The American Prospect

The Constitution and the Middle Class Zephyr Teachout

The Great Kansas Trickle-Down Implosion

liberal intelligence

Justin Miller

Europe’s Ideological Muddle Robert Kuttner

Who’s Behind the Israeli Occupation?

Gershom Gorenberg

Summer 2017

The Wages of Neglect The Economic Abandonment of Middle America and Its Political Consequences

Ruy Teixeira • Stanley Greenberg • Harold Meyerson Guy Molyneux • william Spriggs • Joan Fitzgerald • John Russo

Working families are watching.

The North American Free Trade Agreement – NAFTA – has been a disaster for working families. The new negotiations should produce a trade deal that benefits working people in all three countries, not multinational corporations.

CWA and progressive allies are fighting for a NAFTA that safeguards good jobs, protects the environment, and benefits communities and working families, not corporate power.

We’re watching and will hold elected leaders accountable.

Chris Shelton, President Sara Steffens, Secretary-Treasurer

contents

volume 28, number 3 Summer 2017

Columns 4 prospects The european mirror by Robert Kuttner

notebook 7 Settlements: The Real Story by Gershom Gorenberg 10 Silk Roadblock by Manuel Madrid 12 Ignoring Police Violence by Brentin Mock

Features 16 Cover Package The Wages of Neglect 17 Place Matters by Harold Meyerson 22 The Democrats’ ‘Working Class’ Problem by Stanley B. Greenberg 28 The Pittsburgh Conundrum by John Russo 34 A Tale of Two Populisms by Guy Molyneux 38 Democrats Need to Be the Party of and For Working People

by Robert Griffin, John Halpin, and Ruy Teixeira 43 Why the White Worker Theme is Harmful by William E. Spriggs 46 Tilting At Windmills by Joan Fitzgerald 50 Kansas, Sam Brownback, and the Trickle-Down Implosion by Justin Miller 56 Private Equity: The New Neighborhood Loan Sharks by Chuck Collins 62 Who Is Wilbur Ross? by Rosemary Batt and Eileen Appelbaum 68 The Great Los Angeles Revolt Against Cars by David Dayen 75 Charlie and the MBTA by Gabrielle Gurley 80 Will Trump Kill the CFPB? by Lisa J. Servon

culture 85 State-Enforced Segregation and the Color of Justice by Randall Kennedy 89 Fiscal Purgatory in New York by James A. Parrott 91 The Long Arc of Protest by David Karpf 93 Goodbye to All That Democracy by Zephyr Teachout 95 Gift Horse or Trojan Horse? by Benjamin Soskis Cover photo by Michael Warren / iStock by Getty

1

from the Editors

L

ast November, when Hillary Clinton lost three states long assumed to be firmly entrenched behind the blue wall—Michigan, Pennsylvania, and Wisconsin— Democrats awoke to two grim realities: that Donald Trump would become president, and that their party’s dwindling support from the white working class had now fallen beneath the level necessary for Democratic victories.

In the wake of November’s disaster, the white working class has become the subject of progressives’ ire or progressives’ sympathy or, occasionally, both. What’s been missing is progressives’ analysis: Is there any way the Democrats can win decisive congressional majorities if they don’t perform better than they did with those voters in 2016? (Not likely.) How big a share of the white working class is actually in play at election time? How can progressives appeal to those swing voters? What’s the overlap, if any, between the progressive agenda—indeed, the progressive mind-set—and that of white working-class swing voters?

To answer these questions, the Prospect, in partnership with our friends at the Democratic Strategist, has sponsored a series Greenberg of articles by pollsters, demographers, historians, and journalists that we’ve posted on our website. Three of those pieces—by Stanley Greenberg , Guy Molyneux , and the team of Robert Griffin , John Halpin , and Ruy Teixeira —appear in this issue. Greenberg argues that the Democrats have seen a fall-off in support from working-class voters of all races, and that absent a more progressive economics, they won’t get those voters back. Molyneux points out that the white workers’ rage at elites is directed more at the politiGurley cal establishment than at Wall Street; while Teixeira and company demonstrate that white workers are distributed across so many congressional districts that the Democrats will need to up their game with those voters to retake power. In addition, William Spriggs adds a warning that overemphasis on the white working class undermines the need to build a strong class coalition of all races around pocketbook issues.

This issue also includes an expanded piece by Harold Meyerson Molyneux from our white working class digital symposium, which documents the economic devastation that has descended on those parts of the nation outside major metropolitan areas, and argues that progressives need to come up with targeted economic development plans for those regions as a matter of both political and moral necessity. John Russo looks at the success and limitations of Pittsburgh’s transformation to a post-industrial city, even as the rest of western Pennsylvania has been increasingly hollowed out, and Joan Fitzgerald examines how clean energy projects could revitalize non-metro America if our trade policy and incoherent approach to planning didn’t get in the way.

We also inaugurate in this issue a new series, Mobility, underwritten by the Barr Foundation, which documents how cities can use public transit systems to create good jobs in poor and minority communities. David Dayen looks at what Los Angeles has been doing, and Prospect Deputy Editor Gabrielle Gurley reports on the Boston experience.

Finally, this summer, the Prospect welcomes our two new writing fellows: former editorial intern Manuel Madrid, who reports in this issue on how Trump’s travel restrictions have impacted artists from abroad, and Kalena Thomhave , an activist and writer on matters of poverty and hunger, who’ll be joining us in September.

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co-editors Robert Kuttner and Paul Starr co-founder Robert B. Reich Executive editor Harold Meyerson Deputy Editor Gabrielle Gurley art director Mary Parsons managing editor Amanda Teuscher associate Editor Sam Ross-Brown Writing Fellows Rachel M. Cohen, Manuel Madrid, Justin Miller proofreader susanna Beiser editorial interns Ira Berkley, Ishmael Bishop, Barbara Esuoso, Parker Richards, Sadhana Singh contributing editors Marcia Angell, Gabriel Arana, Jamelle Bouie, Heather Boushey, Alan Brinkley, Jonathan Cohn, Ann Crittenden, David Dayen, Garrett Epps, Jeff Faux, Michelle Goldberg, Gershom Gorenberg, E.J. Graff, Bob Herbert, Arlie Hochschild, Christopher Jencks, 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 Amy Marshall Lambrecht Director of Business Operations Ed Connors Development Manager Justin Spees Publishing assistant Stephen Whiteside board of directors Michael Stern (Chair), Shanti Fry, Jacob Hacker, Stephen Heintz, Robert Kuttner, Ronald B. Mincy, Miles Rapoport, Janet Shenk, Adele Simmons, William Spriggs, Paul Starr Fulfillment Palm Coast Data 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 permissions@prospect.org

Asking yourself what you can do now?

S TA R T H E R E .

W H AT I S D E M A G O G U E R Y ? Some demagogues are easy to spot: They rise to power through pandering, charisma, and prejudice. But a demagogue is anyone who reduces all questions to us vs. them.

W H Y I S I T D A N G E R O U S ? Demagoguery is democracy’s greatest threat. It erodes rational debate, so that intelligent policymaking grinds to a halt.

H O W C A N W E S T O P I T ? Demagogues follow predictable patterns. The key to resisting demagoguery is to name it when you see it—and to know where it leads.

Demagoguery and Democracy

by Patricia Roberts-Miller

R E A L I T Y. It used to seem so simple—reality just was, like the weather. Why question it, let alone disagree about it? And then came the assault, a mind-bending stream of “fake news,” “alternative facts,” and lies disguised as truths that cast so many of us tumbling into a state of moral panic. How did we get here? And why didn’t we see it coming?

The Trouble with Reality

by Brooke Gladstone

ON SALE NOW WHEREVER BOOKS ARE SOLD.

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Prospects

The European Mirror

by Robert Kuttner

T

he British election demonstrated that with the right combination of luck, circumstance, and leadership, popular economic grievances can go left as well as right. Jeremy Corbyn, the Labour Party leader who was long dismissed as hopelessly old left, demonstrated that if left means taxing the rich and restoring popular services such as free higher education, that sort of left is what lots of voters want, especially the young.

Under Corbyn’s leadership, Labour made its biggest gains in a single election—about ten points—since Clement Attlee’s epic defeat of Winston Churchill in 1945.

But Labour did not win a governing majority. Instead, British politics is more muddled than ever, and the politics of exit from the European Union only adds to the muddle. The narrow referendum vote in favor of quitting the E.U. in 2016 was a spasm of popular protest against the declining living standards of ordinary Brits.

It was not a nuanced analysis of the E.U.’s complex role in promoting free trade and the rights of finance while undermining jobs and social protections.

Working-class voters who voted for Brexit, especially in devastated industrial regions like the areas around Manchester, Liverpool, and Newcastle, were rebelling on a visceral level. They didn’t like Bulgarians and Poles taking local jobs, dark-skinned people invading their pubs, radical Islamists producing homegrown terrorists, and bureaucrats from Brussels adding

4 WWW.Prospect.org Summer 2017

insult to injury with ministries of silly rules. But mainly, they were rebelling against lost livelihoods.

The remedy of quitting the European Union may keep out some foreigners but will not address the deeper economic grievances. Brexit will only make matters worse. The United Kingdom sends half of its exports to the nations of the E.U., while Europe sends about 10 percent of its exports to Britain. As Britain has de-industrialized, its remaining auto plants are Japanese and Korean export platforms, whose main markets are the European continent. With the loss of tarifffree trade, they will likely relocate to E.U.-member nations. Britain is heavily reliant on finance, and the big banking houses are already making contingency plans to relocate to Dublin, Amsterdam, or Frankfurt. Leaving the E.U., especially under the auspices of the Conservative Party, which has no interest in rebuilding a mixed economy in one country, will do nothing for those who supported Brexit.

Does that ring a bell? The people who voted for Donald Trump, as a way of giving a fat middle finger to the mainstream of both parties whose cosmopolitanism had left so many Americans behind, are the losers from Trump’s actual policies. It remains to be seen what it will take for Trump’s working-class base to wake up.

One necessary ingredient would be a Democratic Party that is more aggressive in serving the interests of the people whom the British call the left-behinds.

As the package of several pieces in this issue of the Prospect demonstrates, the Democrats, once the Party of Roosevelt, became so infatuated with globalism and the politics of rainbow identity that they forgot about class. They forgot about making sure that economic development benefited places that the new governing class viewed as flyover states. New Labour, under former Prime Ministers Tony Blair and Gordon Brown, suffered from the same myopia.

In much of the West, the revolt

against elite globalization produced a paradoxical and perverse result of conservative rule poisoned with ultra-nationalism. None of this will address the real grievances that led to the revolt. In the United States, the president is not only a faux-populist buffoon whose antics front for a standard corporate agenda, but a true madman.

The story on the continent is hardly more reassuring—and a comparable ideological muddle.

Beginning in the 1990s with the Maastricht Treaty that created the European Union, the European project became more about ever-freer markets and less about consistent social standards. Maastricht guaranteed freedom of movement for capital, goods, services, and people. It had few offsetting guarantees of social rights.

The left became the center-left, trying to broker a slightly more benign version of neoliberalism.

It didn’t work. Ordinary people lost security, dignity, and decent earnings—and found themselves

with no credible political champions. Into this vacuum stepped the ultra-nationalist right, with plenty of scapegoats but no solutions to the pocketbook distress. (Hitler, at least, built the Autobahn.)

In several European nations, including onetime social democratic strongholds, far-right parties are now the second- or third-largest in parliaments. In parts of Eastern Europe and in Turkey, neo-fascist parties already govern. They are contemptuous not just of foreigners, but of democracy; they are bent on destroying liberal institutions.

The Brussels bureaucracy and its banker allies, revealingly, are potent enough to demand that the French balance their budget, that the Swedes weaken collective bargaining, and that Greece pauperize itself, but not strong enough to prevent Viktor Orban from destroying Hungarian democracy.

This is the bitter fruit of neoliberal globalism on one continent.

Worse, leaders such as Orban and Recep Tayyip Erdogan in Turkey are genuinely popular. They are promoting what Orban proudly calls “illiberal democracy.” Since the Enlightenment, liberalism and democracy have come packaged together. Democracy has meant not just the formal right of the people to select a leader, but respect for the rules of an open society and a constitutionally limited state, in which leaders can be freely criticized without retribution, and the opposition has a chance to win elections.

The new, neo-fascist right

Prospects

conceives of democracy more along the lines of Mussolini or Hitler, in which the Leader speaks for the true People. Orban is destroying pluralist institutions, but he could probably be elected by a wide margin in a free election. Likewise Hitler, had he deigned to compete in a free election in the late 1930s.

The right-wing populist spasm is not a random event, nor is it simply a fearful response to terrorists and refugees. During the 30-year postwar boom, there was no support for far-right parties because the social settlement of that era served the common people. The evolving European project was a nicely balanced compromise between market and state, in which the predecessors of the current European Union advanced commerce, while individual nation-states governed capitalism and enforced social standards.

The architects of that era, having survived the 1930s, were determined never to suffer another European war. They recognized that limiting nationalism went hand in hand with promoting full employment and rights for labor. When that project was undermined by elites, and Europe became the instrument of a new experiment in laissez-faire, ghosts assumed to be long buried reappeared.

Elsewhere in Europe, Emmanuel

Macron has won a huge governing majority for his brand of centrism. In the recent Dutch elections, the far right fizzled. In Germany, Angela Merkel is likely to win re-election in September.

The center seems to be holding against the far right. But look a little deeper and that is small comfort—for it is the policies of the center that produced economic stagnation and resulting ultranationalist backlash.

Macron, for one, hopes to liberalize labor laws to make it easier to fire workers, and in exchange put new money into retraining and public investment to create more and better jobs—a kind of Swedish

solution. But that will take public borrowing, and Merkel, Macron’s close center-right partner in the role of Europe’s fiscal watchdog, won’t allow it. If France’s slump continues, and with even fewer worker protections, Macron’s personal popularity will prove transient.

Germany’s role is especially perverse and worth a moment’s further reflection. Postwar Germany’s economic recovery was partly built on the Allies’ willingness to write off almost all of Germany’s Hitler-era public debt. So while Britain, which won the war, was saddled with a debt ratio of about 260 percent of GDP, West Germany’s debt ratio in the 1950s was under 20 percent.

How about a little reciprocity?

But Germany today would not for a moment consider writing off, say, most of Greece’s debt. (What-

The remedy worked for Germany, which benefits from what effectively is an undervalued currency—the euro. The German trade surplus today is larger than China’s. But the policy is deadly for the rest of Europe. By contrast, when the United States was the dominant Western power during the postwar era, America was generous with aid. As political scientists like to put it, the United States, as the hegemonic power, often placed “system-maintaining” responsibilities ahead of narrow national interest. Not so the Germans in their role as Europe’s current hegemon.

There is an old joke about European heaven and European hell.

In European heaven, the police are British, the chefs Italian, the mechanics are German, the lovers are French, and it’s all organized

aside the special case of the former East, does not suffer from the kind of regional disparities described elsewhere in these pages, which in turn produce political backlash.

Germany’s industrial excellence has long been promoted by a constellation of policies that include state banks, a federal development bank, high-quality apprenticeship programs, and subsidized jobsharing programs in downturns so that skilled local workforces do not dissipate during recessions. And although Germany does not have Japanese- or Korean-style planning, German industrialists and their union partners share a kind of soft economic nationalism; they know without being told to keep good jobs in Germany, while their Anglo-Saxon cousins relentlessly look for ways to outsource. Germany has been almost obsessed

Is there any way out of the dialectic of neoliberal policies producing economic backlash and support for the nationalist far right? ever Greece did to fiddle its books was pretty tame compared with the sins of Hitler.)

In the German historical narrative, the Allies’ act of macroeconomic mercy has vanished into the national memory hole. What stuck was the Weimar hyper-inflation of 1923, which ruined Germany’s currency and middle class, and helped pave the way for Hitler.

When Germany reunified in 1990, its government poured a small fortune into modernizing the Soviet-style economy of its east—about 1.3 trillion euros in all. This in turn led to several years of relatively high inflation, a tight money policy by the Bundesbank, and a most un-German bout of high unemployment. Germany’s internal remedy was to weaken labor protections and cut labor costs, and to impose tight budgetary requirements on itself and on the rest of Europe.

by the Swiss. Hell is where the police are German, the chefs are British, the mechanics are French, the lovers are Swiss, and it’s all organized by the Italians. One might add that in the deepest circle of economic hell, fiscal policy is enforced by the Germans—the worse the recession, the more extreme the tightening.

Germany today is the European equivalent of Typhoid Mary.

Germany itself is thriving; it’s everyone else who succumbs to the fiscal bacillus of deflation spread by Berlin. It was one thing to throw money at the reconstruction of the former East Germany— they were Germans after all. The rest of Europe can fend for itself.

This is doubly shortsighted, since prolonged depression only nurtures neo-fascism.

The irony is that Germany’s own economic model is in many ways exemplary. Germany, leaving

with spreading economic growth around. Around Germany, that is.

With this bleak tour of the West, is there any way out of the dialectic of neoliberal policies producing economic backlash and support for the nationalist far right? If there is, it will likely originate in America. Ultranationalism as a front for corporate plutocracy is most likely to crash and burn first in the United States. Post-Trump America could mark a return to genuinely progressive politics and policies. As in the Roosevelt years, the United States could once again stand for a brand of globalism that puts the rights of citizens and working families on a par with the rights of finance. Given the multiple blockages in Europe, it’s hard to imagine the road back to economic decency and broad redemption of democratic legitimacy beginning anywhere else.

Summer 2017 The American Prospect 5

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notebook beginning went unreported then— and it is still almost entirely absent from the popularly accepted history of settlement, as told in Israel and as reflected in foreign news coverage. This isn’t just an academic dispute: This mis-telling of history warps debate in Israel, and perhaps beyond, about making peace with the Palestinians.

Construction in Gilo, an Israeli settlement in East Jerusalem

If you’d like to get the classic,

Settlements: The Real Story Fifty years after the Six-Day War, a mistaken account of how settlement began still plagues Israeli politics.

by G e rs h o m Goren berg

rrodrickbeiler / istock by get t y

L

et’s go back 50 years, to midJuly 1967: A jeep arrives at an abandoned Syrian army base in the Golan Heights. A man jumps out. He’s 24, a shepherd from a determinedly secular, leftwing kibbutz in the Galilee. Feeling adventurous, he has joined a group that will establish a new kibbutz in the Heights, part of the territory that Israel conquered a month before.

He’s the first to arrive—which also makes him the first Israeli settler in occupied territory.

So began the Great Entanglement. Today more than 600,000

Israelis live in land conquered in June 1967 in six days of fighting with Egypt, Jordan, and Syria.

The victory created a temporary military occupation and the potential for Israel to negotiate for peace from a position of strength.

It’s the settlement enterprise that has chained Israel to occupied territory. It’s settlement that creates a two-tier legal and political regime in the West Bank—Israelis living with the rights of citizens; Palestinians without those rights. It’s settlement that steadily undercuts Israel’s status as a democracy.

Outside of declaring its

independence in 1948, starting to settle its citizens in the occupied territories may be the most consequential act in Israel’s history.

The founding of the kibbutz in the Golan Heights makes clear a fundamental fact about the settlement project: It began as an initiative of the left-of-center, secular political forces that dominated Israel in 1967, and later accelerated as a project of the mostly secular rightwing forces that have held power for most of the years since 1977.

There was no ceremony on July 16, 1967, no press release, no media coverage. The moment of

inaccurate Israeli narrative of settlement in two hours, watch The Settlers, a documentary released this past year in time for the 50th anniversary of the 1967 war.

The film tells us, correctly, that the “joy of victory ... consumed many Israelis” after the Six-Day War. But from there on, The Settlers focuses on the young followers of Rabbi Tzvi Yehudah Kook, the charismatic teacher of a nationalist theology. Kook’s students believed he had prophesied the conquests in a speech he gave a short time before the war, and they saw settling the “liberated territories” as a divine imperative.

The “first settler”—according to the film, apparently quoting earlier versions of the same story— was Hanan Porat, a student of Kook. In late September 1967, Porat led an Orthodox group to settle between Hebron and Bethlehem in the West Bank. They reestablished Kfar Etzion, a religious kibbutz that had fallen to Arab forces on the eve of Israel’s independence. In the film’s portrayal—again, echoing many others—Prime Minister Levi Eshkol was reluctant to allow the project, but approved it when he learned that the settlers had loaded trucks with supplies and planned to go ahead regardless of what he said.

From that opening, the film’s narrative skips ahead to the spring of 1968, when another Kook follower, Rabbi Moshe Levinger, brought a group of religious nationalists to settle in the Palestinian city of Hebron, again overcoming resistance from a

Summer 2017 The American Prospect 7

weak Israeli government. The chapter after that is set in 1975: The new Gush Emunim (Bloc of the Faithful) movement, led by Porat, Levinger, and others, led illegal settlement attempts near the village of Sebastia in the northern West Bank. Prime Minister Yitzhak Rabin and Defense Minister Shimon Peres folded under their pressure and allowed a small group of settlers to remain. Many thousands of Gush Emunim supporters would follow in the years to come, establishing dozens of settlements.

A strange irony of this origin tale is that it recasts some of the icons of Israeli toughness—such as Rabin, Golda Meir, and Moshe Dayan—as nebbishes who cede policy to a fringe group of extremists.

The Settlers, a two-hour film, pauses briefly to tell us about the Allon Plan, the postwar strategy put forward by Labor politician Yigal Allon.

The plan called for building Israeli settlements in the sparsely populated area along the Jordan River, while refraining from settling in the more heavily populated mountains of the West Bank. Another brief interlude in the film is devoted to Israelis who move to the West Bank for reasons of comfort rather than ideology. In settlements, they can afford homes much larger than what their money would buy inside the Green Line, the pre-1967 border.

Overwhelmingly, though, the film pictures settlers as religious nationalists, from Porat to today’s far-right extremists. All this fits Israeli popular perceptions. In media debate, “settler” is practically a synonym for Orthodox nationalist. For years, I’ve given a onequestion history test to well-informed Israelis, asking them what the first settlement was. With few exceptions, their answer is Kfar Etzion, Hebron, or Sebastia.

The problem with this account is that it mistakes the supporting actors for the stars. Religious nationalists have played a key role in the settlement saga—but as the fractious clients of Israel’s major parties, Labor and the Likud. Those parties, and their leaders, are the main characters in the drama.

Take that first kibbutz in the Golan Heights. Its founders were followers

8 WWW.Prospect.org Summer 2017

of Yitzhak Tabenkin, the octogenarian ideologue of the Ahdut Ha’avodah (Unity of Labor) Party, then an important faction of the Zionist left. Tabenkin saw rural communes, kibbutzim, as the means to build socialism from the bottom up. Tabenkin also saw the Jewish homeland—the Land of Israel—as extending well beyond the borders of pre-1948 Mandatory Palestine, which were the invention of European imperialists. The narrower borders of independent Israel were even less satisfying. The fighting had barely ended in June 1967 when Tabenkin began urging massive settlement in the newly conquered land.

One of Tabenkin’s disciples was Yigal Allon. After the war, Allon stunned his comrades when he proposed giving up the most populated parts of the West Bank. Allon thought this was necessary to avoid turning Israel into a binational state. At the same time, as a minister in Eshkol’s government, he aggressively pushed for settlement in areas he wanted to keep. He channeled ministry funds to the Golan kibbutz, and pushed for settlement in Hebron.

