not lost millions of manufacturing and textile jobs? Does NAFTA really have nothing to do with it? Lumping Edwards in with the liars was just a baseless opportunity to slam an honest person. He’s at least as honest as one can possibly be and still hold on as a major candidate. Without the massive runup in military and government spending over the last seven years, employment actually has contracted since 2001. Forget about adding jobs to keep pace with population growth, the private sector has shed more jobs than it added. I suppose Dobbs thinks this too is totally unrelated to NAFTA and other disastrous “free-trade” agreements.

David Moglen, Economics Professor

San Jose

My letter to the FCC in 2006:

I am a constituent. I am an Economics Professor. I influence people to vote and I vote myself. There are some public trusts that our sacred to our democracy, where it is the reponsibility of you and every uncorrupt official to DRAW A LINE.

I implore you as a citizen of this nation, this democracy, to overturn FCC's recent giveaway/travesty regarding the cross-ownership rule.

When will we ever see diverse ownership and independent voices take a place in our media when this vital unrepresented unseen majority of Americans are struggling and hav now lost thanks to the FCC their last little hred of the media pie.

Most of us cannot get any exposure, and hence MOST important ISSUES cannot get any media. This why a volume called Project Censored has to come out EVERY YEAR to just skim the surface o fthe huge, all important stories that our media will not tell us - like Hallinurton providing Iran with Nuclear material.

Let's please right this ship in the name of democracy, independent voices, in

dependent media, and the 1st Ammendment.

We do not have a 4th pillar of government because corporate journalism is coopted by the Republicans and a siamese twin with their corporate interest.

So in the words of my fellow progressives, the American majority, those who are physically sick with pundits on the media, starved to see the views of any reasonable person except for the one hour a day that Olbermann is on:

We write to you today to ask you to act swiftly to overturn the FCC's Dec. 18 vote to relax media ownership rules.

We have spoken out against media consolidation in every way we know how: attending hearings, writing letters, submitting comments. However, on Dec. 18, the FCC ignored this widespread public opposition -- just like it did in 2003. The FCC has turned its back on its mission and its mandate. Their decision to let Big Media get even bigger will erode localism, diminish minority ownership, and decrease competition.

Please take action now to overturn the FCC's reckless action.

My letter to the FCC in 2004:

I am one of the few people nationally who enjoys the right that has now a privilege: I can hear one radio station without having reality obscured into sound bites subjugated for entertainment to ultimately serve only narrow corporate profit and market share interests. Like countless like-minded people, I am now restricted to one radio station and zero TV stations (most people don’t get the Free Speech TV station). Sadly, this meager privilege is far more than even other Californians who simply live outside the range of the one remaining network that prioritizes the public. 70% of Americans get all their news from TV, so the argument that the Internet is a valid alternative to public interests in other media is multiply flawed. Internet companies can censor or promote sites in a number of ways; it is just another version of a few disproportionately powerful people controlling the masses.

Somehow the FCC or the Commerce Committee should “slip some legislation” past the lobbyists, instead of passing their legislation unbeknownst to the public and often with key clauses buried to the point of indecipherability by lawmakers. Can our regulators do nothing positive in recent years? Is it all repeal and rollback of laws to protect the public’s access to information? The 1996 rules that squelched local programming and helped deliver us to this point today must be assessed and revamped if not revoked. With their existence and the upcoming vote on further deregulation, it is nothing less than the sanctity of our democracy at stake. The wholeness of our system is predicated on an informed populace, and nearly all opinion on public matters is media-determined. The current extent of homogeneity of viewpoints due to consolidated ownership does unrelenting harm to our democratic rights to be heard.

Too many Americans now feel forced to get news from firms abroad so they do not have to be lied to. US media firms have a third goal lately, and it is quite evident: please the Administration and the Pentagon by being their megaphone, in addition to the idols of entertainment and profit. In so doing they can increase owner wealth by getting an almost tit-for-tat return: further deregulation. The result is that the media no longer exists as a “fourth pillar” checking up on the other democratic branches of government.

No TV networks broadcast the hearing on proposed rules changes that took place on the 26^th of April in San Francisco, meaning most Americans are in the dark about the further monoculturization that looms. These hearings were at first thought by the FCC to be unnecessary, and the commission saw fit to rush through this elitist deregulation with no public comment or awareness. We still don’t have the level of awareness due to the monopoly of big media in bed with military and government, but somehow social action groups were heard, in Virginia, where lobbyists are nearby. Contrast that hearing with the one in San Francisco, where countless eloquent members of society gathered for six hours. Not one favored deregulation, and not one representative of its proponents attended or said a word of logic in its support. Also, as the FCC knows well, due to affiliation agreements, networks shamelessly determine local broadcasting, including brazenly compelling entertainment to be shown over important political functions like high-level candidate debates. Many intelligent activists have technically sound alternatives devised. If the FCC and Commerce Committee could give these leaders a tiny fraction of the time allotted to corporate sponsors, true progress could be made.

In closing I respectfully voice my outrage as an American citizen at having no substantive media source that is not continually checked by narrow ideology and profiteering. There are legitimate ways to open the airwaves to the public. The FCC and all federal regulators need to wean themselves off corporate ties and rediscover the interests of the public they are meant to support. The banning of songs by Sarah Jones and Eminem in the same year shows both a disregard for the first amendment and an uneven hand, where the vile Eminem can quickly be heard due to big media approval while the moral, upright Ms. Jones faced an unjustifiable uphill battle to have her song heard. Even now, Clear Channel has mandated the banning of songs by Springsteen, the Beatles, and many others. Speech is a microcosmic arena of rights infringement that must be alleviated for all others to have air.

Chairman Michael K. Powell: mpowell@fcc.gov
Commissioner Kathleen Q. Abernathy: kabernat@fcc.gov
Commissioner Michael J. Copps: mcopps@fcc.gov
Commissioner Kevin J. Martin: kjmweb@fcc.gov
Commissioner Jonathan S. Adelstein: jadelste@fcc.gov

Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

McCain

241 Russell Senate Ofc. Bldg.
United States Senate
Washington D.C., Washington DC 20510

Boxer

112 Hart Senate Office Building
Washington, D.C. 20510

My Letter to CNN

12/16/07

Dear CNN,

I’m watching Blog Buzz at the moment (Sunday, 12/16/07), or should I say suffering through it. As usual in CNN’s relentless attempts to become Fox News lite, you have brought on a telegenic Republican to toe off against an unpalatable Democrat. This is exactly like Fox putting Prom King Hannity against walking skeleton Colmes, whom no progressives on the face of the earth would choose as their spokesperson. For the sake of our Democracy, if you gave me two weeks I could find dozens of attractive, eloquent representatives of the progressive viewpoint.

Every time I watch CNN the last few months, it is either worthless marshmallow fluff – entertainment news, or it is rancid pro-GOP talking points propaganda. Why have you taken a cue from the NewYork Times playbook and decided to report lies if they benefit the right rather than truth if it benefits the left? Why don’t you just hire Judith Regan and Judith Miller and turn your whole programming into an infomercial?

CNN used to be my main source of cable news. Now I only watch it to keep tabs on how bad it’s gotten, and I HAVE SWITCHED TO MSNBC. At least they have Olbermann, the only trustworthy person on TV, and Matthews and Abrams are jolted by his ratings into becoming his part-time imitators. On your station Cooper has epitomized the swing from willing progressive to purely Newstainment/ Right-Wing flack, Dobbs would never say anything good about any Democrat (nor check his facts when you look at the economic benefits from illegals, like the stacks of billions they pay into social security using false SS #’s, and the inflation containment they provide our economy), Blitzer is putrid as evidenced by his exchange with Michael Moore, where even the ostensibly reputable Dr. Gupta was proven to be a liar with this false balance. Look at the tapes, look at the facts, Michael Moore is so much more right on the facts then any of your personalities.