Allon’s lifelong rival, Defense Minister Moshe Dayan, advocated building Israeli towns in precisely the land that Allon wanted to relinquish. He proposed giving West Bank Arabs limited autonomy, or creating an Israeli-Jordanian condominium in that territory. Either way, the goal

Israeli Labor Party leaders (from left) Yitzhak Rabin, Golda Meir, Yigal Allon, Yeruham Meshel, and Shimon Peres, in Tel Aviv, June 15, 1977

was to maintain overall Israeli rule and allow settlement without giving citizenship to the Palestinians living there. Dayan’s younger ally, Shimon Peres, held those ideas as well.

Eshkol himself had two immediate priorities after the war in 1967: building Jewish neighborhoods in annexed East Jerusalem, and returning Jews to the handful of spots in the West Bank where they had lived before 1948, including Kfar Etzion. Porat and his religious nationalist friends weren’t overcoming Eshkol’s resistance; they were providing him with the warm bodies needed to carry out his goals.

Early in 1968, three left-of-center parties merged, bringing Eshkol, Allon, and Dayan all into the new Labor Party. The arguments within the party, and within the government it led, were over where to build settlements in occupied territory, not whether to do so. Eshkol, for the most part, agreed with Allon’s strategy. So did his Labor successors as prime minister, Golda Meir and Yitzhak Rabin.

Religious nationalists were just one source of recruits for settlement. The partnership between them and the government was sometimes strained by a public dispute—again, over where to settle. That’s what happened at Sebastia. One reason that Rabin compromised with Gush Emunim is that his own party was in danger of splitting. The Peres faction was closer to Gush Emunim than to Rabin.

ma x na sh / ap images

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In the big picture, though, settlement was a government project. The Allon Plan wasn’t a sidelight; it was Labor governments’ blueprint for settlement-building.

The clash over where to settle had an element of the absurd. Allon was convinced it was possible to reach peace with Jordan on the basis of his map. The religious nationalists wanted to prevent such an agreement by settling in areas that the government seemed willing to give up. Allon’s confidence remained completely undented by his 1968 contacts with Jordan’s King Hussein, the Arab leader most eager to make peace. At a secret meeting with the king in London, Allon presented his maps. Hussein rejected Allon’s idea and, to leave no doubt, followed up with a position paper saying that the proposal was “wholly unacceptable.”

That exchange has defined the real parameters of Israeli-Arab peace contacts ever since. The 1967 war convinced most Arab leaders—some immediately, some later—that Israel’s existence and its pre-1967 borders had to be accepted. King Hussein’s position that any border changes had to be based on a one-to-one exchange of land later became a principle in Israeli-­Palestinian negotiations.

Under those parameters, Labor’s settlements along the Jordan River were just as much a barrier to peace as Gush Emunim’s settlements elsewhere.

By the time Labor lost power to the Likud in 1977, it had established close to 80 settlements in the West Bank, Gaza, Sinai, and the Golan. The Likud built on that foundation, but built much faster. Its map, drawn by Ariel Sharon, deliberately created bands of settlements between Palestinian cities.

The result was that Palestinians lived in enclaves surrounded by settlements.

The Likud used two different kinds of settlements to draw Israelis into the West Bank. One was small, membersonly communities, many of them deep in occupied territory. These attracted the Orthodox nationalists who fit the public stereotype of settlers. The other was larger settlements with a classic suburban appeal: A young family could get more home for less money.

The “quality of life” suburbanites

Religious nationalists have played a key role in the settlement saga.

But in the big picture, settlement was a government project.

can’t be squeezed into the standard settler stereotype. Many are secular.

Some are ultra-Orthodox Jews, who don’t buy into the theology of religious nationalism. But with large families and small budgets, they find the cheap housing in settlements irresistible.

The two largest settlements are ultraOrthodox, and account for nearly a fifth of all settlers. For that matter, one-third of all Israelis in occupied territory live in the Jewish neighborhoods of annexed East Jerusalem. In mainstream Israeli discourse, they are almost never referred to as settlers.

What all these people have in common is that they live where they do because of fifty years of government policy.

Given the facts, what explains the staying power of the classic narrative of settlement as a religious project?

For one thing, first impressions have staying power. In this case, the first impressions were formed by news coverage in the early months and years of settlement. And the government then tried its best to minimize coverage.

The ruling parties of the Zionist left had a tradition going back to pre-independence days of quietly “establishing facts.” When it came to settlement, Labor’s motto could have been “Speak little and carry a big hoe.” Yisrael Galili, the settlement czar under prime ministers Meir and Rabin, was particularly obsessed with secrecy.

Being in power made acting quietly easier, especially in an era when the Israeli press was much tamer than it is today. Much of the account I’ve given here of Labor’s settlement effort is based on internal government documents that remained classified for 30 years or more. Hanan Porat, the supposed “first settler,” sincerely believed that he’d forced Eshkol’s hand, but wasn’t privy to the prime minister’s office files.

In contrast to the Labor governments, the young religious activists loved publicity and the glory of being rebels. They happily told their version of events. While researching settlement history, I found that most published accounts of the founding of Kfar Etzion could be traced back to Porat and a couple of his activist colleagues.

Quite naturally, confrontations

drew media coverage. So the face-off at Sebastia between Gush Emunim and the Rabin government filled the Israeli press in December 1975. Government settlement efforts elsewhere got less attention.

Another factor: The Kulturkampf between ideological secularism and Orthodoxy has always been an intensely emotional feature of Israeli politics. There’s a tendency to map the debate about settlement onto the religious-secular divide. This makes the political picture simpler—and deceptive. The original Labor advocates of settlement fade from sight. Even Likud leaders such as Sharon and Prime Minister Benjamin Netanyahu become enigmas.

There are also valid reasons for paying particular attention to religious settlers today, as long as you don’t ignore the rest. The extremists who have engaged in violence against Palestinians come from the religious camp. And if there is a peace agreement, the most extreme religious settlers pose the greatest risk of violent resistance to evacuation.

One dubious assumption that pervades Israeli politics, especially the center and center-left of the spectrum, is that the religious settlements would have to go in a two-state agreement with the Palestinians, while qualityof-life settlements, at least those in large “settlement blocs,” could stay put. After all, those settlement blocs are simply too big to evacuate, and don’t intrude too deeply into the West Bank. The reasoning here is that territorial concessions by the Palestinians, or territorial exchanges, would allow Israel to keep those blocs.

By this logic, the religious settlements are the obstacle to peace; the “consensus” settlement blocs are not.

It’s true that small religious settlements are scattered throughout the West Bank, far from the pre-1967 border. They stand in the way of any imaginable peace agreement. But what about the “quality of life” town of Ariel, home to 19,000 Israelis and the anchor of one of those supposed blocs?

For Israel to hold Ariel would mean annexing a finger of territory sticking deep into the West Bank. The town of

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Ma’ale Adumim, east of Jerusalem, has over 37,000 residents and is the core of another such bloc. But connecting it to Israel would mean annexing more land and creating another finger of territory that practically divides the West Bank in two.

The distinction between religious settlements and settlement blocs, then, repeats the error built into the Israeli political debate during the first years of the occupation. Back then, the self-deception was that Allon Plan settlements posed no impediment to peace. Jordan would just have to accept that Israel would keep parts of the West Bank. Now the myth is that Israel will be able to keep the blocs— which means annexing pieces of land outside its pre-1967 borders.

In reality, no one knows which settlements, if any, Israel would be able to retain under a peace agreement. Judging from the brief periods of serious final-status talks over the years, the baseline for new IsraeliPalestinian negotiations will be the Green Line. Negotiations could lead to small exchanges, with Israel giving up bits of its pre-1967 territory in return for equal-sized bits of the West Bank.

But even if that happens, the amount of land involved, and the number of settlements saved, is certain to fall far short of the expectations created by the talk of keeping the settlement blocs.

The narrative that focuses exclusively on religious settlement is more than an academic error. It stands in the way of Israel coming to terms with what happened in 1967 and after: Settling Israelis in occupied territory wasn’t imposed by a radical fringe. It was a national policy, for which the country’s major political camps—Labor as much as the Likud—share responsibility.

Even worse, the distorted telling of the past continues to distract attention from the hard political reality of today: Any home, built in any settlement, makes it harder to negotiate peace. It’s one more knot in the Great Entanglement.

Gershom Gorenberg is a senior correspondent for the Prospect. He is the author of The Accidental Empire: Israel and the Birth of the Settlements, 1967-1977, among other books.

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Silk Roadblock Yo-Yo Ma’s celebrated project for global understanding through music runs into Donald Trump’s sour note.

by Man uel Madrid

I

n 2000, the revered cellist Yo-Yo Ma embarked on a project that would today seem quixotic: uniting a group of musicians from every corner of the globe, with the goal of using music to transcend national and cultural boundaries. He couldn’t have imagined then how radical a statement the simple existence of the Silk Road Ensemble would soon become.

Silk Road joined together virtuoso musicians on instruments from different cultures that had never before been played together. These include the pipa and sheng from China, the Galician bagpipes, the oud from the Middle East, and more than a dozen others. Artistically, the result is astonishing. Culturally, the message is that appreciating “the music of strangers” (the title of a 2016 documentary about Silk Road) can be transformative.

But quite without intending to, Silk Road now finds itself as a cry of artistic protest against heightened xenophobia and irrational immigration policies. President Donald Trump’s self-proclaimed “travel ban,” despite being restrained by court decisions, continues to leave Silk Road musicians and countless others literally stranded in uncertainty.

Kayhan Kalhor, for one, doesn’t know if he will be allowed to return to his home in California.

A world-renowned player of the Persian kamancheh and one of Silk Road’s first members, Kalhor was born and raised in Iran, one of the countries included in both Trump’s original and revised executive orders.

Kalhor, who carries a Canadian passport, left the United States in June to visit his wife in Iran, a long-delayed homecoming. Kalhor, ironically, had been unable to return to Iran due to political problems with the country’s previous administration. In the Mideast, he stands for dangerous artistic freedom. In the United States, he is treated as a possible menace.

A few days after his U.S. departure, after flying from Iran to Turkey for a concert, Kalhor received a letter from the American embassy in Ankara. His green card was being revoked. No reason was provided in the letter.

“Normally, the United States would be home for me, but I’m stuck in Iran at the moment,” Kalhor told the Prospect on a call from his home in Tehran.

“I’m having two lives—I really don’t know what’s going to happen.”

Kalhor moved to America in 1992 after he graduated from the music program at Carleton University in Ottawa, Canada. Kalhor’s weapon is a bowed string instrument of delicacy and range, virtually unknown outside his native region and surrounding countries. The kamancheh is widely used in Iranian classical music. Immigrants like Kalhor who are able to demonstrate an “extraordinary ability” in science, business, or art can be granted an EB-1 visa, which allows for employment-based permanent residency. I ask Kalhor if he had received such a visa and whether he had used it in his application for his green card. “Yes,” he says—and then laughs. “But apparently that doesn’t count for anything.”

Another Silk Road member, the celebrated Syrian clarinetist Kinan Azmeh, knows the feeling. He was stuck in limbo after Trump’s initial executive order in January. Azmeh, who first arrived in New York to study at Juilliard only one week before the September 11 attacks, has lived in the United States for 16 years. He was granted a green card through his EB-1 visa in 2014.

Azmeh was in Beirut for a concert the night the executive order was signed, prohibiting Syrians and citizens of six other Muslim-majority countries from entering the United States. Azmeh, who has been unable to return to his apartment in Damascus for six years because of the country’s ongoing civil war, is still struck by the memory today. “I still find it

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hard to believe that one signature can change the lives of so many people,” Azmeh said in an email to the Prospect. “I continue to think that such a ban is an insult to humanity.”

Less than two months after being stranded in Beirut, Azmeh was treated to an unexpected dose of déjà vu.

He had been scheduled to attend and perform in England at the Skoll World Forum, an annual gathering for social entrepreneurs around the world, but could not get a visa to enter the country. The British government had outsourced visa processing to a forprofit company, VFS Global. The usual ability of performing artists to have recourse to senior diplomatic personnel in special situations was blocked— by private-sector bureaucracy.

Cristin Bagnall, Silk Road’s director of artistic and learning programs, pulled out all the stops.

“We’ve had challenges over the years, but in those cases the issue was complexity. I’ve never had one where everything was done correctly, and we still got turned away,” says Bagnall.

Cristina Pato, acclaimed player of the Galician bagpipes and longtime Silk Road member, had to draft an alternate program for the ensemble to play in case Azmeh couldn’t make it. He almost didn’t. It took the combined personal influence of Yo-Yo Ma and officials from the London School of Economics and Oxford University to get Azmeh there just in time for Silk Road’s performance, exhausted from having to revise last-minute travel plans.

“What I was used to, after [the 9/11 attacks], was a conversation around: OK, what hoops do I need to jump through?” says Bagnall. “Now, the word is that a Syrian is just going to be a problem.”

“There’s an acceptance that this is just how the world works now,” Bagnall adds. “I don’t know if I want to live in a world like that.”

Because of the complications inherent in carrying a Syrian passport, Azmeh was forced to miss a rehearsal and a panel discussion. The theme of the entire forum? “Fault Lines: Creating Common Ground.”

The irony of a cross-culture collaboration that uses music, a language without borders, being limited by borders is not

lost on those in Silk Road. And the travel ban isn’t dead yet. In June, the Trump administration asked the Supreme Court to reinstate the six-country ban, requesting an expedited hearing.

The nation’s highest court will likely make a decision sooner rather than later, according to Leah Litman, an assistant professor of law at University of California Irvine School of Law. “I think it is almost certain that the Supreme Court will act on the government’s [appeal] before the current term is over,” says Litman. The Supreme Court term is due to close at the end of June.

The residual effects of the ban, which has been blocked multiple times over the course of the last four months, can make life difficult for foreign musicians. With so much uncertainty surrounding the imminent Supreme Court ruling, booking artists like Kalhor and Azmeh has become a risky prospect.

Despite being blocked by court action, “the ban … still has a very strong impact on arts presenters,” says Matthew Covey, director of Tamizdat,

Silk Road musicians Kayhan Kalhor (top) and Kinan Azmeh (performing with Cristina Pato) have had their ability to travel freely impeded by American and British immigration authorities.

a nonprofit that does pro bono work for foreign artists struggling to enter the country. “If you’re a big venue ... you’re taking a major production risk to book an artist when you don’t know if there’s any way that they’re going to get here.”

Long before Trump, Ma testified before the House Committee on Government Reform in 2006, pleading with the government to ease the “extraordinarily high” barriers faced by foreign musicians. “I think dignity is the huge issue that we’re all talking about,” he told the committee.

As anti-immigrant sentiments heightened in the new millennium, Silk Road continued in its mission of connecting different cultures from around the world. Since 2014, ensemble members have made several trips to refugee camps in Lebanon and Jordan, bringing instruments and sharing their art with children displaced by the conflict in Syria.

“I think cross-cultural collaboration should be the norm and not the exception,” sccording to Azmeh, who, in addition to Lebanon and Jordan, has also visited refugee camps in Holland and Germany and has hosted various fund­raising concerts for Syrian refugees. “We forget that this is what humanity should be all about. In fact, it is our only way forward.”

The impetus of the Silk Road Ensemble flows directly against the undercurrents of xenophobia and nationalism that have pervaded the recent political backlashes in the United States and Europe.

“Hatred is a result of ignorance,” says Kalhor. “Culture can overcome that. Culture can introduce people to one another.”

The Music of Strangers documentary winds down where the present day begins: navigating the challenges of a world growing rapidly more exclusive.

Kalhor sits in front of the camera and relays his belief that the toxic rhetoric of the few will one day fade away in the minds of the many.

“Nobody remembers who was king when Beethoven lived,” Kalhor reminds the audience. “But culture stays. ...

Music stays.”

For the moment, Kalhor has no choice but to stay in Iran. What comes next, he doesn’t know.

Summer 2017 The American Prospect 11

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Ignoring Police Violence Baltimore officials accepted a voluntary settlement to reduce police abuses. Jeff Sessions wants to kill it.

by Bre n t i n M o c k

O

n April 7, U.S. District Judge James Bredar officially approved the consent agreement between the U.S. Justice Department and Baltimore’s mayor, city council, and police department to reform local law enforcement practices across the city. The judge did so over Attorney General Jeff Sessions’s pleas to the judge to refrain from signing the agreement until he had a chance to review it. Bredar dismissed Sessions’s request, saying that there was no legal justification for holding up a process that already had the full endorsement of all involved parties, including, apparently, Sessions’s own team.

Last August, when Barack Obama was still president, the Justice Department concluded, after a year-long probe, that Baltimore police’s “disproportionate enforcement against African Americans is suggestive of intentional discrimination.” Investigators came to this conclusion after realizing that the racial disparities they found were most extensive in those enforcement practices where officers had the most personal discretion, particularly with searches and arrests. Which meant police were choosing to discriminate against African Americans. They clearly needed to be reined in.

Baltimore was still reeling from the death of the young African American Freddie Gray, which happened while he was in police custody, and for which no police officer has been convicted of a crime. A consent decree is the instrument the Justice Department uses to correct structural and systemic problems found in recalcitrant police organizations—in this flagrant case, Baltimore. Under the consent agreement, the police department must, among other things, establish a new civilian oversight task force, to make the department more responsive to the public.

Such agreements, authorized by the

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1994 Violent Crime Control and Law Enforcement Act, are sought by the Justice Department only in extreme cases. Since the law’s passage, only about 70 investigations and 40 agreements have resulted, out of several thousand police departments in the United States.

Sessions was indignant about the judge’s decision to move forward with the Baltimore agreement, saying in a public statement: Today, a federal court entered a consent decree that will require the court and a highly-paid monitor to govern every detail of how the Baltimore Police Department functions for the foreseeable future. This decree was negotiated during a rushed process by the previous administration and signed only days before they left office. While the Department of Justice continues to fully support police reform in Baltimore, I have grave concerns that some provisions of this decree will reduce the lawful powers of the police department and result in a less safe city.

In fact, the time that elapsed between the Justice Department announcement of its investigation’s findings and the parties’ agreement on reforms—the consent decree—was roughly five months. This was hardly a rushed process. Maryland state lawmakers complained in November that the Obama administration was dragging its feet on getting the agreement signed. The fact that such agreements aren’t simply consummated in a matter of days or even weeks reflects a rigorous negotiation process that often involves multiple stakeholders, sometimes including police unions and community activists. In Ferguson, Missouri, where a police officer’s killing of the young African

There’s no evidence for Attorney General Sessions’s claim that Justice Department consent agreements on police abuses make cities less safe.

American Michael Brown invited a Justice Department investigation into the city’s police practices, it took ten months to settle a consent decree. In other cases, such agreements have taken years to finalize.

Sessions’s other contention, that the Baltimore consent decree would make the city less safe, is the standard response from people who believe that local police officers are over-regulated. According to research by criminal law professor Stephen Rushin, there is some truth to the idea that crime initially rises in cities where consent decree–imposed police reforms are issued. In examining 31 consent decree agreements made in various cities between 1994 and 2016, Rushin found a “statistically significant uptick in crime rates,” particularly property crimes, in the immediate years after reforms were installed. However, those upticks were temporary.

Rushin’s research also shows those crime rates diminish “to statistical insignificance over time.”

Meaning, cities go through some rough crime-related turbulence—or “growing pains,” as Rushin puts it—as police transition into the new systems of operations that come with consentdecree reform. As they get more settled in and comfortable with the new systems, they can police more effectively, and crime rates start to drop. It is a fact that crime has dropped precipitously in most cities since the first consent decree was signed for Pittsburgh’s police department in 1997.

Criminologists and Giuliani-ists have argued for years about whether the crime drop had more to do with the larger tough-on-crime provisions of the 1994 crime bill, or if it were other factors such as the burnout of the crack epidemic. But what can’t be disputed is that consent decrees did not lead to any permanent rise in crime in the bulk of cities where such federally enforced police reforms took hold.

The real problem Sessions seems to have with these instruments—which he has admitted publicly he hasn’t even read—is that they force police departments to be accountable to the public. It is true that consent decrees haven’t necessarily solved police brutality, or dealt a decisive blow to

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discriminatory policing in general.

A Washington Post study of consentdecree implementation found “mixed results,” in that many police departments under federal oversight actually experienced increased incidents of police using violent force against civilians. Noted police reform expert David Harris, who runs the “Criminal Injustice” podcast, stated in a recent New York Times article that some reforms from the 1997 Pittsburgh police consent decree “did not stick.”

Where consent decrees have been effective, though, is in forcing police departments to actually respond to and investigate citizen complaints.

Before this tool was available, police notoriously ignored anyone who even attempted to file a grievance against an officer who mistreated them. The failure to record complaints registered against police made it impossible to track which officers were most problematic. This continues to be a problem among police departments that are not subject to federal supervision, as often is revealed once a police

Our friends in blue? Police stand in formation as a curfew approaches in Baltimore.

department becomes the target of a Justice Department investigation.

For the Baltimore police investigation, the Justice Department wrote:

by discouraging officers from reporting misconduct and discouraging supervisors from sustaining allegations of it.

For years, the [Baltimore Police] Department’s process of investigating and adjudicating complaints has been plagued by systemic failures, including: discouraging individuals from filing complaints; poor investigative techniques; unnecessary delays; minimal review and supervision; and a persistent failure to discipline officers for misconduct, even in cases of repeated or egregious violations. BPD likewise fails to provide information about officer misconduct in a transparent manner or receive input on the accountability process from the community it serves. As a result, a cultural resistance to accountability has developed and been reinforced within the Department. This culture further undermines accountability

The Justice Department found similar failures to track or investigate complaints in their recent probes of Chicago, Ferguson, Cleveland, New Orleans, Miami, and Newark. In many of these same cities, African Americans were stopped, searched, frisked, questioned, and arrested at far higher rates than white civilians, even as police turned up less evidence of drugs, weapons, and criminal activity among their black targets. Reporting for The New Yorker and a PBS Frontline documentary on the Newark consent decree, Jelani Cobb wrote, “In place of reasonable suspicion, the police have adopted a standard in which all suspicion is reasonable.” But not apparently when suspicion is found within the Newark police department, where 99 percent of officer complaints were dismissed by the internal affairs office.

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Consent Decree,” issued by the Justice Department’s Office of Community Oriented Policing Services, there were three main reasons the city signed on. The first was that the city hired a reformminded police chief, Robert McNeilly, who was actually and finally serious about making changes to police culture. The other reasons:

When the Justice Department

inked its first consent decree deal in 1997 with Pittsburgh’s police department, one of that agreement’s main functions was developing a working complaint-intake system and a protocol system for investigating complaints. At the time, there was scant precedent out there from which to model remedies.

The one major case of departmentwide reform was the Los Angeles Police Department, which underwent policy transformations after the Rodney King beating, and the ensuing riots after King’s police attackers were acquitted. The Christopher Commission, which investigated the police, found that despite more than 3,000 allegations from the public of police using excessive force between 1986 and 1990, only 3 percent were actually sustained by the department.

Most major-city police departments had been around for at least 100 years by this point, but it wasn’t until this Christopher Commission took off— prompted by the savage beating of an African American—that departments were made to finally get serious about acting like responsible and accountable organizations.

Before Pittsburgh entered into its consent decree in 1997, it was already under intense scrutiny from the local NAACP and ACLU chapters, which were engaged in a massive probe into rampant and unpunished police misconduct throughout the department.