We should hear in every report on health that in France the doctor come to your door. Forget wait times in emergency rooms. THE DOCTOR IN FRANCE WILL COME TO YOUR DOOR. Why have we never heard that reported? I am so sick of the relentless right-wing propaganda. Stop trying to curry favor with the FCC or whatever is your motivation for ignoring progressives. I want to see the progressive viewpoint represented!

I want it be made palatable. This is not hard. In poll after poll, on every progressive issue, we have the majority of Americans. As a microcosm, while you continue to describe those against the Iraq War as the fringe anti-war left liberal wing of the Democratic Party, this supposedly minority fringe anti-war group is the MAJORITY OF THE COUNTRY. 60-80% of people want us out of Iraq depending how pollsters ask the question.

So please consider attempting to fulfill your duty to the American people, give a little balance to your GOP talking points programming, find a way to get rid of Dobbs and that absurd little ant Blitzer, or at least balance them out. If you are lacking for ideas how to make progressive people and views palatable, contact me and I will line it up for you even with no resources. It is so easy to find loads of model good looking people who will intellectually crush their conservative counterparts. (Have you ever heard of Matt Gonzalez in California - or for that matter, John Edwards and Barak Obama?) That is, if you are willing to allow a fair fight on an even playing field. And as you can tell from my tone, I have zero confidence that you will improve. I will continue to watch for it when I have time.

I can’t believe the most credible news source in the mainstream media has become this prostituted, to the point the MSNBC, the station that fired Phil Donahue and hired Alan Keyes, is more credible. Please limit the fluff and get a little balance on air.

Truthful Media Starved Citizen of our Dictatorship,

David Moglen

Assoc. Professor of Economics at Foothill, Ohlone, and Evergreen Valley Colleges

Letter to Newsbusters

This was my recent letter to newsbusters.org, which is a media watchgroup aimed at lambasting alleged liberal media bias:

Your whole site is based on a false premise. We are absolutely overrun with a one-sided right wing corporate mainstream media (MSM).

You cannot find a progressive voice 99% of the time on TV or anywhere else, save for some pockets of public radio. AM radio is just about 100% right-wing lunatic. How many Air Americas are there? Answer: ONE. The only chance to hear honest analysis in the MSM is the 1st 1/2 hour of Olbermann's program. Other than that, even CNN has completely crossed over to your dark side. If you can't see that, that the media has a severe pervasive right-wing bias from top to bottom, you are not fit to operate a motor vehicle. It’s no surprise corporations are blindly pro-corporate and promilitary-industrial complex since most of the media is owned by a few companies, and a really a few Rupert Murdoch type personalities. Have you ever heard of media consolidation?

Listen to Counterspin. Listen to Democracy Now. Do it religiously. Turn off the FOX news BS, turn off Rush Oxycontin Dopehead Limbaugh. Don't listen to anything from the right-wing think tanks that dominate our media and our government. Maybe then you will be open to progressive voices, which represent the desires of the majority of Americans on every important issue, health care, war, economy, etc. in poll after poll. Stop endorsing (and encouraging the endorsement of) politicians who only work to enrich the top 1% by looting the US treasury and VASTLY EXPANDING THE SIZE of government - look at the runaway spending under this GOP administration. If it wasn't for George Bush BLOATING THE GOVT we would have lost jobs in this economy since 2001.

A Radical Proposal

Why are we always told that to give health care to people will raise taxes yet to spend hundreds of billions every year for Iraq can be done along with (regressive) tax cuts?

A note on abbreviations:

h= health

hc = health care

hcp= health care providers: docs, hospitals, nurses, pharma industry

ins= Insurance

sq= Status Quo

mkt pwr= market power

http://www.guardian.co.uk/Iraq/Story/0,2763,1681119,00.html

http://www.rollingstone.com/politics/story/12855294/national_affairs_the_2_trillion_dollar_war/print

has: “that includes the government's past and future spending for the war itself ($725 billion), health care and disability benefits for veterans ($127 billion), and hidden increases in defense spending ($160 billion).”

Other analyses of the Stiglitz study clarify that hundreds of billions in costs are being incurred by destroyed physical capital like humvees and other vehicles, including helicopters that are downed. It is clear that none of the budgeting we hear about takes into account one penny of the value of destroyed trucks, machinery, and weapons we will have to pay to replace.