The civil rights organizations were gathering testimonies from hundreds

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of people across the city, mostly African Americans, which they used to file a lawsuit against the police department in 1996.

“What we saw was an environment where police officers felt like they could do anything they wanted, and it was often demonstrated in basic rudeness and unprofessionalism,” says Witold “Vic” Walczak, legal director for ACLU of Pennsylvania, who helped lead the lawsuit effort against the Pittsburgh police.

Walczak explained to me how his lawyers were granted a court order to look through the police department’s internal affairs files for discovery, but were dismayed to find that those files weren’t archived or catalogued in any kind of organized format. In going through them, Walczak’s investigators turned up numerous cases of police officers with dozens of complaints attached to their names, most of them dismissed or denied for trivial reasons. The ACLU ended up halting its lawsuit when the Justice Department took over in 1996, and as a result of the consent decree, the police department was forced to get its affairs in order.

“It forced Pittsburgh [police] to adopt good management practices, and that’s all these consent decrees are: good management practices, which unfortunately most police departments don’t have,” says Walczak.

According to a 2005 report, “Federal Intervention in Local Policing: Pittsburgh’s Experience with a

A long struggle for reform: Demonstrators outside of Baltimore City Hall after a mistrial was declared in the manslaughter trial of one of the police officers charged with the death of Freddie Gray, December 16, 2015

[C]ity officials realized that police record-keeping was so poor that they couldn’t adequately defend the police against the allegations. Finally, the changes the federal government was demanding would include a new database system that, among other benefits, would allow the city to produce statistics that could refute future critics of police conduct and show that police were not targeting minorities disproportionately.

The Pittsburgh Bureau of Police dates to 1857, but it took 140 years for its leaders to figure out that keeping a record of police conduct and complaints might actually protect them.

However, police unions have historically only really been concerned with protecting police officers from having to answer to the public. Additional research from Stephen Rushin shows that Pittsburgh was among a small group of federal consent-decree cases where reform efforts were considerably hampered by the collective-bargaining agreements cities signed with police unions.

“In Pittsburgh, the union contract has prevented investigators from considering all complaints because of a clause that establishes a ninety-day statute of limitations on civilian-complaint investigations,” wrote Rushin in his study of police union contracts published in the Duke Law Journal in March 2017. The clash with the union in Pittsburgh perhaps could have been avoided, though. As the “Federal Intervention in Local Policing” report lays out, Justice Department investigators did not interview union

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The largest section in Baltimore’s 227-page consent decree agreement focuses on misconduct investigations and police discipline. The department is now compelled to respond to all civilian complaints and investigate them to completion in a timely manner. They are required to organize collected data around the complaints in order to better identify which officers are getting flagged the most and for what reasons. In its execution, Baltimore has the advantage of learning what has and hasn’t worked in the reform systems put in place in dozens of other consent-decree police departments that came before it.

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officials in their probe, and perhaps because of that, the union sat out consent-decree negotiations. Getting at least some union buy-in—to the extent that was possible—might have helped make consent-decree operations run a little smoother.

With the Baltimore consent decree, Justice Department officials told the local public radio station that it solicited and included police union input for the final agreement (though union leadership denies this). Still, the Baltimore police union continues to undermine the consent-decree process, and supported Sessions’s attempt to delay its implementation.

Meanwhile, the Justice Department’s findings regarding police misconduct complaints were, as in the Pittsburgh case 20 years ago, as much about improving the department’s management practices as they were about accountability.

In the Baltimore case, the Justice Department found that the BPD failed to record vital information regarding officers’ stops and searches of pedestrians and drivers, and that there was no integrated data system to track officers’ use of force against civilians.

Investigators learned that the BPD maintains “232 separate databases to store information, most of which cannot link to each other.” On top of that, the police supervisors had no way of tracking things like how frequently police officers searched the people they stopped, or how often their arrests led to dismissed charges. So there’s been no way to account for whether a civilian’s complaint against an officer might have some additional merit based on that officer’s track record.

“Indeed, our review did not identify a single stop, search, or arrest that a front line supervisor found to violate constitutional standards—even though numerous incident reports for these activities describe facially unlawful police action,” reads the Justice Department’s investigation report. “The Department sustained only one excessive force complaint that came from internal channels between 2010 and 2015, despite the over 2,800 uses of force that BPD recorded during that time period.”

If there’s no way to analyze and cross-check data, then there’s no way to ascertain which police officers are regularly flouting the law with impunity. Under the new consent decree, the police department has agreed to maintain a centralized electronic tracking system for all misconduct complaints and police activity in the streets. Also, the public will be allowed to access and track the status of misconduct investigations.

Such measures might allow community members to muster some level of confidence that police are actually following up on civilian grievances, which might actually start to establish some trust in the police department, particularly within black communities. As it stands, that kind of confidence is woefully low. In a recent Urban Institute survey of people living in communities with the highest levels of violence and police presence, only 28.3 percent said police were responsive to their concerns. Less than 25 percent said that their police department holds officers accountable for misconduct.

Consent decrees are among the few instruments out there that force police departments to confront those perceptions, and to do something about it. One could argue that consent decrees are even influencing police departments that aren’t subject to federal interventions. There are several cases in recent years where police officers, caught on camera killing or otherwise exercising violence on civilians, are being suspended without pay or fired, sometimes before they’ve even been convicted of anything— almost as an acknowledgment that police officers likely won’t be held accountable in courts even if there’s evidence of wrongdoing. In Cleveland, the police officer who killed 12-year-old Tamir Rice was fired despite a grand jury declining to bring charges against him. A police officer who recently killed an unarmed black teenager in Austin was also fired.

Police leaders seem to be terminating violent officers perhaps as a way to avoid triggering a federal review of their departments’ practices, and not to show black communities that they are serious about accountability.

“The importance of the consent decree is that you’re dealing with a closed system—law enforcement is by and large not a transparent agency,” says Walczak. “And given what the Supreme Court has done to hamstring civil rights and private-party litigation over the last 50 years, there are a lot of constraints on groups like the ACLU being able to use the courts to fix this problem. … Section 14141 [of the 1994 Violent Crime law] gives DOJ the tools to do this work, and they are the only ones who can do it effectively.”

The Justice Department investigation found that the Baltimore police department failed to record information on officer stops and searches, or use of force.

Sessions, for his part, has been more inclined to cater to police forces than to improve policing practices.

After Sessions met with leaders of the National Association of Police Organizations, which represents rankand-file officers, on May 4, NAPO’s newsletter criticized the Obama administration’s championing of accountability measures:

Under the previous administration, the Civil Rights Division has made the demonization and prosecution of law enforcement officers who have used force one of its top priorities, which has alienated the law enforcement community and seriously eroded any trust between law enforcement and the DOJ. The Civil Rights Division must view law enforcement as its ally in protecting the civil rights of our nation’s citizens. The Attorney General shared this concern and he has already made headway on this issue with his call for the review of all consent decrees and memorandums, amongst other actions.

He does not feel it is the federal government’s job to dictate how state and local law enforcement agencies should be run.

The Violent Crime Control and Law Enforcement Act states otherwise.

Right now, it looks like Sessions is determined to undermine a law he has a duty to enforce.

Brentin Mock is a staff writer at CityLab, where he writes about civil rights and justice matters.

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The Wages of Neglect Outside America’s big cities, investment is scarce; jobs are fewer; lifespans, shorter. And working-class white voters have turned their backs on the Democrats. Here’s what progressives can do to remedy these economic and political crises.

After roughly 140 years of metal production at its Bethlehem, Pennsylvania, plant, Bethlehem Steel Corporation ceased operations in 1995.

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Place Matters

As in the 1930s, progressives need economic development strategies for the left-behind regions of the country.

By Haro ld M ey erson

j. zehnder / dreamstime

D

onald Trump’s election may have stunned us all, but it shouldn’t have. There were plenty of signals that regions of the country on whose support Democrats had long counted were in economic collapse. And like most of us, the Democrats failed to see them.

In May 2016, the Economic Innovation Group (EIG) released a study—“The New Map of Economic Growth and Recovery”—that made no discernible impact on progressive discourse or Democrats’ strategy. But, like the Angus Deaton and Anne Case studies on rising death rates within the white working class—which did enter progressive discourse but also had no impact on Democrats’ strategy—it sure as hell should have.

The EIG’s study strikes me as the necessary corollary to the Deaton-Case documentation of the rise in “deaths of despair” within the white working class. What it shows, simply, is that businesses and employment opportunities are concentrated as never before in a shrinking number of metropolises, and that the economies of Everyplace Else in America have all but hollowed out.

This hollowing is a development of the past 25 years, as, correspondingly, is the clustering of business in major cities. In the economic recovery of 1992 to 1996, the share of new business establishments created in counties with more than one million residents was just 13 percent. But that share rose to 29 percent in the recovery of 2002 to 2006, and to 58 percent in the recovery of 2010 to 2014.

In counties of 100,000 to 500,000 residents, the share of new businesses was 39 percent in the 1992–1996 recovery, which slumped to 36 percent in the 2002–2006 recovery, and to 19 percent in the 2010–2014 recovery.

And in counties with fewer than 100,000 residents, the share of new businesses created in the 1992–1996 recovery was a robust 32 percent, which tumbled to 15 percent in the 2002–2006 recovery, and collapsed to a flat zero percent in the 2010–2014 recovery.

If you live outside the big cities, what’s not to despair?

The geographic trend in net job creation, of course, tracks the trend in business creation. In the 1992–1996

recovery, counties with fewer than 100,000 residents accounted for 27 percent of the net increase in the nation’s jobs. In the 2010–2014 recovery, they accounted for only one-third of that—just 9 percent of the new jobs. Conversely, in the 1992–1996 recovery, counties with more than one million residents accounted for just 16 percent of the new jobs created, while in the 2010 –2014 recovery, they accounted for 41 percent.

It should come as no great surprise, then, that when Working America surveyed the vote in five key swing states in the 2016 election—Florida, North Carolina, Ohio, Pennsylvania, and Wisconsin—it found that the counties in which Hillary Clinton’s share of the vote declined most from that of Barack Obama in 2012 were those states’ rural counties. It also found that the economic metric that most set apart those counties from their urban counterparts was labor force participation: The rates were far lower in rural areas than in major cities.

While the Clinton campaign failed to recognize that these new metro-rural polarities could swing the election, the Trump campaign clearly did. His message resonated in places where work had disappeared; the rural locations of many of his campaign rallies, while bewildering to much of the press corps, actually reflected very acute targeting.

Racist and cultural demagogy clearly played to Trump’s advantage, as they have to Republicans’ advantage at least as far back as the 1960s. But the economic politics of nonmetropolitan decline should have presented the Democrats with a significant opportunity. What was the flight of capital from nonmetropolitan America if not a massive market failure? Nothing under the laissez-faire sun was going to entice enterprise back to the heartland it had abandoned. This regional disparity cried out for the kind of public-sector development policy at which Democrats once excelled.

Not only did the Democrats fail to come up with such a policy; they failed even to see the problem. Over the decades, their ability simply to perceive nonmetropolitan America’s decay had waned—as the unions that once had represented its factory workers dwindled and disappeared,

Summer 2017 The American Prospect 17

Main Street Blues: Storefront in Welch, West Virginia, a mining town that knows all too well about the absence of investment in nonmetropolitan America

outside metro America remain very real. Republicans aren’t going to implement any policies that will revive its economy; any for-profit infrastructure projects they may support will steer clear of counties whose residents can’t afford to drive on toll roads. Regions that were home to zero percent of the start-ups in the last recovery aren’t going to get much private-sector investment in infrastructure, or anything else. The economic revival of red America, if it happens at all, will be the work of the blue party—provided the Democrats can commit themselves as thoughtfully and wholeheartedly to a 21st-century version of the public investment that once defined them.

In The New Dealers, a brilliant and unjustly neglected 1993 account of Franklin Roosevelt’s presidency, historian Jordan Schwarz chronicles an often downplayed focus of the New Deal: its investment in the public works and regional development policies that would help raise the economies of the South and the West to nearer the national

18 WWW.Prospect.org Summer 2017

norm. The Tennessee Valley Authority, the mega-hydroelectric projects in the West, and the Rural Electrification Administration brought power and higher living standards to the nation’s backwaters. New financial regulations strengthened regional banks and held Wall Street in check.

New Dealers like Jerome Frank and Beardsley Ruml floated proposals for regional investment banks to bolster particularly hard-hit parts of the country. Their proposals weren’t adopted, but defense spending in the buildup to and prosecution of World War II rode to the economy’s rescue. And straight through the end of the Cold War, the arms economy served as the nation’s public investment/economic development program. (So did President Dwight Eisenhower’s interstate highway system, which was at least partly conceived as a necessary component of the defense infrastructure.) Presidents had their annual Pentagon budgets approved by members of Congress who never failed to include funding for defense plants and bases in their districts, while the Reagan administration made a special point of directing that spending to its electoral base in Sun Belt states.

But the Cold War’s end brought with it an end to the military Keynesianism that had propped up much of the nation’s economy, most especially in nonmetropolitan areas. The conflicts that engage the Pentagon today don’t require a Cold War–level of manufacturing (nor does today’s semi-robotized manufacturing require as many people as it used to).

The end of the one post-FDR public policy that had steered public investment to the nation’s nonmetropolitan regions was only one reason why the economy outside big cities tanked. The financial pressure on manufacturers to move factories abroad, where labor was cheap, also played a role, as did the increasing robotization of factory work. The dominant industries of the 21st century, finance and high-tech, clustered in cities, and as those cities grew, their low-wage service and retail-sector workforces grew with them.

This urban clustering of enterprise isn’t a uniquely American phenomenon. In the United Kingdom 30 years ago, London accounted for 15 percent of the U.K.’s gross domestic product. Today the capital accounts for a full 25 percent. But this kind of clustering is peculiar to Anglo-American capitalism, in which finance has driven manufacturing offshore, in which economic planning is shunned, and in which the Reagan-Thatcher infatuation with laissez-faire economics has yet to be fully dispelled.

Berlin, we should note, accounts for a measly 4 percent of Germany’s GDP. That’s not just because Berlin at first glance seems a city of grad students. It’s also, as Bob Kuttner demonstrates elsewhere in this issue, because West Germany, partly at

d av i d g o l d m a n / a p i m a g e s

as their elected representatives in those regions grew fewer, and as the centers of their electoral support increasingly clustered in big cities. Some progressive Democrats from heartland states implored the national party to pay attention, but the presidential party wasn’t listening.

The poverty that Democrats were attuned to was urban, and they’ve sought to address that poverty with higher minimum wages, paid sick days, enhanced overtime regulations, and (completely unsuccessfully) labor law reform.

But outside the cities? Raising the minimum wage is good in itself, but doesn’t do much for a town where work itself has vanished.

And yet, the political opportunities for the Democrats

The Wages of Neglect

the urging of its postwar U.S. occupiers (a number of them veterans of the New Deal), dispersed its manufacturing across the country. It also consistently resisted developing the kind of mega-banks that came to dominate public policy and eviscerate manufacturing in the United States and the United Kingdom in favor of regional development banks.

If the Democrats are at all serious about developing a 50-state political strategy, they need a 50-state economic development strategy.

That’s no easy challenge, since many of the jobs Democrats once knew how to create aren’t coming back. Anyone who’s spent time in a modern factory knows that machinery now does a large and growing share of the work that humans once performed. “Thirty years ago, it took ten hours per worker to produce one ton of steel,” John Surma, then the CEO of U.S. Steel, told me in 2011.

“Today, it takes two hours”—and doubtless less than that today. Construction has also become a good deal more capital-intensive than it was in the heyday of the WPA , most of whose workers used picks and shovels. “The work itself has changed since the ’30s—or the ’60s,” Robert Balgenorth, then the president of the AFL-CIO’s Building and Construction Trades Council of California, told me several years ago. In the 1960s, Balgenorth was an electrician working on building schools. “It took 15 to 20 electricians to build a high school then,” he told me.

“It takes four or five today. Stuff that we had to assemble then comes pre-assembled today.” Heavy equipment has changed as well. “You can haul more in bigger trucks today,” he said. “You need fewer drivers.”

That said, the decay of the nation’s infrastructure—from Flint’s water system to LaGuardia Airport—is one of the very few aspects of the American condition acknowledged at all points on the political spectrum. The sheer volume of the work required to restore that infrastructure, much less create the wind turbines and energy-efficient buildings of tomorrow, means that even capital-intensive construction work could still employ millions.

Trump’s barely perfunctory infrastructure proposal is just the latest version of a venerable libertarian fantasy: Have the private sector do it. As Eileen Appelbaum and Rosemary Batt recount (page 62), Trump plans to turn over infrastructure to tax-subsidized private equity investors.

Such is the condition of nonmetropolitan America, however, that even its Republican representatives have voiced apprehensions about turning over the infrastructure to the private sector. Republican Senators Jerry Moran of Kansas, John Thune of South Dakota, and Roger Wicker of Mississippi have expressed fears that Trump’s plan to privatize air traffic control could lead to the shutdown of

small-town airports—completing the devastation wrought by airline deregulation. GOP Senators John Barrasso of Wyoming and Shelley Moore Capito of West Virginia have said that their constituents might not generate enough business to support new highways if they were privately funded toll roads.

For years, a number of progressive Democratic legislators, led by Connecticut Representative Rosa DeLauro, have proposed establishing a national infrastructure bank—a proposal that never went anywhere with GOP control of Congress, and won only belated and lukewarm support from the Obama administration. Other Democratic officials have periodically advanced proposals for state banks, both to fund infrastructure and to provide credit to small businesses; Phil Murphy, the current Democratic nominee for governor of New Jersey, has made such a proposal the centerpiece of his campaign. The plan turned Murphy’s main political liability—his career at Goldman Sachs—into something of an asset (OK, at least he may know how to run a bank).

For Democrats to actually make a politically winning issue of their commitment to infrastructure and the jobs it creates, however, they need to do what California Democrats have been doing for years: lay out specific infrastructure plans for each state, and if need be for each district and each community. In the 1970s and 1980s, Californians were presented with ballot measures that would authorize public bonding to create infrastructure projects; they almost always failed. Once the authors of such proposals wised up and began promoting ballot measures that specified which highways would be built where, and which upgraded, and which districts would get more schools and more parks, the ballot measures began to pass. Elsewhere in this issue (page 68), David Dayen tells the story of how voters in L.A. County have twice voted by more than the required two-thirds margin to raise their sales tax to pay for a new $120 billion transit plan that stipulated which rail lines and roads and even bike paths would be built, and when, and where.

The clear majority of residents of nonmetropolitan America have neither the will nor wallet to vote increases to their local taxes, of course. But that’s all the more reason why Democrats should canvass residents and experts in as many states and districts as they can to devise specific proposals to build what those communities need—to be paid for by progressively funded federal dollars. Those kinds of specific, necessary local improvements should be part of the kind of national project that the Center for American Progress called for this May: a Marshall Plan for America. CAP ’s report proposed establishing a new version of the WPA that could “have a target of maintaining the employment rate for prime-age workers without a

A 50-state political operation

won’t Help

the Democrats absent 50 state economic development plans.

Summer 2017 The American Prospect 19

PROVOCATIVE, PROGRESSIVE

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The Wages of Neglect

bachelor’s degree at the 2000 level of 79 percent. Currently, this would require the creation of 4.4 million jobs.” With the jobs paying $15 an hour, CAP estimates the yearly cost would come to $158 billion—a lot of money, but nothing that an increase in the capital gains tax couldn’t cover.

(And a survey this May from the Public Religion Research Institute showed that 58 percent of working-class whites favored raising taxes on the rich.)

Elsewhere in this issue (page 34), Guy Molyneux argues that those white working-class voters whose support could swing from Republicans to Democrats harbor a profound mistrust and loathing for politicians—but not for equitable government programs that they believe will benefit their communities. Winning their electoral support will require Democratic candidates in districts where such voters predominate not only to demonstrate their independence from the political and financial establishments, but also to run on plausible local or regional economic development plans.

Many of the party’s existing economic priorities play well in both spheres of underdevelopment, the urban and the rural, and among groups found in both places, such as millennials. Reducing costs or eliminating tuition at public colleges and universities is popular everywhere.

The public’s level of support for Medicaid, which congressional Republicans’ proposed ACA repeal seeks to slash, is overwhelming: A Quinnipiac Poll from March found just 22 percent of Americans favored cuts to Medicaid while 74 percent opposed them; among white working-class respondents, 29 percent favored the cuts and 66 percent didn’t. The declining incomes of white workers and the rising eligibility thresholds of the ACA have combined to increase the number of Medicaid recipients within the white working class—a development that Paul Ryan and his ilk failed to anticipate.

None of this is to deny that the Democrats’ commitments to racial and gender equity, their support for immigrant and LGBTQ rights, and their general affinity for cultural pluralism all make them toxic to large swaths of the white working class. Worse yet, the economic and demographic isolation of nonmetropolitan America is compounded by an informational isolation, as the various news outlets that bombard them increasingly convey fake news. But unless and until the Democrats devise compelling programs for these Americans—programs that not only help revive their economy but make clear that they are as much a part of the Democrats’ vision of America as any other group—Democrats’ electoral prospects in district after district and state after state will remain dim. And the Democrats’ ability to deliver for their base will continue to be thwarted by basic electoral arithmetic.

Just as Democrats speak to preponderantly urban and

largely minority service-sector workers not just with national programs but also with their support for raising the local minimum wage and kindred measures, they need to speak to preponderantly nonmetropolitan and largely white working-class voters with policies for nonmetropolitan development and job creation. Donald Trump won the White House on vague promises to do that, fool’s gold though they’re turning out to be. Now, the Democrats need to deliver the real thing.

They did once. In 1959, as he was beginning his notquite-public campaign for the presidency, Lyndon Johnson traveled to Hyde Park to speak about his political hero, Franklin Roosevelt. Here is what Johnson said:

He was a New Yorker and an Easterner. But one of the first tasks which he set himself was the raising up of the South, economic problem number one, still suffering from the destruction of capital in the War Between the States. He was an Easterner and a New Yorker, but the second important task he set himself was to bring to the West the electric power, the rural electrification, and the water which it needed to grow.

And the West and the South will forever love him— and follow where he led.

When Democrats Delivered: Campaigning (successfully) for re-election in 1940, Franklin Roosevelt dedicates the Chickamauga Dam, part of the Tennessee Valley Authority that brought electric power to the South.

That love had begun to fade, of course, even before Johnson spoke, but his appreciation of Roosevelt’s trans­ regional empathy and economic and political smarts nonetheless rings true today. If they want to win more working-class votes, white and nonwhite, and actually build the more equitable economy they seek, the Democrats could use some of that empathy, and a lot of those smarts.

Summer 2017 The American Prospect 21

The Democrats’ ‘Working-Class’ Problem It’s not only with whites. It reaches well into the party’s base.

By Stan ley B. G reenber g

T

he road to a sustainable Democratic majority—nationally, locally, and in the states— must include much higher Democratic performance with white working-class voters (those without a four-year degree). Nearly every group in the progressive infrastructure is busy figuring out how Democrats can get back to the level of support they reached with President Obama’s 2012 victory. That is a pretty modest target, however, given the scale of Democratic losses. It underestimates the scope of the problem and, ironically, the opportunity.