Take $125B/yr as total War in Iraq costs. It can easily be more, and this says nothing of expenditure in Afghanistanl; note this entire analysis assumes the US involvement in Afghanistan goes on at the same level of engagement as it is today.

Health care costs 7-8K per person in US.

Use more conservative #'s to say it wouldn't solve the health care crisis to get out of Iraq & redirect the $, Say we say 10K per person, and only $100B /yr. that's 10 m people covered.

That's not yet including any gov mkt power to reduce costs. (a single buyer or major buyer in a market will effect a reduction in price to the extent their sellers - the producers - do not also have comparable market concentration aka monopoly power)

Military spending is minimum 5-600 Bn, so trimming it 30-40% would (combined with 0 spending in Iraq) cover health care for the other 35m currently uninsured.

Note there was no change in taxes here.

Trimming this % Non-Iraq Military Spending would even have to be cut are conjunctive policies of (1) govt using its mkt power to get lower prices in nearly every type of health care and (2) There is a buyer (govt) and a seller (direct providers: hospitals, docs, nurses, pharma companies) so there is no need for a middleman (the health insurance company). So all money spent (by policy holders in s.q.) that becomes their profits, advertising, and labor costs would be saved by the buyer. Payouts by the Insurance co's that had gone to docs, hospitals, pharma, would not be part of the savings since those payments would still have to be paid.

Taking (1) and (2) together, there are several reasons the 7-8k/ person currently paid for health care would be reduced. Say it becomes 5k.

($100B from Iraq + $200B from military)/ $5k = number covered --->60m...covering the 45m uncovered + $ to improve conditions for underinsured and shore up catastrophic coverage, or even natural disaster protection eg Katrina.

To this point we've got the uninsured covered w. no change in taxes. Nothing has changed for the 255 M who already had coverage.

THE PAYROLL TAX

Now what if we give those 255M people the option of not spending the (avg) 7k for insurance and instead paying (avg) 5k for the govt program (In taxes, net of medicare payroll taxes already being paid). This would most likely be accomplished for each person opting into the new program by having their payroll taxes, which currently total 13% of their pay and go toward SS, unemp, disability insurance, and medicare insurance, would increase several percentage points. If we wanted to ease the burden on lower and middle classes, the cap on payroll tax by income would be raised and preferably removed entirely. This idea in brief:

Currently payroll tax of 13% is collected only up to 90K of income.

Person A makes $9k per year $9k*13%= $1,170

Person B makes. $ 90k per year $ 90k*.13=$11,700

Person C makes $900k per year $900k*.13= $117,000

Wow, $117,000, thats a lot of revenue from person C. Too bad under s.q. the Gov't never sees a dime of 90% of it since the payroll tax is currently not collected for income earned above 90k. That means under the current system Person B pays $11,700 in payroll tax and Person C pays the exact same $11,700 in payroll tax, just as they would if they made 900 Million per year. $11,700.

It's not hard to see how this reform (removing the cap on taxable income for payroll tax collection) could go a long way towards easing the burden on Person A and Person B if Person C now actually does have to pay the full 13%: $117,000

Now with single payer a $5k cost rather than (conservatively) a $7k / person cost. We have 300 m people . 45m we just paid for.

255m left. Multpily each by the $2k saved, you get$ 500 B . This will either be a saving in total spending or if the full $7k/ person is collected by the govt, it's More than enough to build the army back up, after mkt forces adjust down the price of health care due to (1) and (2). If they only want to let people keep $200B of this savings, they more than make up for the cut in military spending, so that can be restored. If they didn't let any savings flow back to the people, even Iraq cd also be maintained. Lets say they let people keep the savings. Instead of an avg $7k paid to insurers, much of which goes to the hc providers, they pay $5k to govt. So taxes have gone up but they save overall$ 2K on avg.

Private, no change from S.Q. option open to however many millions of Americans like their hc:

To make it palatable the first announcement to the public could be if you like your private insurance, keep it. While the government is totally bypassing the middleman, let anyone who wants to pay the toll of the insurance every month to have a company dedicated to keeping the hcp from delivering hc to a patient continue to do so. This interim phase would of course mean not a total immediate die off of the health insurance industry but a slow contractionary period of indeterminate length at the start of which it will have had its customer base drop by at least 2/3.

Relative to the hundreds of billions discussed here, a small amount will have to be set aside (similar to what's called trade adjustment assistance) in funds to get the hc insurance employees back into the workforce, even giving them free training, certificate programs, and education choices. Keep in mind while the near-total dissolution of the h. insurance industry is likely eventually in this scenario, there are other types of insurance jobs these workers could pursue, including car ins, home - fire, earthquake, etc. ins, renters ins, life ins. Not only that, some could be given preference to join what will have to be a somewhat larger beurocracy and become govt employees coordinating delivery of health to patients. This could be quite liberating for them to be in a job where anything doctors say a patient needs is done as opposed to their previous position that earned more profits for their employer to the extent procedures and medications were denied to patients.

Note that (1) above is automatic; single buyer (monopsony) from many sellers has the mkt pwr to effect a lower price just as a single seller (monopoly) to many buyers has mkt pwr to raise price.
But (2) would require a conscious policy to go around the middleman.

QUESTION:

So my question for you is, can you advocate such a plan or argue against it?

In terms of arguing against it of course there are opportunity costs, since this started with a cut, at least a temporary drawdown in military spending. Remember though, to whatever extent (1) and (2) reduce costs, and those reductions are not simply returned to the taxpayer, that money could be used to build the military right back up. In practice since it takes so long to overhaul the military up or down, by the time the year is over and the money has been restored, the drawdown would have only partially begun. Perhaps on the expectation that the tax revenue will be rolling in this year, funds could be moved around to have no drawdown whatsoever. But we also said spend much less money in Iraq to do this. Since Iraq is going to have direct costs of about $150B/yr and we used as a # from that source only $100B/yr, we'd have to maintain any activities there on just the remaining $50B/yr. If we can do our business there on less that $50B that money could be used domestically as well. So are there consequences from any of this policy as described? What are they?

Finally, is it radical? Relative to what the power elite (media and politicians) have ordained as mainstream U.S. politics, it is certainly borderline radical at the least. However, since every developed country in the world besides the U.S, does see hc as a human right rather than a privilege and does have a national hc system it would from a global perspective make the US s.q. radical if systems like Sweden, Britain, etc. are the standard for the entire Western Industrialized world.

Comment From L. Moglen, Attorney

Comment, the anti-illegal-immigration folk (including me) will see this as further impetus to draw Latinos north. Since many of them do not report income, they will have free run of our health care system at yours & my expense. They have already overwhelmed the emergency care units. They are poised to take down the free care for all system by shear multitude.

D. Moglen's response:

The Immigration issue, while I'd lk to take the time here to argue a system of legalizing hard workers and therefore makng sure they pay Both the Payroll And Income Tax, to be brief if they have a false SS number reported the govt is withholding payroll tax. Whether they get all or only a part of it back will vary by person, certainly in the SS portion of the payroll tax excess billions pour in every year from people with false SS #s and these people most likely will never receive SS payments. So whether illegal immigrants are paying the 17% or 13 % or whatever the payroll tax is at the time is again an issue of IRS Enforcement strength and priorities.

In other words, if they work and if we’re watching employers closely enough to make sure wages are reported, payroll tax withheld each month and sent to the US Treasury, those folks will through this tax or through savings outlined in the plan pay for their own care. Non-working folks who get emergency care will be a burden, but keep in perspective the total percentage of illegal (let alone legal + illegal) immigrants who are both not working and illegal. People come here to work. It is a very small percentage who come here seeking only emergency medical care.

IIlegal immigrant criminals raise the question of deportation, and how can it be immediate. Injuries incurred on US soil in these incidents will be a small cost in the scheme of the money being discussed here, especially if deportation occurs expediently. Expediting deportation for undocumented criminals should be a priority.