The Democrats don’t have a “white working-class” problem. They have a “working-class” problem, which progressives have been reluctant to address honestly or boldly. The fact is that Democrats have lost support with all workingclass voters across the electorate, including the Rising American Electorate of minorities, unmarried women, and millennials. This decline contributed mightily to the Democrats’ losses in the states and Congress and to the election of Donald Trump.

Fortunately, Democrats have the opportunity to consolidate, engage, and perform much better with all of working America. I say “opportunity” advisedly, because better performance requires Democrats to embrace dramatically bolder economic policies and to attack a political economy that works for the rich, big corporations, and the cultural elites, but not for average Americans.

Bernie Sanders’s “revolution” and attack on big money was much closer to hitting the mark than was Hillary Clinton’s message, and he won millennials and white workingclass voters in the primary. It is not surprising that white working-class voters then went for Trump, and that some Sanders voters went for the Green Party in the general election, but the Democrats’ working-class problem goes way beyond what Sanders broached.

What is the Democrats’ working-class problem?

Working-class Americans pulled back from Democrats in this last period of Democratic governance because of President Obama’s insistence on heralding economic progress and the bailout of the irresponsible elites, while ordinary

22 WWW.Prospect.org Summer 2017

people’s incomes crashed and they continued to struggle financially. They also pulled back because of the Democrats’ seeming embrace of multinational trade agreements that have cost American jobs. The Democrats have moved from seeking to manage and champion the nation’s growing immigrant diversity to seeming to champion immigrant rights over American citizens’. Instinctively and not surprisingly, the Democrats embraced the liberal values of America’s dynamic and best-educated metropolitan areas, seeming not to respect the values or economic stress of older voters in small-town and rural America. Finally, the Democrats also missed the economic stress and social problems in the cities themselves and in working-class suburbs.

These are big structural challenges, but we have plenty of evidence that they can be addressed and that Democrats can speak powerfully to these working-class voters about them.

The core problem is President Obama’s handling of the economy. Confronting this problem won’t make me popu-

lar. The president and the Democrats heroically rescued America and the global economy, restored the soundness of the financial system, and managed the economy back to a full recovery. But incomes for most Americans fell during this period and the top 1 percent took all of the income gains of the recovery—a subject that mainstream Democrats barely mentioned and did not fight to address. The president of the United States was the main messenger for the Democrats, and his consistent economic message to the country—from one year after the crash through last year’s presidential election—was this: The recession has been transformed into a dependable recovery, our economy is creating jobs, and we are on the right track, but the Republicans drove our economy “into the ditch” and are doing everything possible to obstruct our progress. He closed the 2016 election with this appeal: We created 15 million new jobs, incomes are rising, poverty is falling, and you must get out and vote to “build on our progress.”

Closely bound up with the “progress” narrative was the bailout of the Wall Street banks with taxpayer money.

Wall Street excess took the country’s economy off a cliff, and Democrats rightly came to the nation’s rescue by pass-

The Wages of Neglect

ing the Troubled Asset Relief Program. But the bailout of the banks was, and remains, a searing event in American consciousness—and one inextricably linked to Democratic governance. While the bailout came at the urging of President Bush and his Treasury secretary, it was embraced by then-candidate Obama and passed with Democratic votes in the House and Senate. It was under President Obama that the government signed off on the executive bonuses for TARP recipients and under Obama that no executive was punished for criminal malfeasance. It should come as no surprise, then, that one year after the Housing and Economic Recovery Act’s passage, the majority of voters thought the big banks, not the middle class, were the main beneficiaries—and they were damn angry about it too.

That mix of heralding “progress” while bailing out those responsible for the crisis and the real crash in incomes for working Americans was a fatal brew for Democrats. It was evident in the double-digit drop in Obama’s approval ratings in Maine, Michigan, Minnesota, New Hampshire, and Pennsylvania in 2010. (Note this is 2010, not 2016.) His approval rating rebounded to nearly 50 percent in most of those states in 2012, but it fell sharply in 2014 in Florida, North Carolina, New Hampshire, Maine, Wisconsin, Ohio, Michigan, and Minnesota. Obama’s approval rating the year before the 2016 election hovered between 40 percent and 42 percent in Iowa, Maine, New Hampshire, and Ohio.

Street’s undimmed influence. They knew these jobs paid dramatically less. They saw the government rescue the big banks but do next to nothing about the home foreclosures and lost wealth in their Hispanic and black communities.

That is why about 40 percent of the Rising American Electorate disapproved of how the president was doing his job in both 2010 and 2014. Every segment of this progressive base underperformed on vote and turnout in 2010, and their disengagement in 2014 gave us the lowest off-year turnout in any election since World War II and with it, another Republican wave.

The electoral consequences were particularly acute among millennials. Weighed down by student debt and

Obama Approval in key states 2009 2010 2011 2012 2013 2014 2015

Florida 57% 46% 43% 48% 47% 42% 46%

Iowa 57% 47% 46% 49% 42% 37% 41%

Maine 59% 47% 47% 50% 45% 45% 41%

Michigan 60% 49% 48% 51% 48% 43% 47%

Minnesota 61% 48% 48% 50% 48% 45% 47%

New Hampshire 55% 41% 39% 46% 44% 39% 40% North Carolina 55% 47% 44% 47% 43% 41% 44% Ohio 55% 47% 42% 47% 42% 39% 42% Pennsylvania 57% 46% 45% 47% 43% 42% 43% Wisconsin 58% 48% 47% 50% 46% 42% 45%

steve helber / ap images

Source: Gallup

These are the states that figured in the well-told retreat of white working-class voters from the Democrats. But introspection among progressives—including those at the White House—failed to see the retreat of hard-pressed working-class voters in the new American majority of minorities, unmarried women, and millennials, most of whom do not have a four-year degree. While the president was calling on these base voters to come to the polls to defend the progress we’d presumably made, these voters, too, were angry about the claims of jobs and about Wall

the weak job market, millennials pulled back in 2010 and importantly, did not come back in 2012 when Barack Obama was on the ballot. Their vote share was down 2 points from 2008 (from 17 percent to 15 percent), and their level of support for Obama was down 9 points (from 66 percent to 60 percent). Mitt Romney won the white millennials by 7 points.

Democrats’ unified control of government under Obama and the Democratic Congress began losing working-class Americans’ support right from the outset, but progressives never collectively paused to take stock of why.

Working-Class Hero: Bernie Sanders sounded themes that resonated with white working-class voters and the young.

Trade is a key issue that has separated Democrats from many working-class voters. That separation grew wider

with Obama’s battle for the Trans-Pacific Partnership and with Trump making his opposition to it central to his vow to represent “the forgotten Americans.”

In 2015, more than 70 percent of Democrats in the Senate (33 of 46) and 85 percent of Democrats in the House

Summer 2017 The American Prospect 23

Partisans flip on nafta: Democrats and Republicans rate their feelings (100 = very favorable, 0 = very unfavorable).

60 50 40

56.0 48.5 48.1

48.4

48.4 44.3

45.6

47.7

46.9

40.7 42.2

30

54.3 54.7

41.5

40.1

40.1

41.8

■ republican ■ democrat

35.9 30.8

’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 Source: Democracy corps survey of national likely voters for Public Citizen, October 2016

With Trump centering his campaign on bringing back American jobs by withdrawing from and renegotiating trade agreements, the Republican base voters emerged as those most opposed to multinational trade agreements.

Despite Obama’s efforts, Democratic voters also shifted

24 WWW.Prospect.org Summer 2017

against trade in principle and the TPP specifically over the course of the campaign—including big shifts among millennials (a 22-point shift in margin), white unmarried women (21-point margin shift), all unmarried women (15 points), and minority voters (9 points). Yet Hillary Clinton went silent on the TPP in the closing weeks of her campaign, even as Obama and his administration stumped publicly for its enactment, though there was virtually no chance a lame-duck Congress would pass it. That magnified the Democrats’ working America problem, and perhaps decisively so in the Rust Belt.

Immigrants today strengthen our country because of their hard work and talents.

Immigrants today are a burden on our country because they take away our jobs, housing, and healthcare.

Percentage who agree:

Percentage who agree:

68% 58% 45%

40%

40%

college white men

non-college white women

non-college white men

college white women

college white men

non-college white women

29%

22% college white women

42%

non-college white men

college white women

college white men

non-college white women

non-college white men

(160 of 188) had voted against giving Obama fast-track authority to negotiate the TPP. The party’s presidential candidates were strongly opposed to corporate lobbyists dominating the drafting of the TPP and to major provisions that would have granted foreign corporations the Do you support or right to sue for damages over U.S. consumer and envioppose the Trans-Pacific ronmental protections. But working-class Americans Partnership? clearly associate Democrats with support for multiPercentage who Oppose: national trade agreements—even though they are passed with mostly Republican votes in Congress— 62% because Democratic presidents have been their main 50% 48% champions over the last 25 years. NAFTA was enacted 31% under President Bill Clinton (with my support, as I was then the president’s pollster, and over the very strong objections of my wife, Representative Rosa DeLauro). Obama made passage of the TPP a consuming priority at the end of his presidency.

Support for trade and trade agreements is greatest on the West and East Coasts, among Hispanics and Source: Democracy corps survey of national likely voters for Public Citizen, Asians, and most importantly, among college graduOctober 2016 ates, particularly in the big cities where Democrats govern. But the white working class, who live amid the remains of the manufacturing sector in the industrial Midwest, strongly oppose these trade agreements with increasing ferocity, particularly the men who were disproportionately employed in manufacturing.

The Obama presidency produced a partisan realignment on trade, reinforcing the class and gender bases of the two parties, that will disrupt the politics of both, if it hasn’t already. Before 2008, Republicans were more supportive of NAFTA than Democrats, but at the end of Obama’s presidency, GOP support for NAFTA collapsed, pushed off the cliff by Trump. Democrats, on the other hand, became more favorably disposed to NAFTA .

Source: Democracy Corps election night survey of 2016 voters for wvwvaf & roosevelt institute

Immigration is the next critical element of the Democrats’ working-class challenge. Since 1990, the world

has watched a massive increase in global migration, and, remarkably, one in five of these migrants lives in the United States. The number of immigrants in the United States doubled from 20 million to 46 million during this time, and our largest metropolitan areas are being shaped by accelerating migration and increasing numbers of foreignborn people living there. More than three million, roughly 37 percent, of New York City residents were born outside of the United States; 60 percent of Miami’s residents and almost 30 percent of Houston’s residents are foreign-born.

Despite Trump’s ascendance, America remains one of the few places in the world that views immigration as positive, but Americans’ reactions have a strong class and race component that reinforces the conclusion that there is a workingclass challenge cutting across partisan lines. In Democracy Corps’ election night survey, it was white college-educated women who embraced immigration most strongly, and not surprisingly, white working-class men who were most cautious. But do not assume that African Americans do not share some of those concerns; many in our focus groups

The Wages of Neglect

raise anxieties about competition from new immigrants.

But reactions to legalization for the undocumented reveal some of the emotional and economic dynamics at play. Americans are fairly positive about the economic effects of legalization and see many of these immigrants as hard-working, but they do worry about the costs. More than 60 percent believe granting legal status would lead to greater competition for public services, and more than half believe it would take jobs from American citizens.

Those numbers are not driven entirely by Republicans.

Indeed, 41 percent of Democrats think those immigrants would “take jobs from U.S. citizens,” and more important, half of Democrats believe granting legal status “would be a drain on government services.”

Perceived costs of legalization Percent who agree with statements about undocumented immigrants in U.S.

Total Rep

Dem

Ind

Diff

Deporting all undocumented immigrants is unrealistic

77% 76% 80% 78% D+4

Better for the economy if they become legal workers

75% 70% 83% 74% D+13

Most are hard workers who should have the opportunity to improve their lives

75% 69% 81% 73% D+12

Granting legal status would encourage more to come illegally

64% 77% 53% 68% R+24

Granting legal status would be a drain on government services

61% 72% 50% 63% R+22

Granting legal status would reward illegal behavior

54% 68% 41% 56% R+27

Granting legal status would take jobs from U.S. citizens

51% 66% 41% 51% R+25

Source: Pew research center / USA Today national survey, June 12–16, 2013

Obama, who led the battle for immigration reform, was fairly trusted on this issue, as he always began by defining “real reform.” It meant “stronger border security,” and his administration did in fact put “more boots on the Southern border than at any time in our history.” “Real reform” also meant “establishing a responsible pathway to earned citizenship” that included “paying taxes and a meaningful penalty” and “going to the back of the line behind the folks trying to come here legally.”

Pro-immigration advocates won majority support for comprehensive immigration reform only after the public became confident that leaders wanted to manage immigration and that they took borders and citizenship seriously.

The reform that passed the U.S. Senate increased enforcement at the border, introduced new technology to ensure lawful employment, expelled those with criminal records, and allowed a path to citizenship for those who paid a fine and back taxes and learned English. That combination allowed progressives to proudly advocate a new law that would greatly expand the number of legal immigrants and

make America more culturally and economically dynamic.

By the time Hillary Clinton was running in 2016, however, the path to citizenship moved to the center of her offer, as did concern for immigrant rights in the face of Trump’s promised Muslim ban and Mexican border wall.

A month into Trump’s presidency, Democracy Corps and the Roosevelt Institute conducted focus groups with white working-class Trump voters who had previously supported Obama in Macomb County, Michigan. It was clear how central concerns about immigration, borders, foreignness, and Islam were to their receptivity to his call to take back America. Many thought Clinton, on the other hand, wanted “open borders.”

I am confident Democrats will once again lead a multicultural America in the same way America has forged unity from such diversity in the past. We build on a unique framework for immigration and a unique history. Even this ugly interlude will not keep America from its exceptional path.

The final dynamic distancing Democrats from working-­ class America is the party’s alignment with the economically and culturally ascendant in America’s metropolitan centers, where Democrats win office and govern. As

Clinton’s winning popular vote margin grew to nearly three million, concentrated in an ever-smaller number of urban counties, the Brookings Institution revealed that fewer than 500 Clinton-won counties produced two-thirds of the nation’s GDP in 2015.

Perhaps that is why President Obama and Secretary Clinton sounded so satisfied with the state of America and its future. In nearly every speech for most of his presidency, including in his 2014 State of the Union address, Obama rightly declared that America “is better-positioned for the 21st century than any other nation on Earth.” When he and Clinton closed the 2016 campaign in Philadelphia, Detroit, Miami, Chicago, Raleigh, Cleveland, and Columbus with their upbeat take on America’s future, they symbolically aligned the Democrats nationally with the economically ascendant cities—and they barely noticed anything amiss in smaller cities and towns and rural America.

They were also aligning the national Democrats with a liberal narrative and moral frame that values equality, equal rights, and fairness. They are more empathetic and worry more about harm to the vulnerable. They are more open to diversity and celebrate differences and outside cultures. They value a kind of individualism that emphasizes personal autonomy, self-expression, and sexual freedom for men and women. They welcome the emerging pluralism of family types and reject the traditional family and gender roles. Education is the path to individual fulfillment and opportunity, and science and technology are the keys to learning discoverable truths. They consciously do not

On the campaign trail, Obama and Clinton

barely

noticed

anything amiss in rural America and its small cities and towns.

Summer 2017 The American Prospect 25

It’s The Economy, Stupid: Early on, Clinton had a chance to outperform Obama with working-class women, but her failure to adequately address their economic stress scotched the deal.

moral frame and America’s economic ascendance misses is not just the plight of nonmetropolitan America, but also the reality on the ground in the big cities, which are ground zero for our country’s greatest challenges. Any Democrat running for mayor in New York, Chicago, or Los Angeles knows this, which is why Mayor Bill de Blasio’s critique of “two New Yorks” was so resonant. It is in these cities where large numbers of residents are struggling economically, with low-wage jobs and sky-high costs of living, where poverty and segregation stubbornly persist, where millions of children are raised by single parents, and where inequality is most stark. At the same time, the increasingly diverse ethnic and racial mix in the cities is full of working-class communities where both liberal and conservative moral frames matter. For example, like the more conservative working-class whites, African American women place a high premium on faith in God and the need to put American citizens before immigrants. That is why the simple embrace of metropolitan America’s liberal

26 WWW.Prospect.org Summer 2017

values and economic elite hurts Democrats with workingclass voters in both the big cities and in rural America.

Fixing the Democrats’ working-class problem The rift between Democrats and working-class Americans was painfully widened by how Democrats governed and campaigned nationally. The party was not up to the great challenge of leading an America that is more culturally diverse and racially conflicted, more urban and younger, more economically and socially unequal, and more corrupt.

All of those challenges, however, are also a call to action.

After the 2014 debacle and in advance of the 2016 presidential cycle, the Women’s Voices Women Vote Action Fund, with which Democracy Corps partners, produced a frank report on disappointing results in our base. They highlighted the unmarried women whose vote for Democrats dropped 7 points from 2012, and the fact that Democrats lost white unmarried women by 2 points. That is when we made the connection between white unmarried women and the white working-class women who are now a majority of the white working class.

Both groups see only a precarious path to the middle class. Both believe jobs don’t pay enough to live on and that the middle class pays a lot of taxes. Both groups, more than other voters in the Rising American Electorate (RAE), expressed concern about welfare-spending and getting control of the border. When we tested a bold Democratic economic agenda against the Republican agenda, white unmarried women embraced the Democratic offer with great enthusiasm, and this agenda trailed the Republican offer by only 8 points among all white working-class women. The results were so promising, we proposed at the outset of the 2016 cycle that progressives adopt an “RAE+” strategy to reach the working class more broadly.

Given how disastrously Clinton performed with white working-class voters in the end, it is important to recall with data that she was poised to over-perform with the white working-class women compared with Obama in 2012, when Mitt Romney won white working-class women by 20 points. During the presidential debates, Clinton closed Trump’s margin with white working-class women to just 4 points in NBC/Wall Street Journal’s national polling—and those voters did not break away from her until the last week, after Clinton went silent on the economy and change. These white working-class women, who form a majority of today’s white working class, were open to voting for Clinton, perhaps in historic numbers.

Not surprisingly, white working-class women form a big portion (40 percent) of the independents and Democrats who voted for Trump in the end. While Republican Trump voters think of themselves as middle-class, and

jim cole / ap images

turn to traditional authority for moral absolutes, and they devalue those who depend on faith-based conclusions.

Those who hold to a conservative moral frame, by contrast, accept faith-based moral absolutes and respect traditional authority. They honor an individualism that is grounded in personal responsibility, industriousness, strong work ethic, self-reliance, self-restraint, and selfdiscipline, which guard against idleness and dependence.

They honor the traditional family and the male breadwinner role. They value patriotism, love of country, and those who defend it from our enemies, and they believe American citizens come first.

What the national Democrats’ embrace of the liberal

The Wages of Neglect

35%

27%

31%

27%

23%

23%

29% 21%

8/16 9/16 10/16 11/16

8/16 9/16 10/16 11/16

non-college white women

non-college white men Source: nbc/wsj national likely vote surveys, 2016

two-thirds say they would have no problem handling an unexpected $500 expense, these non- GOP Trump voters think of themselves as working-class and would struggle to handle the sudden expense. They are also, in contrast to the Trump Republicans, pro-union.

But, in what may border on campaign malpractice, the Clinton campaign chose in the closing battle to ignore the economic stress not just of the working-class women who were still in play, but also of those within the Democrats’ own base, particularly among the minorities, millennials, and unmarried women. It likely diminished turnout in the cities and Clinton’s vote across the base.

Obama’s final campaign speeches spoke of an economy that moved from recession to recovery and created 15 million jobs with rising incomes and reduced poverty. But if you look at people’s view of the economy on the night of the election, three in five scorned that rosy economic outlook—led by nearly every group in the Democrats’ base. “Jobs still don’t pay enough to live on and it is a struggle to save anything,” said 70 percent of minorities and 65 percent of unmarried women in our postelection survey. A majority of unmarried women said they could not handle an unexpected $500

61%

60%

non-college white men

total

Rising Amer. electorate

non-college white women

minority

unmarried women

30% total

31% Rising Amer. electorate

25%

28% non-college white women

non-college white men

29%

24% minority

unmarried women

63%

Percentage who agree:

63%

Percentage who agree:

65%

Jobs still don’t pay enough to live on and it is a struggle to save anything.

70%

The economy is starting to get to full employment and a lot of people are finding jobs that pay more.

Anti-Trump Argument

Economic Contrast Argument

[Republican candidate] never spoke out about the hateful and racist things Trump said about Mexicans as “rapists,” or his refusal to disavow the support of former KKK leader David Duke, or his disparaging remarks about veterans, Gold Star families, and people with disabilities. [Republican candidate] took too long to speak up about Trump’s offensive behavior towards women, calling them “bimbos,” “dogs,” “disgusting,” and “fat pigs.” They never spoke out about that. So, we can’t afford to put [Republican candidate] in the U.S. Congress.

We need an economy for everyone, not just the rich and well connected. But [Republican candidate] supports trickle-down economics, more tax cuts for the richest, and special breaks for corporations. Big oil and Wall Street are spending millions to support him. Well, that’s not right. We need to rebuild the middle class, invest in families, education, jobs with rising incomes. Protect Social Security by asking the rich to pay their fair share. So, we can’t afford to put [Republican candidate] in the U.S. Congress.

After hearing this argument, would you vote for the Democratic or the Republican candidate?

After hearing this argument, would you vote for the Democratic or the Republican candidate?

■ democrat ■ republican

26 19 9

19

18 13

11

34

32

24

23

16 8

9

8

7 non-college white women

35% 39%

millennials

61%

unMarried white women

38%

52%

49%

43%

unMarried women

53%

47%

60%

non-college white women

61%

millennials

72%

■ trump ■ clinton

expense, putting them most on the edge. That is the heart of the Rising American Electorate, and their judgment on the economy was very close to white working-class women’s.

The failure to see that the problems of working America run right through the new American majority cost the campaign a chance to produce a very different result in this election.

As I have written in The Guardian and Democracy, Clinton’s strong performance in the debates produced big gains for her regarding which candidate was better suited to handle the economy and taxes, and to stand up for the middle class and against special interests. After the debates, she was near parity with Trump on handling the economy—closing an 11-point pre-convention gap.

unMarried white women

in the 4 months leading up to the election

unMarried women

White Working-Class Presidential preferences

Source: Democracy Corps national likely voter survey, October 2016

Democracy Corps’ national survey conducted after the debates and shared with the Clinton campaign showed that more attacks on Trump’s temperament and his treatment of people of color and women barely moved voters.

In contrast, a compelling economic message demanding “an economy for everyone, not just the rich and well-connected,” attacking trickle-down tax cuts “for the richest and special breaks for corporations,” and promising an agenda to “rebuild the middle class” moved unmarried women (including white unmarried women), millennials, and white working-class women.

This experiment showed—retrospectively, alas—that Democrats can reach working-class Americans both in our base and well into the swing electorate, including the white working class. It is time to make that challenge task number one.

Stanley B. Greenberg is a founding partner of Greenberg Quinlan Rosner Research and Democracy Corps, and author of America Ascendant: A Revolutionary Nation’s Path to Addressing Its Deepest Problems and Leading the 21st Century.

Summer 2017 The American Prospect 27

The Pittsburgh Conundrum

Can you have a model city in a left-behind region?

By Jo hn Ru s s o

F

orty years after the decline of the steel industry, Pittsburgh has emerged from the ashes of deindustrialization to become the new Emerald City. Its formidable skyline gleams with homegrown names—PPG, UPMC , and PNC. Touted as the “most livable city” by the likes of The Economist and Forbes, its highly literate and educated workforce has contributed to a robust and diverse local economy known as a center for technology, health care, and bio-science. It is a leader in startup businesses. Uber and Ford’s announcement in 2016 that they would base development of their self-driving cars in Pittsburgh, rather than in Silicon Valley, is a telling example of the power of high-tech image and low costs.

Pittsburgh also ranks high in housing affordability. Residents can easily walk or bike to public libraries, museums, and arts and entertainment venues. Some see Pittsburgh as a model for economic development and a new urbanism that could revitalize the Rust Belt and other former industrial regions.

In short, Pittsburgh seems to have responded more effectively to the challenges of deindustrialization than many other cities. Hunter Morrison, winner of the American Planning Association’s 2015 Burnham Award for his work on regional planning in northeastern Ohio, notes that Pittsburgh has done better than Cleveland in several areas. It has retained more of its residents, largely minority households; stabilized its working-class neighborhoods without relying on gentrification; and steadily attracted educated millennials. Morrison also says that Pittsburgh has held on to its historic working-class culture and civic identity more than have other legacy communities. “The concept of the ‘Steelers Nation,’” he says, “goes well beyond a marketing campaign and appears to be embedded as a deeply felt personal identity by people of all classes. The retention of dialect, food, symbols, team colors, and attitude is remarkable and, I would argue, increasingly unique.”

But is there really such a thing as Pittsburgh exceptionalism? Or, as with other successful cities, do we need to ask: A renaissance for whom? Residents like Kathleen Newman, a working-class studies scholar and professor at Carnegie Mellon, see gentrification expanding with Pitts-

28 WWW.Prospect.org Summer 2017

burgh’s drive to attract high-tech industries. This threatens the city’s remaining working-class neighborhoods and its already small African American middle class. Some resistance to gentrification has emerged—protests over the construction of high-income housing and a Whole Foods Market in Pittsburgh’s East Liberty neighborhood, for instance. Residents are also proposing their own alternatives for affordable housing.

And there are more fundamental questions: Can— does—Pittsburgh’s success extend beyond city limits? Can it resurrect its broader Rust Belt region? What can Pittsburgh do—what can we do—for the broader regions that it has left behind?

Pittsburgh was always more than its city limits. The seven counties composing the metropolitan region include surrounding towns that contributed to Pittsburgh’s industrial might in the 20th century, such as Braddock, Homestead, Aliquippa, and McKees Rocks. But the area beyond Pittsburgh, extending from these towns through western Pennsylvania, has not experienced the revitalization that has transformed the city. From Weirton, West Virginia, to the west, Uniontown to the south, Johnstown to the east, and Sharon to the north, economic recovery has been, at best, uneven across the region. Apart from a few newer suburbs like Cranberry and some older revitalization projects, such as the Waterfront complex in Homestead, the region continues to be plagued by the long-term effects of deindustrialization and disinvestment. Along with underperforming schools, violence, and pollution—including, according to a recent report, lead contamination—the region still struggles with employment and population declines. The Bureau of Labor Statistics shows wide swings in employment over the last decade, but non-farm employment in the Pittsburgh metropolitan area declined by about 15,000 between October 2016 and March 2017. A University of Pittsburgh study reports that 23 percent of Pittsburgh residents live in poverty, and 43 percent earn less than 200 percent of the poverty level. Furthermore, outside its urban core, a larger number of individuals actually live in poverty than in Pittsburgh itself. In the seven-county Pittsburgh metropolitan statistical area, fully 79 percent of the people living in poverty reside outside the city limits.

f 11 photo / istock by get t y

The Wages of Neglect

Both the city and the surrounding area are also losing population. Census data show that Pittsburgh’s Allegheny County lost almost 4,000 people in 2015 and 2016, while the seven-county region lost nearly 9,000 people on top of the more than 6,700 lost in the previous year.

The Pittsburgh story, then, involves more than a shining city on many hills. As a case study for thinking about economic development and urban planning, we have to go beyond the city itself. If you drive out of the busy downtown, away from the academic neighborhoods, and past the new suburbs, you cannot help but see the remains of the troublesome legacy of deindustrialization. Deteriorating factories, empty parking lots, dilapidated housing, and vacant lots all bear witness to the continuing material and social costs of economic restructuring. Urbanists, developers, and politicians have much to learn by expanding their view of Pittsburgh.

In 2013, Carnegie Mellon University organized the 25th anniversary conference of the original Remaking Cities Congress. Pittsburgh was chosen as both site and symbol for its “25-year transformation from an industrial economy to a knowledge economy.” The conference brought together 300 leading national and international urban and city planners, economic development specialists, and architects to consider the state of efforts to revitalize deindustrialized communities. Many conference participants praised Pittsburgh as a prime example of the new urbanism that promotes walkability, diverse housing, quality architecture and design, increased density, mixeduse neighborhoods, smart public transportation, and commitment to sustainability and quality of life.

The plenary speakers included urbanologist Richard Florida, the Brookings Institution’s Bruce Katz, the architect David Lewis, and Prince Charles, who had played a

Shining City On Many Hills: Pittsburgh has navigated the challenges of deindustrialization better than most American Rust Belt cities.

Summer 2017 The American Prospect 29

Echoes Of The Past: Chic apartment buildings are springing up on Pittsburgh’s former heavy industrial sites—like The Foundry, in the Lawrence­ville neighborhood.

researching his book The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life, which argued for the power of technological determinism in shaping urban regeneration and economic growth. Initially published in 2002, the book instantly became a touchstone for economic developers and urban planners. Esquire magazine named Florida one of the “Best and Brightest” in 2005, and Businessweek called him a Voice of Innovation in 2006. Within several years, Florida became a beacon for those suggesting that postindustrial cities should concentrate on attracting a “creative class” of writers, painters, musicians, software developers, engineers, and doctors.

30 WWW.Prospect.org Summer 2017

At the Remaking conference, however, Florida focused (as he does in his new book) on the unintended consequences of the growing knowledge economy he had earlier championed. While obliquely addressing Pittsburgh and its region, his analysis of the growing inequality, injustice, and resentment shown toward this and other cities captured, among other things, the growing populist unrest in western Pennsylvania and eastern Ohio—a pattern that would play out a few years later in the 2016 election.

Florida’s change of heart did not surprise Chapman University professor Joel Kotkin. As Kotkin argued in The Human City: Urbanism for the Rest of Us and The New Class Conflict, the new urbanism lay at the heart of an emerging class conflict. Unlike industrial conflicts between owners and laborers, this class conflict pitted a postindustrial elite made up of high-tech oligarchs and policy, media, and academic experts against the middle and working classes. According to Kotkin, the rise of the knowledge economy and new urbanist planning strategies had erased the idea that the city could be a place of hope for advancement for those in poverty. Instead, the poor, many of them people of color, were displaced by rising housing costs as white residents returned to the city and developers created a “Disneyland” of “restaurants, shops, and festivals.” For Kotkin, the American dream could now be found in the suburbs, where it was cheaper to live and survive in uncertain economic times. He argued that suburbs have become more racially diverse, and people with lower incomes had more opportunities to own property and build community.

But Kotkin’s suburbanist dream has also come under scrutiny. Urbanists have claimed that suburban sprawl increases demand for land usage and water, police, and fire services, as well as car dependency. The opioid epidemic has also reached the suburbs. Long commutes disconnect suburban residents from community life. Online shopping causes suburban malls to close, shattering local retail economies. Shoddy construction and poor materials long associated with suburban tract housing have become increasingly apparent.

Most crucially, studies make clear that poverty has grown most rapidly in suburban areas. Florida has countered Kotkin’s optimism. “The suburbs,” he has written, “are no longer the apotheosis of the American Dream and the engine of economic growth.” Citing David Lewis, he wrote that “the future project of suburban renewal would likely make our vast 20th-century urban renewal efforts look like a walk in the park.”

n at e s m a l lw o o d / p i t t s b u r g h t r i b u n e - r e v i e w v i a a p i m a g e s

pivotal role in organizing the initial conference. Alongside numerous self-congratulatory presentations about how cities were reinventing themselves, however, ran a darker undercurrent of uncertainty. In his plenary presentation, Florida noted how the new urbanism was fostering inequality, outmigration, and racial divisions. His analysis became the foundation of his new book, The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class— and What We Can Do about It. Florida had been in a good position to observe changes in Pittsburgh and other cities associated with the knowledge economy. He taught at Carnegie Mellon while

b . g . wa l k e r / i s t o c k b y g e t t y

The Wages of Neglect

Debates between urbanists and suburbanists have consequences for planning and policy—just as the rift between metropolitan residents and other Americans has political consequences. In the 2016 presidential election, voting patterns in Pittsburgh and western Pennsylvania reflect this divide. While many commentators focused on racial, educational, gender, and generational gaps, The Atlantic’s Ronald Brownstein argued that none of these divides “proved more powerful than the distance between the Democrats’ continued dominance of the largest metropolitan areas, and the stampede toward the GOP almost everywhere else.” Nationally, Democrats won an average of 72 percent of the vote in counties with an urban core.

But they lost in suburbs, midsize cities, and small and very small cities, and the farther these places were from cities, the bigger the loss for Democrats.

The voting in Pittsburgh and western Pennsylvania followed the national trend. Real Clear Politics reported that Hillary Clinton won culturally cosmopolitan areas “most commonly seen as centers of economic growth, political power, or cultural production,” but Trump made gains in the popular vote in traditional Democratic areas like Cleveland, Detroit, Buffalo, St. Louis, Pittsburgh, and other smaller cities in the middle of the country, when their decaying suburbs and exurbs were lumped into the tallies.

Pittsburgh and Allegheny County voted Democratic at 56 percent. This was only slightly lower than the levels of 2008 and 2012. But in surrounding counties in western Pennsylvania, support for Democratic candidates dropped.

With larger turnouts in areas with greater Republican support, like Butler and Westmoreland Counties, western Pennsylvania could not deliver the votes necessary for the Democrats to win Pennsylvania. In addressing the decline in support for Democrats even in the city, Pittsburgh Mayor Bill Peduto said it best: “What we saw [on Election Day] was Democrats voting Republican.”

Clearly, the Republicans and Trump were successful in reducing support in what had been traditional Democratic areas by mining the divide between urban and suburban/ rural areas, benefiting from the politics of resentment toward urbanism and economic elites.

Following the election, deliberations over new urbanism, urban-suburban identities, and the urban crisis have intensified as part of the debate over our future economic policy. The competing narratives have been shaped by such think tanks as Brookings and New Amer-

ica, representing a range of liberal and conservative political viewpoints.

For example, New America co-founder Michael Lind joined with Kotkin to produce a new report arguing that the solution to America’s economic problems lies in the revitalization of the heartland. In “The New American Heartland: Renewing the Middle Class by Revitalizing Middle America,” Lind and Kotkin reject the view that the coasts, epitomized by Silicon Valley in California and the finance industry in New York, should be the drivers of the American economy. They claim that what they call the “Gulf of Mexico watershed”—an admittedly imprecise geographic area—better reflects an ongoing population

and economic shift away from the coasts toward middle America. This New American Heartland includes the older manufacturing rust belt, broad agricultural regions, and resource-extracting areas along the Gulf Coast. In other articles, Kotkin suggests this was the very region responsible for the election of Donald Trump.

Lind and Kotkin reject both Democrats’ and Republicans’ belief that America’s economic future is tied to knowledge, media, and finance industries that require the higher-skilled and better-educated employees located in coastal areas, and they also point out that even knowledge workers are leaving the coasts. While they do not deny that automation and offshoring have reduced employment in manufacturing and

Left Behind: Pittsburgh’s renaissance hasn’t extended to Braddock, a town just outside the city’s limits where an abandoned house sits a block away from the Edgar Thomson Steel Works (in the background).

Summer 2017 The American Prospect 31

A Renaissance For Whom?

Pittsburgh’s expanding gentrification threatens the city’s remaining workingclass neighborhoods and its already small African American middle class, leading to protests like this one in the East Liberty neighborhood.

the New American Heartland. They call for the government to supplement efforts of the private sector, but they also warn that “misguided regulations” could “thwart economic development.” For example, they note that regulatory attempts to mitigate the “possible” harms of climate change only increase the costs of fossil fuels. They are more concerned about possible dangers to energy industries, American jobs, and productivity growth. Instead, they suggest, the federal government should largely limit its support to basic science research and development, infrastructure, and tax support for state and local government and public-private partnerships.

Brookings scholar Bruce Katz and Jennifer Bradley, director of the Center for Urban Innovation at the Aspen Institute, offer a similar but decidedly smaller geographic analysis, minus the anti-coastal attacks and criticism of technology industries. In The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy, they argue that metro areas, like Greater

32 WWW.Prospect.org Summer 2017

Pittsburgh, will drive economic growth because they are home to clusters of universities, local businesses, hospitals, museums, and advanced technology and manufacturing industries, what Katz and Bradley call “innovation districts.” They encourage planners and government officials to develop new strategies based on “Emergent Metros.”

Like Lind and Kotkin, Katz and Bradley raise doubts about the role of the federal government. They believe that the metropolitan revolution is “exploding this tired construct” about federal solutions. Instead, they argue, cities and metro areas “are becoming the leaders in the nation: experimenting, taking risk, making hard choices and asking for forgiveness, not permission.” This, they suggest, will lead to “only one logical conclusion: the inversion of the hierarchy of power in the U.S.” That inversion, however, would put business elites and their closely affiliated local foundations in power. The examples that Katz and Bradley highlight all involved a shift in power from elected government officials to unelected business and economic leaders and nongovernmental organizations, leaving local electorates, community groups, and neighborhoods with little power to do anything other than rubber-stamp the decisions made by local elites. They minimize the involvement of popular movements in urban issues. They contrast both the Occupy and Tea Party movements with their metropolitan revolution, which they describe as “reasoned rather than emotional, leader driven rather than leaderless, born of pragmatism and optimism rather than despair and anger.”

In contrast, Richard Florida envisions a more critical and stronger role for government in supporting urban transformational changes. In The Urban Crisis, he argues that a “disconnect between the vital economic role of cities and our policymakers’ neglect of them” has led to a crisis.

Florida still believes, as he wrote in The Rise of the Creative Class, that cities are most economically successful when they bring together the three “Ts”—technology, talent, and tolerance. Cities remain platforms for innovation, wealth creation, social and progressive values, and political freedom, and these, in turn, contribute to the health of suburbs and outlying areas. However, he now argues that cities must resist the “winner-take-all urbanism” that fosters economic inequality and segregation. He offers seven keys for more equitable development: reforms in building, zoning codes, and tax policies; infrastructure investment to spur density and clustering and to limit sprawl; affordable rental housing in central locations; turning low-wage service jobs into family-supporting work; addressing poverty through greater investment in people and places; helping build stronger and more prosperous international urban cities; and empowering local communities and local leaders to strengthen their own economies. No doubt many

pa m pa n c h a k / p i t t s b u r g h p o s t- g a z e t t e v i a a p i m a g e s

goods-producing industries, they believe that “the tradable sector” is far more essential to American prosperity than its share of current employment suggests. This sector includes manufacturing, industrial agriculture, energy, and minerals, fields that are dominated by large firms and complex supply chains. Once again indirectly criticizing the failures of urbanists’ visions of technology as the source of economic growth, they argue that every city and county cannot be Silicon Valley, and that the lower housing and energy costs and weaker regulatory environment in the “New Heartland” will drive future economic growth and development.

Lind and Kotkin’s political colors become more apparent in their discussion of the role of government in revitalizing

The Wages of Neglect

of these reforms would make cities more affordable and attractive to the middle and working classes, but they would also require massive government subsidies. For Florida, then, the federal government has a central role to play in alleviating the urban crisis.

The real problem for Florida is not the coastal elites and tech hubs and oligarchs so vilified by Lind and Kotkin. Rather, the problem lies with “urbanized knowledge capitalism” itself, which has clear winners and losers, as evidenced by the economic segregation, wage and income inequality, and home unaffordability that plague the urban centers of knowledge capitalism. This urban crisis is not limited to coastal areas. It affects cities and metros of all sizes across the country. To address the underlying crisis of this “secular stagnation,” Florida believes, the federal government must move beyond the usual but vague debates over infrastructure spending and make “strategic investments in the kinds of infrastructure that can underpin more clustered and concentrated urban development.”

What is missing from the larger discussions of urban and regional development are any fully formed progressive solutions. Even the most progressive of recent political campaigns offered little. While Bernie Sanders championed “New Deal Reforms” and a “new Bill of Rights” that, he claimed, would create “an economy that works for all, not just the very wealthy,” other than making housing affordable and increasing wages and benefits, he put forth no concrete plans for dealing with the broader crisis of urban and regional economies. Some of Richard Florida’s more progressive pillars found their way into Martin O’Malley’s campaign, but that never got off the ground.

More recently, the Center for American Progress has put forward a progressive solution, a report entitled “Toward a Marshall Plan for America: Rebuilding our Towns, Cities, and the Middle Class.” It argues for developing a commission to design a “domestic Marshall Plan for jobs and community investment.” The Marshall Plan Commission would be “under the direction of national, regional, and local leaders.” They would “seek input from urban and rural leaders who represent labor, business, education, health, faith, community, economic development, and racial justice to help understand the problem; lift up promising practices; develop bold ideas; particularly for people who did not attend college.” The plan encourages the building of “community institutions that support incomes, employment, and mobility” through greater infrastructure spending, investment in education, public employment, improvements in access to child care and health care, tax reform, and increased wages and social security, among other strategies. Overall, the plan can be read as a provisional “New Deal Lite,” a thinly disguised

re-do of the center’s contributions to Hillary Clinton’s economic platform, with belated attention to the working class and nonmetropolitan America.

There is a good reason why no one has offered clearer strategies, though. As Pittsburgh shows, there are no easy answers to challenges facing metro regions. When we look beyond that city’s core, we clearly see that even the place most often praised for having gotten economic renewal right still battles uneven development and inequities just beyond the city limits. None of the strategists offer much hope for the many former mill towns and rural communities in western Pennsylvania. Without a new and enduring infusion of economic vitality, smaller towns and rural areas outside the upscale metropolitan hubs will show persistent signs of economic struggle. Some may be beyond repair.

It isn’t that the Pittsburgh story is wrong. It is simply incomplete. The narratives about this city, like the broader debates among new urbanists and economic and urban planners, do not fully consider the continuing costs of deindustrialization, disinvestment, globalization, and neoliberal austerity programs on individuals and communities. These personal, community, and national costs rival the displacements caused by natural disasters and armed conflicts. The devastation of economic change has left far too many with limited options and little power to improve their lives or communities.

Even if someone could offer clear solutions, however, their proposals would still have to surmount political gridlock. Neither party seems poised to take on this crisis in any effective way, which only contributes to the disillusionment of many voters and to a growing divide that, as Brownstein argues, splits urban residents from those living in suburbs, small towns, and rural areas.

Even with the best of intentions, urban planners and economic developers are complicit in sustaining the broken socioeconomic system that Florida suggests is central to the urban crisis. They need to recognize that the problem goes beyond even secular stagnation, segregation, gentrification, inclusion, regional integration, and the business and government efforts so prominent in their narratives.

The problem is with capitalism as it currently exists—its reliance on inequality and racism, and its externalization of its social costs. This is not to say that economic and social improvements cannot be made through some of the reforms suggested previously. But they won’t solve the underlying problems that come from capitalism’s subordination of social needs to its economic necessities.

Urbanists need to consider long-term strategies based on values, and not just spatial considerations, that address the concrete needs of people. What makes our urban and regional crisis seem so intractable, ultimately, is this very tension between market forces and ethical and moral solutions.

Even the city praised for getting economic renewal right

battles

inequities

just beyond the city limits.

John Russo is a visiting researcher at the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University, co-author of Steeltown U.S.A.: Work and Memory in Youngstown, and coeditor with Sherry Linkon of the blog “Working-Class Perspectives.”

Summer 2017 The American Prospect 33

A Tale of Two Populisms

The elite that the white working class loathes is politicians.

By G u y M oly n eu x

M

any analysts, and leading Democrats, have attributed Donald Trump’s impressive 2016 vote margin among white working-class voters to his embrace of economic populism. In the wake of Trump’s victory, Senator Bernie Sanders suggested that “millions of Americans registered a protest vote on Tuesday, expressing their fierce opposition to an economic and political system that puts wealthy and corporate interests over their own. … Donald J. Trump won the White House because his campaign rhetoric successfully tapped into a very real and justified anger, an anger that many traditional Democrats feel.”

Senator Elizabeth Warren also identified possible common ground on economic issues: “When President-elect Trump wants to take on these issues, when his goal is to increase the economic security of middle-class families, then count me in.”

Democrats can take obvious comfort in a story about Trump winning in large measure because he stole our ideas. And there may be strategic value in this argument for Democratic leaders, who hope either to nudge Trump in a progressive direction or—more plausibly—lay the groundwork for accusing him of breaking promises when he fails to do so. When Democratic Leader Chuck Schumer says, “President Trump ran as a populist and still talks like one, but his first month has been a boon for corporations, the wealthy, and elite in America,” he is trying to box Trump in and to start developing a 2018 campaign message.

However, as an analysis of why so many white noncollege voters pulled the lever for Trump, this assessment misses the mark in important ways. In order to develop strategies for winning back these voters, it’s important to get the story right. Trump’s populism surely played a role in the surge of white working-class voters to the GOP ticket in 2016. But Trump’s brand of populism—and more importantly, that of working-class whites—differs in important ways from the populism of Bernie Sanders and Elizabeth Warren. I don’t mean only that Trump’s populism incorporates racial grievance and crude nationalism, though that is clearly a critical distinction both morally and politically. Even setting aside Trump’s ethnonationalism, these

34 WWW.Prospect.org Summer 2017

two populisms have less in common than it may appear.

Sanders and Warren are the champions of what we can call economic populism, a worldview centered on contrasting the interests of working people with those of economic elites. In Warren’s now famous formulation, the system is rigged: People feel like the system is rigged against them. And here’s the painful part: They’re right. The system is rigged. Look around. Oil companies guzzle down billions in subsidies. Billionaires pay lower tax rates than their secretaries. Wall Street CEOs—the same ones who wrecked our economy and destroyed millions of jobs—still strut around Congress, no shame, demanding favors, and acting like we should thank them.

For economic populists, the bad guys are the wealthy, corporations, and CEO s—with a special place in hell reserved for Wall Street. Trump, however, tells a fundamentally different story about how the world works, and who has been winning and losing. Here is Trump’s rendering of populism, as expressed in his inaugural address: For too long, a small group in our nation’s capital has reaped the rewards of government while the people have borne the cost. Washington flourished—but the people did not share in its wealth. Politicians prospered—but the jobs left, and the factories closed. The establishment protected itself, but not the citizens of our country. Their victories have not been your victories; their triumphs have not been your triumphs; and while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land.

Warren speaks of the power of economic elites to further enrich themselves at the expense of average people. But in Trump’s tale, it is political elites who wear the black hats.

This is political populism: The people have been betrayed by their government.

Progressives mock Trump for claiming he wants to “drain the swamp” while promising to deliver deregulation, regressive tax cuts, and other goodies to special interests. But in

The Wages of Neglect

Trump’s view, the “swamp” is inhabited by bureaucrats, not billionaires. His answer to “corruption” is to rescind civil-service protections for federal workers, not limit political spending. His political reform agenda consists almost entirely of telling politicians what they cannot do—banning lobbying by former members of Congress and executive branch officials—rather than restricting powerful interests.

It is true that Trump has embraced some economic ideas that depart from traditional Republican free-market orthodoxy, most obviously his hostility toward free-trade agreements. But even on the trade issue, where the two populisms converge most closely, they offer distinct narratives. Compare Sanders and Trump:

38 percent chose “We need a government that does more to solve problems and help people.”

62 percent chose “We need a government that is smaller, less expensive, and interferes less in people’s lives.”

32 percent chose “When government tries to solve a problem, it usually does more good than harm.”

68 percent chose “When government tries to solve a problem, it usually does more harm than good.”

27 percent chose “Government has helped me achieve my goals.”

73 percent chose “Government has made it harder for me to achieve my goals.”

Sanders: I voted against NAFTA, CAFTA, PNTR with China. I think they have been a disaster for the American worker. A lot of corporations that shut down here move abroad. … TPP was written by corporate America and the pharmaceutical industry and Wall Street. That’s what this trade agreement is about.

This anti-government sentiment is mainly driven by antipathy toward political leaders, rather than governmental agencies and departments. When white non-college voters think about the government in Washington, 83 percent say they think first about elected officials, while just 17 percent say that programs and agencies are what first come to mind. In focus groups I conducted with white workingclass voters last year for Americans for a Fair Deal, it was clear that confidence in politicians and the political system was virtually nonexistent. Among the comments:

Trump: For too long, Americans have been forced to accept trade deals that put the interests of insiders and the Washington elite over the hard-working men and women of this country. As a result, blue-collar towns and cities have watched their factories close and good-paying jobs move overseas, while Americans face a mounting trade deficit and a devastated manufacturing base.

Trump does tap into blue-collar whites’ worries about job loss and stagnation in declining manufacturing communities, but note who benefits: not multinational corporations or their CEOs, but the “Washington elite.” Sanders speaks of corporations moving overseas, but in Trump’s account it is the “jobs” that move, and the bad actors once again are politicians (and the foreign countries that take advantage of their incompetence). In political populism, corporate interests and the wealthy remain invisible.

Indeed, one might even say that is its primary purpose.

Trump’s political populism is, fundamentally, a story about the failure of government. And unfortunately, there is good reason to believe it deeply resonates with white working-class voters. Just 20 percent of them believe they can trust the federal government more than half of the time (a rather low bar). While 61 percent of white working-class voters have an unfavorable view of corporations, a stratospheric 93 percent have an unfavorable view of politicians.

Given a choice between positive and negative statements about government’s capacity and performance, white noncollege voters consistently pick the negative view in a recent poll conducted by my firm:

They put their political career first. It seems like it’s all self-interest in government. It’s [that] they’re never agree[ing] on anything. It’s always … about them.

Everybody that’s in the government is a lawyer.

They’re from a very well-to-do family. They’ve always had everyone doing things for them, and they’re like the silver-spoon-in-their-mouth kind of scenario. So they’ve never struggled. They don’t really understand the little people like the average American, because they’re not average Americans.

We asked our focus group participants what they want from their political leaders, and the answers are revealing.

They did not talk about jobs, or trade deals, or any other policy goal. Again and again, they told us they just want leaders who care about the people and not just themselves.

61 percent of workingclass white voters view corporations unfavorably, but a stratospheric

93 percent have an unfavorable view of politicians.

Focus on the needs of the people, not special interests.

Care more about the people they represent and less about the office they hold.

Have the best interests of the common American in mind.

Care about the people of the country instead of making their wallets bigger.

This distrust of government is, by far, the least-appreciated factor underlying Trump’s 2016 victory. Much of the

Summer 2017 The American Prospect 35

Trump’s

anti-pol populism

appeals to working-class whites more than Paul Ryan’s small government messaging.

post-election analysis has debated whether Trump’s appeal was three parts economic populism to two parts racism, or 70–30 the other way, when hostility to politicians and government was likely just as important as either of these other two factors.

Political distrust has developed over decades, and has many causes. But let us give the devil his due, and acknowledge that Senator Mitch McConnell, more than any other single person, is the father of Trumpism. By grinding Washington to a virtual halt for years, his blanket opposition to Obama helped ratchet up public disgust with the federal government to previously unseen heights. Even while the economy was recovering, confidence in Washington fell steadily, an impressive if perverse feat.

In such a climate, the appeal of an outsider like Donald Trump is readily apparent, as is the enormous handicap imposed on Hillary Clinton, who was perceived by much of the public as the nearly perfect embodiment of “career politician.” White working-class voters did not fear electing someone with no political experience, because those with experience had so clearly failed. Warnings of Trump’s unfitness for office from institutions that historically play a vetting role in our political system, such as newspaper editorial boards, were largely disregarded because the “experts” had gotten so much else wrong.

While particularly well suited to the conditions of 2016, the threat posed by Trump’s political populism continues. As a means of winning white working-class votes, it represents a quantum leap forward for Republicans. The small government vision of Paul Ryan had limited appeal to these voters, and that remains true even while their anger at government has grown. Non-college whites believe government has let them down, but most have no principled or ideological objections to government playing a strong role in the economy. Although just 20 percent trust the federal government, 50 percent also say it should take a more active role in solving the nation’s economic and social problems. Indeed, two-thirds (68 percent) say the federal government should do more to create jobs and improve wages, and majorities also say it should do more to improve K–12 education, to make college affordable, and to regulate banks and the financial sector.

Trump’s political populism is more compelling to these voters than Ryan’s small government message because it is less abstract and ideological. It speaks to their economic concerns in a powerful way and provides a plausible explanatory narrative: Americans are struggling because they have been betrayed by their political leaders, and taken advantage of by foreign nations. Of course, Trump is also careful not to threaten their Social Security and Medicare benefits, no small thing.

36 WWW.Prospect.org Summer 2017

While the anti-government sentiment that Trump exploits and encourages may differ in important respects from Ryan’s vision, functionally it poses many of the same challenges for progressives. White working-class voters’ negative view of government spending undermines their potential support for many progressive economic policies. While they want something done about jobs, wages, education, and health care, they are also fiscally conservative and deeply skeptical of government’s ability to make positive change. So political populism not only differs from economic populism, but also serves as a powerful barrier to it.

Looking forward, progressives must find ways to puncture the belief of working-class whites that Trump’s government is “controlled by the people.” Many Democrats hope that Trump’s cabinet of billionaires has undermined his populist credentials, and each successive appointment has been met with howls that he is betraying his promises to the working class. But if billionaires were anathema to Trump’s white working-class supporters, they probably wouldn’t have elected one to the presidency. They wanted to kick out the career politicians and try something different, and Trump’s reliance on CEOs and military generals has largely honored that wish. The lack of government experience in Trump’s administration may frighten many Democrats, but in the eyes of his followers, it’s the best recommendation imaginable.

My guess is that Trump will lose ground if and when white working-class voters see that he is not delivering for them, and is in fact serving others. Democrats must aggressively contest Trump’s core promise to the white working class: that he is putting the government to work for them.

Much of Trump’s actual agenda is of course devoted to helping millionaires and large corporations. Our job is to make it impossible for working-class Americans to miss, or deny, that reality.

We don’t know yet which specific issues will provide the best openings for accomplishing that task. Republicans’ as-yet unsuccessful assaults on Medicaid and the Affordable Care Act, and their ongoing attacks on food stamps, workplace safety, financial regulation, and many other protections for working people all represent policy catastrophes, but also potential political opportunities.

One issue that particularly engages the working class is also at the top of the Republicans’ agenda: taxes. Workingclass voters are passionate in their insistence that wealthy individuals and large corporations are not paying their fair share, and efforts to give new tax cuts to those at the top will meet with strong resistance. In a recent poll my firm conducted for the Center for American Progress, in 2018 Senate battleground states, 54 percent of white workingclass voters had an unfavorable reaction to GOP plans to

The Wages of Neglect

Washington Is The Enemy: Trump’s anti-government message resonated deeply with white working-class voters. Just 20 percent of them believe they can trust the federal government more than half of the time.

alexey filippov / ap images

pass across-the-board cuts in tax rates that would give a large tax cut to millionaires, and 52 percent objected to large rate cuts for corporations. If Trump delivers huge tax cuts to corporations and the wealthy, he will shake the faith of many of his blue-collar supporters.

In terms of a broader message, Democrats’ traditional economic populism offers a starting point, but we need to also borrow a bit from Trump’s playbook. We must speak not only about inequality and unfairness in our economy, but also about politicians who use their political power on behalf of corporations and the wealthy. White workingclass voters are less interested in cutting down the size of government (38 percent) than in taking back their government so that it works for all Americans (62 percent).

In another survey we conducted for CAP, we identified a particularly powerful way of articulating that idea from a progressive perspective: We need to take back our government so that it works for all Americans, not just billionaires and special interests. The size of government is less important than who it works for. Instead of giving tax breaks and subsidies to big corporations, we should create jobs, improve education, lift wages, and help people retire with dignity. And we should get big money out of politics, so that our government is accountable to the people.

By 64 percent to 36 percent, our white working-class respondents reported they would vote for a candidate with this message over a conservative candidate promising to cut government waste and “revive the American dream by curbing big government.”

Trump and his team will work hard to keep his political outsider brand alive. Ongoing wars with the mainstream media and the federal bureaucracy will give the story some plausibility, and they will enjoy plenty of air cover from the Fox/Breitbart propaganda machine. Still, it will become increasingly hard for Trump, now that he’s president, to pose as the slayer of “political elites.” He runs the government now, and campaigning against Washington will increasingly seem more like ducking responsibility than brave truth-telling.

Moreover, Democrats can assign clear responsibility for every shortcoming of the federal government to what Paul Ryan helpfully calls our “unified Republican government.” Republicans control every branch of the government, and they will own what they break. The message task for Democrats is to identify the underlying problem not as “politicians” generically, but those politicians who rule on behalf of millionaires and corporate titans. We now have a tremendous opportunity to leverage public disgust with government, while focusing it on its proper target: Republicans’ determination to use government power to enrich the rich and empower the powerful.

Guy Molyneux is a partner with Hart Research Associates, where he conducts public opinion research for labor unions and other progressive causes.

Summer 2017 The American Prospect 37

Democrats Need to Be the Party of and for Working People

And they can’t retake Congress unless they win over white workers.

By Robert G rif f in, Joh n Ha l pin, a nd R uy Teixeira

S

ince November, progressives have engaged in many solid post-election audits seeking to explain how the Obama coalition was narrowly supplanted by Donald Trump’s ethno-nationalist wave of white working-class support. Analysts have explored the relative balance of economic versus racial factors; the breakdown in polling, field organizing, and message development; and the role of campaign-specific mistakes and external interventions by the FBI, WikiLeaks, and the Russians. In an election decided by small margins in a handful of states, each of these factors arguably played a role.

Unfortunately, this process has led to some unfruitful debates about whether progressives should double down on the Obama coalition voters, reach out more to white working-class voters, or appeal more to independent and conservative-leaning suburban whites.

When a party narrowly loses the Electoral College it successfully won in two consecutive presidential cycles, and is down hundreds of seats at the state and local level, however, it does not have the luxury of fine-tuning which voters it will reach out to over the next few years.

Democrats need to reach out to all types of voters across a large swath of the country.

The idea that the Democrats should or could afford to ignore white working-class voters, particularly at the state and local level, defies basic political math. Although we’ve written extensively about how the nation’s shifting demographics and ideological attitudes helped to fuel the rise of the Obama coalition, none of these trends preclude the need to build cross-racial and cross-class coalitions in more places.

Younger, more diverse, socially liberal, and Democratic-leaning voters are not evenly distributed across the nation, and even with the long-term expected declines in white working-class populations, these voters alone cannot sustain successful Democratic coalitions going forward.

Democrats do not need to win FDR-level support among white working-class voters, but they cannot afford to lose

38 WWW.Prospect.org Summer 2017

them by margins as high as 30 to 40 points in some key states—as they have in recent elections.

White Working-Class Trends In 1980, the white working class (WWC) composed about 70 percent of the eligible voter population. As a result of the changing racial composition of the country and the rising rates of educational attainment, the next 36 years saw this group decline by 25 points—down to 45 percent of all eligible voters. While the WWC is still the largest race/education group in the country, it ceased to be the majority of eligible voters around 2010.

Figure 1: White Working Class as Percentage of Eligible Voters

1980

2016

■ 80% or more ■ 70%–79% ■ 60%–69% ■ 50%–59% ■ 40%–49% ■ 39% or less

The Wages of Neglect

Whites—including those without college degrees— turned out at a higher rate than they did in 2012.

Turnout in the nation as a whole was up—probably to the tune of about 1.6 points. Two pieces of data point to rising white turnout as the cause—particularly among WWC eligible voters.

Figure 2: White Working class as a percentage of voting age population

■ 80% or more ■ 70%–79% ■ 60%–69% ■ 50%–59% ■ 40%–49% ■ 39% or less ■ no data

First, data recently released in the November supplement of the Current Population Survey—commonly regarded as the gold standard for estimating turnout among specific demographic groups—indicate that white turnout was up overall compared with 2012. Looking at the table below, we can see that this increase in participation was concentrated among non-college whites.

2012 Turnout 2016 Turnout Difference White, Non-College 57.0% 57.8% +0.7% White, College 79.0% 79.1% +0.2% Black 66.6% 59.6% –7.1% Hispanic 48.0% 47.6% –0.4% Asian 47.1% 48.8% +1.7% Other 55.3% 50.4% –4.9%

There is also evidence of rising WWC turnout from election data we have at the county level. Looking at Figure 3, we can see there is a positive relationship between the Figure 3: Change in turnout between 2016 and 2012

by White Working-Class percentage in county Change in county turnout

Neither the 1980 geographic distribution of this population nor the changes since have been homogeneous, however. As you can see in Figure 1, even in 1980 the WWC population was more concentrated in the nation’s interior as well as the Pacific Northwest and deep Northeast. At the time, only two states had an eligible population that was less than 50 percent WWC—New Mexico and Hawaii.

Fast-forwarding to 2016, the 25 percentage-point national decline of WWC voters as a percentage of eligible voters had an impact just about everywhere. However, the change was especially concentrated along the coasts and in those states with economically attractive metropolitan areas, drawing both newer immigrants and college-educated whites.

Using a more detailed geographical breakdown, Figure 2 displays the percent of the voting-age population that is WWC in each county in the United States. Going deeper than the state level, we can see that the highest-concentration counties are clustered in Appalachia, extending northeast (but shying away from the coast) and northwest through the Midwest, Great Lakes region, and the Dakotas.

Although educational projections are difficult, our own calculations suggest that we’ll see declines in the WWC population continue well into the future. Even if we assume that college attainment rates flatten out rather than grow (an assumption that runs counter to current trends), the continuing racial diversification of the nation will cause this group to shrink. We anticipate that the WWC will constitute just 43 percent of eligible voters by 2020, 35 percent by 2040, and 28 percent by 2060.

Despite the demographic decline that has already occurred for this group and the similarly sized decline likely to come over the next 44 years, the WWC maintains a large political presence in America. Why? Although a variety of explanations could be proffered, one of the simplest and most compelling is this: The WWC is very well distributed geographically for the purposes of political influence. They are disproportionately concentrated in swing states, as the maps suggest. But they are also disproportionately concentrated in swing congressional districts. And they are especially concentrated in swing congressional districts within swing states. In Rust Belt states, for example, the typical swing district was 11 points more WWC than the average district across the nation, and 16 points less minority. In short, they live where it counts.

How did these trends affect the 2016 election? We can say a few things with a high amount of certainty.

.10

.05

0

–.05

–.10 0%

20% 40% 60% Percent White Working class

80%

Summer 2017 The American Prospect 39

Figure 4: Estimate shift vs. Actual shift

White working-class voters have

outsized

, clout as they are

disproportionately concentrated in swing states and swing house districts.

Actual shift

.4

.2

0

–.2

–.4

Negative

Simulated shift

Positive

percent of a county that is WWC and the change in turnout between 2016 and 2012. That is, the counties where the voting-age population was largely WWC are also places that saw increases in their turnout, a pattern that suggests WWC turnout was also up this election cycle.

Clinton made gains among white, college-educated voters while Trump gained among white, non-college voters. Multiple sources of data and accounts confirm

that, compared with Romney, Trump improved his margins within the WWC while losing ground with white, college-educated voters. According to the National Election Pool exit polls, these figures were just about a positive 14-point shift and negative 10-point shift, respectively.

Assuming those national figures are true, how much of the county-by-county shift in the vote can be accounted for by combining information about the percentage of the voting-age population that is college and non-college white in a given county with the national-level margin shifts?

Put another way, if we assumed that all white college and non-college voters everywhere shifted by the amount that

Figure 5: Model Residuals of Trump Support

OverEstimate

40 WWW.Prospect.org Summer 2017

UnderEstimate

was recorded in the national exit polls, how well would that line up with the actual change in vote shares we saw on Election Day? As seen in Figure 4, there is a very strong relationship between this simulated shift and the margin shift we actually saw at the county level.

Beyond confirming that these data points from the exit polls seem consistent with the actual results we saw on Election Day, this exercise is also useful because it allows us to see where the model fails. That is, while we see a strong, linear relationship between our simulated shift and the actual shift observed on Election Day, it is not a perfect relationship—the data points in Figure 4 fall both above and below the blue line. The question is, are there geographic regions where this simulated shift systematically overestimates or underestimates the actual shift?

That is, are there areas where we saw a smaller or larger shift to Trump than we would expect given that national margin shift among the WWC and college whites?

Looking at Figure 5, which displays the residuals from the model displayed in Figure 4, we can see that there are strong regional patterns. The areas in red are places where our model underestimated the shift (that is, Trump did better than we would expect given both the national shift among WWC and college whites and the proportions of these two groups in the county), while the areas in blue overestimated the shift (that is, Trump did worse than we would expect).

As can be seen, there is a significant underestimation of Trump’s gains relative to Romney in the Northeast, the Midwest, the Great Lakes region, and the Dakotas. The relatively low levels of nonwhites in most of these counties, particularly as you get away from the coastal areas in the Northeast, means it is less likely that a change in these populations’ behaviors (turnout or vote choice) could account for this underestimation. This implies that Trump in these areas either a) had larger shifts in his direction among whites, probably due to relatively large margin shifts among white non-college voters, b) benefited from higher relative turnout from WWC populations, or c) some combination of both.

In contrast, the South was generally a region where we saw smaller actual margin shifts than we would have expected given the data from the exit polls. There are a variety of ways to make sense of that data, but the most straightforward explanation is probably the correct one: This was a region of the country where whites were already conservative enough that they couldn’t realistically shift their vote margins further rightward to the degree we observed at the national levels.

The Southwest, California, and Texas are home to some of the most Hispanic counties in the country. Where we see strong blue patterning, this could suggest a bit of a counterpunch by Hispanics, with potentially higher His-

The Wages of Neglect

panic turnout and vote margins offsetting the expected gains we thought we would see given the vote-choice shift among whites. Additionally, we might be seeing something similar to the South—a white population that is already so conservative (though not in coastal California) that it didn’t change as much as whites nationwide.

That said, there is also a strong red streak of underestimation coming up from the southern tip of Texas, hugging the border westward, and extending up into New Mexico.

Puzzlingly, we can see in Figure 6 that these are actually some of the most heavily Hispanic counties in the nation.

How do we make sense of this given the relationships we discussed in the previous paragraphs? Interestingly, the same rural-urban divide that we’ve long recognized as an important cleavage in the white population might have played a role here. Specifically, while Trump likely did poorly among Hispanics as a whole, it’s possible that his margins were somewhat better among this group’s rural populations, a finding supported by analysis of precinct data in Texas. Those highly Hispanic counties that we also identified as having smaller shifts than we’d expect generally have relatively low population density.

As we head into the Pacific Northwest we notice a strong blue pattern of overestimation in Washington and Oregon despite large white populations. This is in stark contrast to its counterparts in the white and rural counties of the Northeast. It’s possible that college and non-college whites in this notably progressive region of the country shifted, respectively, further away and not as hard toward Trump.

Additionally, as we can see in Figure 7, this was also a region of the country where a significant portion of the vote went toward third-party candidates. To the extent that Clinton lost ground compared with Obama in 2012, it would appear to be the case that many voters shifted toward Gary Johnson and Jill Stein.

Lastly, Utah is undoubtedly the political outlier of the 2016 election. During the Republican primary, Trump was denounced by Mitt Romney and faced a conservative and Mormon independent candidate, Evan McMullin, who captured an impressive 21.3 percent of the vote. Trump underperformed spectacularly in this state and, as a result, our simple model overestimates the gains he should have made given the demographic composition of the state.

Strategy Going Forward What do these preliminary findings tell us about Democratic Party strategy and coalition-building in the Trump era?

For starters, rather than debating whether Democrats should appeal to white working-class voters or voters of color—both necessary components of a successful electoral coalition, particularly at the state and local level—a more important question emerges: Why are Democrats losing

Figure 6: Percent Hispanic by county

■ 70% or more ■ 60%–69% ■ 50%–59% ■ 40%–49% ■ 30%–39% ■ 20%–29% ■ 10%–19% ■ 0%–9% ■ no data

Figure 7: Third party vote by county

■ 10% or more ■ 8.0%–9.9% ■ 6.0%–7.9% ■ 4.0%–5.9% ■ 2.0%–3.9% ■ 0.0%–1.9% ■ no data

support and seeing declining turnout from working-class voters of all races in many places?

This is just a hypothesis, but in an era of widespread political cynicism, economic and cultural anxiety, and distrust of both business and government, the Democrats allowed themselves to become the party of the status quo—a status quo perceived to be elitist, exclusionary, and disconnected from the entire range of working-class concerns, but particularly from those voters in white working-class areas.

Rightly or wrongly, Hillary Clinton’s campaign exemplified a professional-class status quo that failed to rally enough working-class voters of color and failed to blunt the drift of white working-class voters to Republicans.

The Democrats’ strength on social and cultural issues

Summer 2017 The American Prospect 41

Robert Griffin is a senior policy analyst at the Center for American Progress, focusing on demographic change and American political behavior. John Halpin is a senior fellow at CAP focusing on political theory, communications, and public opinion analysis. Ruy Teixeira is a senior fellow at CAP. His new book is The Optimistic Leftist: Why the 21st Century Will Be Better Than You Think.

helped them build a national popular-vote majority with high levels of support in deep-blue cities and states. But after eight years of Obama, Democrats were simply unable to make a credible case to working-class voters of all races, in the states and regions that mattered most, that they could deliver on working-class voters’ core economic needs or represent their values and concerns.

Donald Trump played this card perfectly, first taking over his own sclerotic party and then successfully stitching together a targeted Electoral College victory by promising serious change and embodying a completely different approach to politics than either traditional Democrats or Republicans could offer.

Examining the Center for American Progress’s postelection survey, a full 50 percent of Trump voters said the most important influence on their vote in 2016 was that they wanted “to vote for Trump and the chance to shake up the political establishment,” compared with 29 percent who voted mainly for the policy agenda of the Republicans and another 21 percent who said they voted mainly against Clinton. A similar percentage of Trump voters (50 percent) said they strongly agreed with the idea that “Ordinary people’s opinions are more honest and correct than those of experts in politics and the media,” compared with only 29 percent of Clinton voters. Although it’s likely these attitudes did not dominate other racial or economic

42 WWW.Prospect.org Summer 2017

considerations that drove people to Trump, the overall conditions for populist voting were clear throughout the entire primary and general election cycles.

Democrats can chew over tactical improvements to their campaigns and outreach, but in the absence of a broad party unifier like Obama, they desperately need to reexamine the public face, leadership, agenda, and ideological approach of the party, given this larger populist context. Voters are in no mood for traditional politics carried out by people they feel are out of touch with their everyday needs and values.

The party needs to rediscover its roots as a working-class party, one that was initially exclusionary of people of color but that today can and must represent the interests and values of working people of all races. As it fights Trump and his brand of divisive right-wing populism, the party needs to bring in more working-class candidates and leaders who can credibly talk with their communities about common economic and social challenges, can forcefully take on the corporate interests that harm these communities, and who can be trusted to fight for the well-being and security of all working men and women.

If not, the Democrats risk ceding the mantle of political change, and possibly losing more elections, to a demagogic billionaire who talks about populist disruption while doing little to help workers and their families, and much to aid his wealthy cohorts.

j o h n m i n c h i l lo / a p i m a g e s

The Party Of Working People: Will blue-collar workers rejoin blue America?

People like these employees of Middletown Tube Works in Ohio will need to be won over.

The Wages of Neglect

Why the White Worker Theme Is Harmful It’s a mistake to racialize an economy that harms the entire working class.

By W illiam E. S p ri ggs “After all, if every economic issue is framed as a struggle between a hard-working white middle class and undeserving minorities, then workers of all shades will be left fighting for scraps while the wealthy withdraw further into their private enclaves.” —barack obama, farewell address, chicago, january 10, 2017

A

fter three losses to Ronald Reagan and George H.W. Bush, a trifecta last accomplished by Presidents Harding, Coolidge, and Hoover, there was much hand-­w ringing among Democrats about the loss of the South and the vanishing loyalty of Southern whites. William Galston and Elaine Kamarck at the Progressive Policy Institute argued that the electoral math made the South the true presidential battleground; that Democrats could not win by being more liberal or hoping to motivate black and poor voters to increase their voter participation.

Thomas Edsall and Mary Edsall similarly warned in the pages of The Atlantic that the South was key, and it was lost because the liberal orthodoxy was too tied to race, and out of touch with white working-class voters.

“Liberal” candidates like Tom Harkin, Dick Gephardt, and Michael Dukakis were out. Their message was deemed too Northern, elite, and alien to the needed Southern white voter. In was a candidate who could rebrand the Democratic Party and break liberal orthodoxy, proving the party could be tough on crime and defense, and reinvent welfare and the social state. This turned out to be Bill Clinton. Now, the defeat of Hillary Clinton has once again caused Democrats to argue about what is needed to win the white vote.

Countless articles have focused on what Democrats have done wrong. And much of the theme remains the same as in 1989—that there is a noble white worker who has been betrayed. Here is how the Edsalls portrayed one such voter back in 1989: “You could classify me as a working-class Democrat, a card-carrying union member,” says Dan Donahue, a Chicago carpenter who became active in the campaign of a Republican state senator in 1988. “I’m not

a card-carrying Republican—yet. We have four or five generations of welfare mothers. And they [Democrats] say the answer to that is we need more programs.

Come on. It’s well and good we should have compassion for these people, but your compassion goes only so far. I don’t mind helping, but somebody has got to help themselves, you’ve got to pull. When you try to pick somebody up, they have to help. Unfortunately, most of the people who need help in this situation are black and most of the people who are doing the helping are white. We [white Cook County voters] are tired of paying for the Chicago Housing Authority, and for public housing and public transportation that we don’t use. They [taxpayers] hate it [the school-board tax] because they are paying for black schools that aren’t even educating kids, and the money is just going into the Board of Education and the teachers’ union.”

As President Barack Obama warned in his farewell address, this depiction of whites as hard-working, noble, and beset (compared with whom?) is nowhere to start a dialogue about an economy in which the real problem is that all economic gains have gone to the top 1 percent. The language presumes that there are not black workers who lost out to trade deals that sent thousands of auto-parts jobs from Flint, Michigan, to Mexico or shut steel mills in Baltimore, Maryland. Richard Trumka, president of the AFL-CIO, echoed Obama on the risks of reinforcing Trump’s cynical manipulation of race and the white working class: Anyone who talks about dividing people in the country as a solution is a threat to the country, to democracy, the economy, and to working people, and we take every one of those seriously.

Oddly, much of the hand-wringing comes after victories

by Presidents Clinton and Obama, each of whom demonstrated both the complexity of the white vote and the fact that the black vote matters. A core challenge is that many voters misunderstand basic economics, leading them to vote against the interests of working America as a whole.

Summer 2017 The American Prospect 43

Working-Class Rainbow: All workers—black and white—benefit from union bargaining power in the fight for economic justice.

tect the income of working-class American families. Yes, it was an entitlement, and proudly so. Social Security was first denied to most black Americans, but then extended.

Aid to Families with Dependent Children (AFDC) was a core part of Social Security. Clinton’s view that single mothers should be written out of the act—for that is what the end of “welfare as we know it” meant—was not viewed as an attack on working people. But it was. Black women, who have historically had the largest labor force participation rate among all racial groups, and who work more hours than any racial group among women, were stigmatized as being made lazy because they finally had access to that part of the Social Security Act which had initially been denied them when it was passed.

Temporary Assistance for Needy Families, the feeble successor to AFDC, removed a class of workers from Social Security protection. Because of the “Nannygate” scandal surrounding Clinton’s attorney general nominee, protections for domestic workers within the Social Security Act

44 WWW.Prospect.org Summer 2017

were watered down. Despite the ravaging effect of the Reagan-era downturn on unemployment insurance, the Clinton administration offered little to repair a state-based system that had gone bankrupt and then refinanced itself by cutting access to benefits and benefit levels.

The hard reality of today’s level of inequality is this: For an increasing share of the population—black and white—the market no longer works to serve basic needs like housing, health insurance, child care, or college education. As the share of income held by the middle 60 percent declines, the top 10 percent’s share continues to grow, and within that, the top 1 percent.

The effect of heavy concentrations of money in fewer hands means that market-based allocations of resources are dictated by a smaller set of decision-makers. Businesspeople react to where the money is, whether they are home-builders, college presidents, or day-care providers.

In the market, price is used as the rationing device, and prices follow where the money is.

When the middle class dominated the economy, it meant that prices for key personal investments followed increases in the incomes of the middle class. The government stepped in with housing, health, and education policies to subsidize those in the bottom 20 percent whose incomes were not keeping pace, and who would be rationed out of housing, health, and education by a market outcome.

Worsening income inequality meant rising demands on government programs to ensure fair access to health and education, as prices rose faster than low income. Through the 1990s, the effect of discrimination made blacks synonymous with the bottom 20 percent, as they were overrepresented in the bottom income group.

What has happened to more whites now is that the market has moved past them as well. Pricing for child care and college education, essentials for their children, are outstripping their income growth; instead, prices are tied to the growth in income for the top 1 percent in the case of college tuition. And whites in the bottom 20 percent of income, who hold considerably more wealth than blacks in any part of the income distribution, can no longer self-insure themselves against the bumps in the economy.

As it took almost 40 years to get to this point, in the near term no recipe of policy fixes will sufficiently remedy the effects. Democrats need to focus on reversing those long-term trends, but also must have something to offer workers now. But every year that Trump is in office, that goal becomes more difficult.

Union representation, a key element in reversing those trends, continues to fall. More states are likely to adopt “right to work” laws. It will be increasingly difficult to rebuild workers’ voice in deciding how corporate output

m a r y a lta f f e r / a p i m a g e s

Many Americans still hold the view articulated by the Edsalls’ late-1980s white voter that government is not the solution. And their misunderstanding has been reinforced by actions of recent presidents.

One of those was Bill Clinton. The pursuit of white voters

by Clinton led to attacks on the Social Security Act, first on the premise that budget discipline was more important, and second on the assumption that Social Security’s aid to the poor was too generous and too much of a handout to black women. Clinton supported partial privatization of Social Security pensions. Even Obama, pursuing deficit cuts, flirted with cuts in the cost-of-living formula.

The Social Security Act, let’s recall, was intended to pro-

The Wages of Neglect

will be divided between wages and profits. That is the greatest source of the rising inequality. The hollowing out of the middle is not the result of automation. Rather, it reflects the relative advantage of those workers more closely tied to management, who squeeze down the income share for the middle and below.

What Reagan achieved in the 1980s was the illusion that by letting the floor fall, the middle could be protected.

Unfortunately, too many white workers still have a view of the economy fed by the Reagan framework of government’s role. The unabated concentration of income will make after-tax methods of redistribution more vital so that Americans can have access to housing, education, and health. The Affordable Care Act, a market-based approach to health access, is one example where the fix is inadequate to rising income inequality, and made worse because it naïvely assumed that states would expand public access to address the gap in affordability.

Under Trump, race will complicate the effort to devise palliatives to rising inequality until more effective remedies can take effect. His dismantling of anti-­ discrimination offices within the federal government will create new downward pressures on an already stressed black working class. And the decline in union membership is more dangerous to black workers, who have higher union density than white workers and who rely far more than whites on union bargaining power to get higher wages. Further, black union density is more heavily reliant on publicsector bargaining than is true for whites, and public-sector unions are a target of Trump, who will abet the attack on public-sector unions taking place at the state level.

Under Trump, the gap between the experience of black and white workers will grow. Trump has already changed the political discourse. He has revived a strain of Southern populism that allows for asserting white privilege.

For Democrats, the problem with language that emphasizes the white working class as a separate problem from rising inequality of income and wealth is that it will racialize the debate rather than emphasizing the common assault on all who are not rich. It evokes the negative part of Bill Clinton’s presidency. Hillary Clinton had a hard time convincing young black workers that welfare reform and mass incarceration weren’t key to the Clinton legacy. The lack of black enthusiasm for Clinton is as much a part of the story of 2016 as the enthusiasm of white voters for Trump.

Further, progressive forces in the Democratic Party have been too uncritical of Bernie Sanders’s inability to lay the proper foundation with the party’s African American base ahead of the primary season. It was curious during the 2016 primary season to see Republicans all hopped up about the “SEC primary” (so-called because the Southern

states involved have flagship universities in the Southeastern Conference), but no mention among the Democrats of the SWAC primary (the Southwestern Athletic Conference, a complementary athletic conference of public historically black universities).

So, while in the fall of 2015 Republicans fawned over attending games between the University of Alabama and Auburn, not a peep was heard on the need for Democrats to be at a game between Alabama State and Alabama A&M. Black voters often determine the victor in the Southern Democratic primaries, but spending time in Iowa and New Hampshire would be a likely outcome of a party worried about white working voters.

Democrats need to spend more time developing a frame to combat inequality. They need to do a better job of explaining that income inequality is a threat to economic growth. They need to be spending time helping Americans take the blinders off and see that workers, of all races, are being given the shaft by a system where corporate greed has become an elite “entitlement.” They need to pull the Band-Aid off a false sense there is some white privilege that can spare some workers the wrath of America’s war on working people. They must fess up to their quiet, and sometimes vocal, support of an agenda that attacked America’s workers. They need to stop believing the problem confronting American workers is that they are uneducated or unskilled. They need to stop defining the white working class as the less-educated. Those are the perennial excuses meted out to black workers. Young black workers reacted angrily in 2016 to a perception that their pain was being ignored. They didn’t vote for Trump, but Clinton lost as much because they didn’t vote for her either as Trump won because white voters voted for him.

The Democrats won’t solve their electability issues repeating the debate about white voters that they had in the late 1980s. They need to focus on the urgency of the effect of income inequality on American democracy. They need to sound the alarm. And they need to wake up and see who they are in bed with. The power elite of the party think they have freed themselves of a dependency on union support. But the Wall Street vision of the economy is poison for workers of all races and for Democrats.

When the Republican Party of the 19th century cut its deal to end Reconstruction and concentrate on winning the white vote, it launched the Gilded Age and the unremittent growth of inequality that collapsed in the Great Depression. It was accompanied by a Southern populism that entrenched a harsh racial code. Trump’s victory puts us within reach of repeating that mistake in history. Democrats need to be wary, and shrewd. How they handle this could entrench the dystopia of more Trumps—or create a new multiracial coalition of class uplift.

Workers of all races are being given the shaft by a system where

corporate

greed has become an elite entitlement.

William E. Spriggs is a professor of economics at Howard University. He served as assistant secretary for policy in Obama’s Labor Department and was executive director of the National Urban League’s Institute for Opportunity and Equality.

Summer 2017 The American Prospect 45

Tilting at Windmills

Why the green jobs promise is still unfulfilled

By Joan Fitz gerald

C

leveland has been trying to develop offshore wind turbines on Lake Erie since 2004. After many false starts, construction on a pilot program will start in 2018, helped along by Project Icebreaker, which will allow year-round production in the partly frozen lake.

Should this six-turbine wind farm on Lake Erie be successful, a new wind-powered energy grid could be developed along the southern shores of all the Great Lakes.

The government’s National Renewable Energy Lab estimates that more than 100,000 megawatts of wind energy could be generated on the Great Lakes. That, in turn, offers the potential for thousands of good jobs in the manufacturing supply chain for turbines, their components, and maintenance. The American Wind Energy Association estimates that wind power has already stimulated 3,000 jobs and $900 million in wind investment in Ohio.

But a closer look suggests how offshore wind epitomizes the unrealized promise of economic redevelopment policies for America’s heartland based on renewable energy. For starters, China has a serious industrial and targeted trade policy for capturing global markets and supply chains in wind (and solar), and the United States doesn’t. China subsidizes production of turbines, plays hardball with parts suppliers, and does whatever it takes to capture market share. European government policy is more consistent than ours in creating a market both for wind energy and for wind-turbine producers.

By contrast, the United States government shuns national industrial policies, uses renewable energy subsidies intermittently, does not coordinate national energy policy with local and regional economic development efforts, and is reluctant to press China hard even when the Chinese violate basic trade norms. As a consequence, regional development policies such as the Lake Erie wind turbine effort are left to local and state governments and their industry partners, who often get steamrolled by the Chinese. Thus, the fantasy of combining a green energy transition with creation of new domestic industries and jobs has not been fully realized. Wages in former industrial powerhouse states like Ohio continue to languish, leaving their workforce as Trump-bait. This is a pity, economically as well as politically, because the potential is immense.

46 WWW.Prospect.org Summer 2017

The Long and Winding Road from Idea to Turbines in the Lake Soon after arriving as president of the Cleveland Foundation in 2003, Ronn Richard began exploring offshore wind on Lake Erie as an economic development engine for this declining manufacturing city. The foundation funded feasibility studies that were encouraging enough for it to underwrite an initiative to create an advanced energy cluster in northeast Ohio. The effort started with a $200,000 grant to the Cuyahoga Regional Energy Development Task Force to examine the legal, technical, environmental, and financial issues involved in developing offshore wind farms. The foundation supported wind more broadly by granting $3.6 million to Case Western Reserve University’s Great Lakes Institute for Energy Innovation to research energy storage, and $250,000 to the Lake Erie Energy Development Corporation (LEEDCo) to coordinate a demonstration project.

LEEDCo, established by Cuyahoga and Lorain Counties, the City of Cleveland, and NorTech Energy Enterprise, also aimed to promote the development of offshore wind energy along the Ohio coastline of Lake Erie. Lake and Ashtabula Counties later joined, as did Erie County in Pennsylvania in 2015. Dave Karpinski, vice president of operations at LEEDCo, cites a long-term goal of generating 20 percent of Ohio’s electricity from offshore wind— which would only be 10 percent of the capacity that could be produced. The first step would be the proof-of-concept pilot program to demonstrate that a turbine could function in the lake.

While offshore wind is well established, development on Lake Erie presents a challenge because the lake freezes.

If you think of a wind turbine as a big sail on a mast, the problem is that it wants to bend in the wind. So, it needs a strong foundation. On land, turbines usually are embedded in a huge concrete block. The towers of offshore turbines in the ocean are anchored into heavy steel tubes driven as much as 100 feet into the seabed and fixed with concrete.

But Lake Erie is not very deep and has a shallow bedrock floor with clay underneath, which could not support a turbine adequately. There would be several false starts before solving this problem.

The Wages of Neglect

monap / istock by get t y

In 2010, LEEDCo selected a partner, Freshwater Wind, and partnered with some 20 companies internationally to continue developing the pilot. By this time, however, the political winds were shifting. Several state economic development programs that promoted renewable energy during Democrat Ted Strickland’s tenure as governor were eliminated when Republican John Kasich was elected governor in 2010.

Under Obama, the federal Department of Energy (DOE) kept the project alive. At the end of 2014, DOE gave LEEDCo $3 million to continue its engineering work. In May 2016, LEEDCo received $40 million from DOE , to be delivered in three smaller grants as engineering, permitting, and construction goals are met. The total cost for the pilot project, including $1.7 million from the Cleveland Foundation, is between $120 million and $128 million, about a third of which will be from private investors.

With first-mover advantage, Ohio’s manufacturers could supply wind production as it expands across the Great Lakes, notes Lorry Wagner, LEEDC o’s president. “This is about building an industry from the science and engineering to production,” he says. The state and the Cleveland Foundation gave several hundred thousands to WIRE-Net, an economic development organization, to work with manufacturers in retooling to build a wind-energy supply chain.

And it seemed to be working—General Electric and Siemens signed contracts for parts including lighting, castings, gears, and fasteners.

But the expected bonanza evaporated quickly due to four forces that interacted to undermine Ohio’s manufacturers: China entering the wind market and violating World Trade Organization agreements; falling prices for natural gas due to fracking, making wind less price-competitive; ongoing subsidies to gas for fracking and intermittent tax breaks for wind and other renewables; and a recession. Given the shifting political support at various levels of government and the threat from rival producers that benefit from more consistent government policy, it’s a small miracle that the Cleveland project is still alive.

The China Complication China entering the wind market was a major blow to Ohio manufacturers who had invested heavily in retooling to become suppliers to turbine manufacturers. Beijing’s policy of heavily subsidizing manufacturers that moved to China and requiring them to source parts locally caused turbine producers based in the United States to source parts in China. In June 2006, GE opened an assembly plant in China to assemble its 1.5-megawatt turbines. By

September 2006, GE entered into agreements with Chinese producers such as Nanjing High Speed & Accurate Gear Company (NGC) to jointly develop gearboxes for GE’s 1.5-megawatt wind turbines. This kind of coercive partnership violates WTO rules, but the U.S. government generally does not resist, and GE, as a partner, does not complain.

Then the 2008 recession reduced electricity demand.

And while the market was in a lull, the big three Western wind-turbine producers in the United States—America’s GE, Germany’s Siemens, Denmark’s Vestas—and other

turbine manufacturers producing in the US moved their global supply chain to take advantage of capacity coming online in China. Meanwhile, unconcerned by recession, China continued its massive purchases of wind turbines and partners for its network of new foundries, forges, and machine shops. “Original equipment manufacturers, starting with GE, began pulling out of their U.S. supply chain at the end of 2008 and transferring the components business to China,” says Ed Weston of WIRE-Net. GE did not respond to requests for comments. In June 2009, GE agreed to produce 900 2.7-megawatt wind-power gearboxes for China’s A-Power Energy Generation Systems in a plant that would become GE’s manufacturing center for wind-turbine gearboxes in Southeast Asia.

This wasn’t just an Ohio story, nor was it a story limited to parts suppliers. Several European turbine producers, such as Gamesa (Spain), Vestas, and Siemens set up plants in the United States in 2007 and 2008 when natural gas prices were high. Although there were no domestic content

Blowing In The Wind: Offshore wind power is well established in other countries; these turbines are outside Copenhagen.

Summer 2017 The American Prospect 47

China’s coherent energy and industrial goals offer a

depressing

contrast to America’s mash-up of policies that seem as unpredictable as the wind.

laws in place, there were hopes that these turbine producers would locally source many of the approximately 8,000 parts that go into a turbine. But global overcapacity, fed

by Chinese producers, crushed many of them.

In 2006, Pennsylvania invested heavily in three Gamesa turbine plants. Only one is still open, employing about a tenth of its peak total, and mostly in maintenance of existing turbines. Nordex ended U.S. production in Arkansas in July 2013 after only two years and since then has been supplying the U.S. and Latin American market from its home base in Germany. Vestas, Siemens, and GE are all that’s left in U.S. turbine production, and more than 80 percent of the total value of parts they use are imported, according to Weston.

China’s coherent energy and industrial goals offer a depressing contrast to America’s mash-up of policies that seem as unpredictable as the wind. Once China decided to move away from coal, the government moved fast, leading to unprecedented growth in wind production and manufacturing. Beijing’s goal is to generate 15 percent of the country’s energy from renewable sources by 2020. In 2015, China moved past the United States in wind installations, adding almost 29 gigawatts compared with the United States’ 8.6. Cumulative capacity has increased from 1.26 gigawatts in 2005 to 169 gigawatts, compared with 82 gigawatts in the United States at the end of 2016.

China invested in its leading producer, Goldwind, and quickly developed a domestic supply chain, aided by policies including 70 percent local-content requirements, a feed-in tariff requiring power companies to buy the electricity produced, reductions in the value-added tax, and a Renewable Energy Fund financed by a surcharge on utility bills. By the end of 2015, China’s Goldwind became the world’s largest wind turbine manufacturer, in front of number two Vestas and number three GE. While Goldwind turbines have been used in several U.S. wind farms, its move to number one is fueled by rapid growth in the Chinese market. China’s policies have worked well—five Chinese companies were among the top ten wind-turbine producers in 2016.

In September 2010, the United Steelworkers union filed a petition with the Obama administration asking the United States to bring a case against China for violating WTO rules by subsidizing wind turbines and other clean energy equipment with free land and low-interest loans. The complaint found that these practices cost U.S. jobs in steel production for turbine towers, turbine assembly, gears, and other components. The complaint also challenged China’s practice of requiring U.S. clean energy equipment producers to license their technology to Chinese partners as a condition of entering the Chinese market and its export restrictions on rare earth elements used in the production

48 WWW.Prospect.org Summer 2017

of wind turbines. Because trade law requires governmentto-government negotiation, an administration must balance pursuit of such complaints against other diplomatic objectives. The United States did press Beijing for some concessions. In June 2011, China closed its Special Fund for Wind Power Equipment Manufacturing program, which provided grants to Chinese wind turbine manufacturers that used Chinese-produced parts and had granted several hundred million dollars to Chinese companies since 2008. But China’s coercive partnerships requiring local content continued, as did the rest of its extensive system for industrial targeting and offering cheap government land and capital.

Tilting Toward Fossil Fuels It’s instructive to compare government subsidies for fossil fuels, which are permanent and immense, with subsidies for wind energy, which are modest and intermittent. Federal energy subsidies for domestic gas and oil production began in 1916 and continued through the 1970s. The oil industry begins with a huge tax subsidy, known as the depletion allowance. The Department of Energy began funding research into fracking in 1978 and maintained it for at least 14 years, totaling $137 million. In 1980, Congress passed a generous tax break to stimulate unconventional natural gas drilling, providing drillers $10 billion between then and 2002. These subsidies have continued to the present, totaling $470 billion in tax breaks over a century.

Despite record-breaking profits, the subsidies continue.

And if that’s not enough, the 2003 Bush-era energy bill exempted fracking from EPA drinking-water regulations, and in 2005 exempted it from parts of the Clean Water Act. Despite the huge advantage fossil fuels have had in federal subsidies, wind energy has become cost-competitive. But while oil and gas subsidies were permanent, federal renewable subsidies for wind and solar have been intermittent.

The production tax credit, first enacted in 1992, was authorized for one or two years at a time, with frequent renewals.

Each time its renewal was in doubt, investment in wind and other renewables dropped dramatically (see figure).

The production tax credits will be phased out gradually by 2019. Renewables received about one-fifth of the support of oil and gas during the early years of development, when strong investment can make a big difference. Currently, wind energy, at $32 per megawatt hour, is competitive with natural gas at $48 per megawatt hour. What this tells us is that wind energy is economically viable as a source of energy. But if wind is to create additional manufacturing jobs, what is needed is more coherent policy to make sure the United States becomes a major manufacturer of wind turbines and components. Unfortunately, this goal also runs into politics.

The Wages of Neglect

Impact of production tax credit expiration and extension on annual installed wind capacity

ptc expiration and extension

12K ptc extension

annual u.s. wind capacity (megawatts)

14K

10K 8K 6K 4K ptc expiration and extension 2K

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1996

0

Source: Union of Concerned Scientists

In 2014, Governor John Kasich signed legislation that put a three-year freeze on the state’s push toward renewable energy adoption. A second Kasich-approved law increased the distance turbines must be located from abutting properties, which stopped the construction of 11 previously approved wind farms. Fortunately, in December 2016, Kasich vetoed a bill to maintain the freeze, citing the jobs and advanced technology being created in both the wind and solar industries.

So, the state policy environment has improved. It is likely that the offshore towers will be produced domestically, says Wagner. And offshore foundations will require lots of steel, fabricating, and welding. Assembly has to occur locally and time will tell how much of the supply chain is in Ohio and the Midwest.

In Search of a National Policy for Wind Currently, there are 88,000 wind jobs, with about 21,000 in the manufacturing supply chain, about 38,000 in construction, development, and transportation, and 19,000 in operation and maintenance. The potential is many times that, especially if the United States remains competitive globally. The DOE estimates high levels of domestic content in the three largest components of a turbine: more than 85 percent for nacelles (the housing for the gearbox and other generating components); between 80 percent and 85 percent for towers; and between 50 percent and 70 percent for blades and hubs. But it is difficult to track the rest of the vast supply chain. The DOE estimates less is made in America than the American Wind Energy Association (AWEA) does. The difference, as someone from the Lawrence Berkeley National Labo-

ratory told me, is that “the AWEA is permissive in how they define a supplier.”

The bottom line is that the United States is a net importer of wind-turbine equipment. With only three major manufacturers—GE, Vestas, and Siemens—competition has become fierce and imported components, outside the three mentioned above, are cheaper.

Nationally, the biggest growth potential for wind is in the 16 gigawatts of electricity in development in 23 East Coast offshore wind projects. The DOE estimates that wind energy off the Atlantic coast could supply about 35 percent of the country’s electricity. As for jobs, a lot is riding on the assumption that offshore turbines and parts will be produced in the United States.

For a contrast with Ohio, consider Maryland, which is aggressively seeking to develop clean energy and to capture the jobs associated with it. In January 2017, the state legislature overrode Republican Governor Larry Hogan’s veto of legislation to raise the renewable portfolio standard from 20 percent to 25 percent by 2020. The bill also sets aside $10 million to assist small businesses in retooling to participate in the supply chain.

As part of the state’s 2013 Offshore Wind Energy Act, Maryland offers developers 20-year offshore renewable energy credits that are worth about $130 per megawatt hour generated to incentivize as much as 500 megawatts of offshore wind. The credits give the state leverage in extracting job benefits.

Maryland’s Public Service Commission is requiring that the developers of two offshore wind projects—Deepwater (proposing Skipjack, a 120-megawatt wind farm, up to 17 miles off the coast of Ocean City) and US Wind— build a supply chain in Maryland. US Wind and Skipjack have committed to investing $51 million and $25 million, respectively, in a steel fabrication plant. The companies also committed to use ports in Baltimore for marshaling and Ocean City for operations and maintenance. They are jointly investing $40 million into Tradepoint Atlantic, a 3,100-acre shipyard east of Baltimore, which can support the cranes that will load onto ships the towers, blades, and nacelles for the turbines. Finally, each developer is contributing $6 million to the Maryland Offshore Wind Business Development Fund. The projects will create 9,700 new direct and indirect jobs and contribute $74 million in state tax revenues over 20 years.

Maryland is a model for what a national industrial policy on renewable energy could look like. Like China, the United States needs to create systemic links with industrial, trade, and clean energy goals, and create policy to achieve them. And that needs to occur at the federal level.

The wind is fickle. That’s a problem technology can solve.

Fickle policy is far more disabling.

Joan Fitzgerald is a professor of urban and public policy at Northeastern University. Her new book, Greenovation: Urban Leadership on Climate Change, will be published in 2018.

Summer 2017 The American Prospect 49

Kansas, Sam Brownback, and the Trickle-Down Implosion

The Kansas governor’s attempt to create supply-side nirvana in Middle America not only failed to grow the economy—it created a crippling crisis of government that led to a statewide rejection of his politics.

By J u s t in m ille r

N

ear midnight on Tuesday, June 6, a number of Republicans in the Kansas legislature did something that few other elected Republicans had done in years: They acted responsibly. Joining with Democrats, they voted to roll back the huge tax cuts that Republican Governor Sam Brownback had inflicted on the state, which had devastated schools and other essential services while also depressing the state’s economy. But after five years of this exercise in trickle-down, the damage had been done.

The Robert B. Docking State Office Build-

ing looms large amid the sparse downtown Topeka landscape. Built along modernist lines in the 1950s, when government bureaucracy began to expand across the country, the simple concrete and glass structure provides a stark contrast with the Greco-Roman-style Kansas state capitol that has stood across the street since the late 19th century.

The Docking building was at one time home to most of the state government’s agencies, such as the Department of Revenue, the Department of Children and Families, and the Alcoholic Beverage Control. Today, the 12-story, 500,000-square-foot building sits nearly vacant—a laminated white sheet of paper on the door reads: “No More Public Services In This Building.” One by one, the alphabet soup of state agencies that once occupied the building moved out, most relocat-

50 WWW.Prospect.org Summer 2017

ing to rented space in private office buildings.

The decaying, hollowed-out building stands as a grim testament to the blunt-force trauma that Brownback’s 2012 tax cuts visited on his state, and to the ensuing budgetary crises that led lawmakers to cut government services to the bone.

For years, Brownback has called for Docking to be demolished rather than renovated. It’s an apt metaphor for his approach to government.

The state’s health-care system teeters on the verge of catastrophe, as Brownback’s privatization of state Medicaid services and further refusal to expand Medicaid has squeezed low-income Kansans and health-care providers alike. Dozens of struggling hospitals across the state are on the verge of closing. “We have to make decisions every day, on which bills to pay. I mean that literally,” one small-town hospital CEO says. Brownback’s decision to cut taxes rather than restore K–12 public education funding has strained both urban and rural school districts, compelling two districts to end the school year early. Meanwhile, he’s ushered in drastic cuts to social services and placed strict work requirements and other limits on welfare programs.

By last year, even Republicans in this heavily Republican state (which Donald Trump carried last November by 21.5 percentage points) had had it with their governor’s insistence on turning the Sunflower State into a Petri dish for radical conservative economics. A number of Republican candidates ousted Brownback supporters in legislative primaries, and this year they teamed

up with the minority Democrats in the legislature (whose numbers increased after last year’s elections) to begin rolling back the Brownback catastrophe. Overturning the governor’s vetoes, which required a two-thirds majority in each house, legislators this June voted to repeal the tax cuts enacted by Brownback and a Tea Party– dominated legislature in 2012.

But the devastation has been profound.

In 2010, Sam Brownback rode the Tea Party

wave into the Kansas governorship, pledging to turn the state into a bulwark against President Barack Obama’s big-government liberalism. By 2012, through aggressive backroom politicking, he pressured hesitant moderate Republicans in the legislature to join conservatives in passing a radical tax plan that eliminated the state’s top income tax bracket, drastically slashed rates, and instituted an outright income tax exemption for limited liability companies—a huge tax break for a tiny segment of the population. Conversely, in a nod to “fiscal responsibility,” the plan did away with a number of tax credits that benefited low- and middle-income Kansans. Moderate Republicans in the Senate had thought they’d be able to engineer a lessextreme version of the cuts while in a conference committee with the House. They didn’t, and days later, Brownback signed into law perhaps the most radical version of trickle-down economics any state had ever embraced.

As part of the plan, Brownback instituted

charlie riedel / ap images

Kansas Governor Sam Brownback at a Johnson County Republican election watch party Tuesday, August 5, 2014

a “March to Zero” provision that would incrementally whittle the income and corporate tax rates down to nothing, while placing a 2.5 percent annual cap on state spending growth.

“Today’s legislation will create tens of thousands of new jobs and help make Kansas the best place in America to start and grow a small business,” Brownback pronounced when he signed the tax cuts into law on May 22, 2012.

But the governor’s push to create voodooeconomic bliss in Middle America never sparked that economic growth. To the contrary, Brownback’s Kansas has produced one of the worst-performing state economies in the country. While the nation has seen 7.6 percent job growth since 2013, Kansas has lagged far behind, with an anemic rate of 3.5 percent. Brownback has blamed the failure to achieve economic growth—and the resulting revenue underperformance—on downturns in the state’s agriculture and oil sectors, which, to be sure, have worsened the crisis on the margins but are not the driving force. Meanwhile, Kansans are fleeing the state in search of greener pastures: A 2015 survey found Kansas to be among the top ten states in the percentage of people packing up and moving away.

Brownback’s promise that the cuts—particularly the LLC exemption—would be “a shot of adrenaline” for the Kansas economy will be written on his political headstone.

The LLC exemption, the crown jewel of the governor’s tax policy, has allowed some 330,000 independent business owners— almost double the original estimates—to avoid state tax on most, if not all, their income, costing the state roughly $500 million in revenue in 2015 alone. A recent report from a team of researchers who scoured Kansans’ income tax returns concludes that the exemption has fueled more tax evasion than job creation.

Though Brownback argued that exempting owner-operated businesses from taxes would increase investment and jobs in the state, the report found no such results. “We can’t, to the best of our ability, find support for real responses in terms of economic activity because of the tax cuts,” report co-author and University of South Carolina economics professor Jason DeBacker says. Instead, the policy drove more people to simply reclassify their income as a pass-through to avoid taxation.

The small-business owners who were the intended beneficiaries suddenly had no tax lia-

bilities each year. But with average savings of about $1,000 a month, according to one estimate, it was hardly enough to hire more workers or expand operations. One lawyer in suburban Johnson County told a Kansas City Star columnist in 2014 that he was saving as much as $10,000 a year—as were the 15 other partners in his practice—while the paralegals and other staffers with no ownership stake were still stuck paying income tax. He told the columnist that he planned to use his tax savings for a family vacation to Cancún. “I’m making out like a bandit, and it’s completely unfair,” he said.

Perhaps the most enlightening example of how the exemption worked came when a public radio station discovered in May 2016 that Bill Self, the head coach of the storied University of Kansas Jayhawks men’s basketball team, was not paying taxes on about 90 percent of his annual $3 million compensation.

While Self pays taxes on the $230,000 annual salary he earns as an employee of the university, he claims himself as an independent contractor for the additional $2.75 million for “professional services rendered,” as radio station KCUR reported. Kansas Athletics, Inc., which operates the university’s college sports, writes a $2.75 million check out to BCLT II, LLC, an entity owned by Self. Thanks to the exemption, Self, the highest-paid state employee, avoids taxation on that income, which would come to about $126,500 each year under the state’s current tax brackets.

Other well-compensated university coaches in the state utilize LLCs as tax shelters as well.

Not even Brownback’s staunchest supporters have argued that Self owns the team or that he has used his tax savings to expand its roster.

What Brownback’s tax cuts have accom-

plished is to have created a crisis of catastrophic proportions for state residents. The tax cuts blew an immediate hole in the $6 billion state budget, as revenue levels fell an astounding $713 million from fiscal years 2013 to 2014.

Those revenue shortfalls have not abated in the years since. To help plug the hole, Brownback has run through all the state’s reserve funds and has increased borrowing, adding $1.3 billion to the state’s debt. “We are essentially the poorest state by now, with no rainy day fund—nothing in the bank,” says Duane Goossen, the former

Summer 2017 The American Prospect 51

52 WWW.Prospect.org Summer 2017

Rural hospitals like the Sumner Regional Medical Center are struggling due to Brownback’s budget cutting.

doesn’t get paid,” Weisgrau says. “People have died while on the backlog.”

Because Brownback slashed the number of state workers who determine Medicaid eligibility, those working on re-certifying recipients were shifted to certifying new applicants. Now, Weisgrau says, nobody is working on redetermination. “Typically if you don’t get redetermined, you get dropped out of the program. We hear reports from the field from providers who are no longer getting paid for those people,” Weisgrau explains.

Last year, the federal Centers for Medicare and Medicaid Services charged Kansas with violating federal compliance laws, stating that its administration of Medicaid was putting people’s health and safety at risk. Brownback’s office dismissed the report as a politically motivated potshot from the Obama administration as it was leaving the White House.

Many of the state’s rural hospitals, which are more likely to rely on Medicaid and Medicare reimbursements rather than private insurance payments, are struggling to stay open. All told, 34 Kansas hospitals are vulnerable to closing.

One of those hospitals is Sumner Regional Medical Center in Wellington, 20 miles south of Wichita near the Oklahoma border. Voters in Sumner County have on multiple occasions voted to tax themselves to help keep the hospital open, most recently in 2016 when they approved a 1 percent sales tax increase.

“We’re in true survival mode, constantly,” the hospital’s CEO told the Kansas City Star.

“If we’re going to go down, we’re going to go down swinging.”

If the Sumner hospital were to close, it could spell disaster for poor and elderly residents who might have a hard time making the trip up to Wichita, even more so for those who face a medical emergency. “Right now, if we lose [Sumner], we have people who live south of that along the Oklahoma border who, by the time an ambulance would get to them and back to a hospital, would have [a trip of] an hour or more,” says Anita Judd-Jenkins, a state representative whose district has three hospitals, two of which, including Sumner, are at risk of closure. “If that were your car wreck or your heart attack, would you not be concerned?”

By prioritizing his trickle-down tax cuts over all else, Brownback has also allowed a long-standing public school funding shortage to metastasize into a full-blown constitutional crisis.

Kansas’s public school system is more reliant on state funding than those of most states.

More than half the state’s general fund is dedicated to funding K–12 public education. For decades, the state and local school districts have battled over funding levels and allocation.

In 2006, Kansas settled a lawsuit with school districts and committed to significant increases in funding over a three-year period.

The state did increase funding, but when the Great Recession hit, then-Governor Mark Parkinson, a Democrat, made deep cuts to the education budget. The cuts were supposed to be temporary, but upon taking office in 2011, Brownback opted for his tax cuts rather than restoring the schools’ funding. Between 2008

k e i t h m y e r s / t h e k a n s a s c i t y s ta r v i a a p i m a g e s

Kansas budget director for both Democratic and Republican governors.

The severely imbalanced budget led Moody’s to downgrade Kansas’s bond rating; three months later, Standard & Poor’s followed suit.

The hit to the credit rating, though, was an inadequate measure of the damage to Kansans’ lives.

Like a number of Republican governors, Brownback refused to expand Medicaid in the state with federal dollars allotted by the Affordable Care Act, blocking 150,000 lowincome Kansans from access to medical care and forcing dozens of struggling hospitals to operate in the red, many on the cusp of closure. Four years ago, Brownback privatized the state’s Medicaid program, arguing that Kansas should get out of the business of providing health-care services, and allow the private sector to provide less-expensive, higher-quality, and more-efficient care. However, the move has largely led to a crisis among beneficiaries and service providers alike, as access to care has become limited and state payouts to providers have been cut time and time again.

But Brownback’s budget cuts greatly compounded the problems created by his failure to expand Medicaid. They compelled the state to neglect the duties it is still in charge of— like enrollment, eligibility, contracts, and performance oversight. “They basically stopped doing all those things,” says Sheldon Weisgrau, director of the Health Reform Resource Project, which educates and assists with the implementation of health reform and ACA services in Kansas. “The functions left to the state can’t get done anymore because the state government has been so hollowed out.”

While federal law requires that states process Medicaid applications within 45 days, it can often take between six and eight months in Kansas. Last summer, the governor’s office claimed there was a backlog of more than 3,000 people waiting to get on Medicaid. That number was eventually found to be closer to 15,000 people. While the state quickly processes low-cost applicants like children and young adults, Weisgrau says, older people who need more care are on the waiting list far longer.

“What we’re seeing is they can’t get declared for Medicaid and thus can’t get into a nursing home; or people get into a nursing home but don’t get approved and the nursing home

and 2013, state school funding fell by 16.5 percent when adjusted for inflation. In 2015, Brownback cut $28 million more from the state K–12 education budget. A month later, he signed legislation that scrapped the state’s long-held school-financing formula, substituting a block-grant system that essentially locked in those cuts for the following two years. Two school districts were forced to end their school year early because they ran out of money.

The failure to restore pre-recession funding has disproportionately impacted urban school districts like Kansas City’s and Wichita’s. The state funding formula includes an “equalization” provision that helps even out funding between wealthy school districts that can rely more on a large base of property tax revenue and poorer districts that can’t. When the school cuts took effect, however, the poorer districts couldn’t take up the slack with higher property taxes.

“Poor districts like ours bore all of the cuts of the recession,” says David Smith, chief of public affairs for Kansas City Public Schools.

Meanwhile, the district was growing, and bringing in more at-risk students, who, in the state formula, are supposed to be weighted for additional funding. Of the district’s 22,000 students, 80 percent qualify for free lunch.

Nearly 45 percent of students are Englishlanguage learners. Smith, who also serves as the district’s lobbyist in Topeka, estimates that his district has lost out on about $120 million in funding that it should have received by the terms of the pre-recession settlement.

In 2010, the Kansas City and Wichita school districts, as well as two more districts in central and western Kansas, sued the state. In 2015, the state Supreme Court ruled in the school districts’ favor and sent the case back to a lower court, which split the case up into matters of “adequacy” and “equity.” Last summer, the legislature addressed the equity matter, which required about $40 million to fix.

That left “adequacy” unaddressed, however.

Soon after the opening 2017 legislative session, the court ruled that the state was nowhere near adequately funding its public schools and ordered the legislature to devise a funding formula that experts estimate would require lawmakers to come up with more than $700 million over the next several years.

By the time Brownback stood for re-elec-

tion in 2014, more than 100 state Republican politicians—including former Senate President Steve Morris, who had presided over the 2012 tax cuts—endorsed his Democratic opponent, then–House Minority Leader Paul Davis.

Brownback insisted all was well, and that his tax cuts were working out just as expected. The full picture of how disastrous the cuts were for the state’s fiscal health had not yet emerged.

“The sun is shining in Kansas and don’t let anybody tell you any different,” Brownback pronounced in a campaign ad. He squeaked out a victory, winning by a bare 30,000 votes.

Just days after his re-election, a team of

Moderate Republicans in Kansas City’s wealthy suburbs led the fight to restore public school funding. revenue forecasters announced that the state would fall $1 billion short of revenue estimates for 2015 and 2016. In December, Brownback proposed $280 million in total budget cuts.

Unwilling to restore tax rates but desperate for revenue, he took nearly $100 million from the highway fund, and reduced the state’s contribution to the Kansas Public Employees Retirement System by $40 million.

Throughout all this, Brownback’s trickledown obsessions have continued to play out.

He has called for regressive increases to the sales tax and higher taxes on alcohol and cigarettes.

At the same time, he continued his war on progressivity, asking the legislature to institute a flat tax—a proposal that garnered just three votes in a clearly fed-up state Senate earlier this year.

That vote reflected a sea change in Kansas politics. Last August, Kansan Republican primary voters across the state supported a group of moderate challengers to more than a dozen

ultra-conservative incumbents in legislative elections. Last November, even as Trump took the state with 57 percent of the vote, Democrats managed a pick-up of 12 seats in the state’s House and one in the Senate. Heading into the January session, there was a new legislature with a class of freshmen determined to undo Brownback’s damage.

The budgetary implications of that damage were very clear. When the new legislators took their seats at the start of this year, they confronted a proposed budget with close to a $1 billion shortfall over the next two years. Soon after the session began, the state Supreme Court announced its ruling that mandated adequate school funding, which required the appropriation of an additional $750 million over the next several years.

The legislatures of the preceding six years had been complicit in creating these shortfalls, but those legislatures were gone. “The [new] legislature looks a lot like it did before 2010,” when there was a stronger bloc of moderates, says Burdett Loomis, a political science professor at the University of Kansas. “People understand that in order to get things done, you have to run through this moderate [Republican]Democratic coalition.”

Observers of Kansas politics will tell you that the state’s two-party system really consists of four core political factions. There are the ultra-conservative Brownback allies, many of whom rode in on the 2010 Tea Party wave or with the governor’s backing in 2012. In the legislature, these Republicans have formed the “Truth Caucus,” the state’s counterparts to the far-right “Freedom Caucus” members in the U.S. House. The second group consists of more traditional conservatives, who in no way can be considered moderate but have soured on Brownback’s experiment and are willing to vote to undo his tax policies to get the state on more solid fiscal ground.

Then there are the truly moderate Republicans, many of them from Johnson County, the state’s wealthiest county, which borders Kansas City and is known for its high-quality public schools. These Republicans have led the battle to restore public school funding, which requires repealing the tax cuts. Last, there are the Democrats, who, with increased numbers and a working relationship with moderates, now have

Summer 2017 The American Prospect 53

In February, the newly empowered coalition of moderates, Democrats, and a handful of fiscally worried conservatives passed legislation that repealed the LLC exemption, reinstituted a third income tax bracket, and increased

rates, a plan that would have raised enough revenue to fill the budget deficit and put the state on the path to balancing the budget. A month later, in an even more uphill triumph, the legislature voted to expand Medicaid in the state.

Brownback promptly vetoed both measures.

The coalition scrambled to whip up the additional votes to override the governor, but failed narrowly on both fronts.

That was a tough introduction to the legislature for Judd-Jenkins, who represents the district with the Sumner hospital. She’s a moderate Republican who ousted the conservative incumbent in the 2016 primary, and she came to Topeka to help fix the state’s mounting fiscal problems by, in part, expanding Medicaid.

When Brownback blocked the expansion, “It was the most emotional day I’ve had in the Statehouse,” she tells me. “We are tasked with [helping] the numbers of people in Kansas that are in need. We take care of each other.

That’s the reason I stayed in Kansas; that’s the values I love about us.

“To live in the denial of those numbers, rather than recognition of those numbers … I don’t understand—I don’t get a concept that wants to not recognize the truth of who we are,” she says.

Senate Minority Leader Anthony Hensley, D-Topeka, left, and House Minority Leader Jim Ward, D-Wichita

54 WWW.Prospect.org Summer 2017

As legislators headed back to Topeka in the first week of May for a “wrap-up session,” the two numbers that echoed through the building’s cavernous atrium were 84 and 27—the number of representatives and senators, respectively, needed to override the governor’s vetoes.

Legislators still needed to pass a budget, and they needed to pass a school-financing bill that would meet the state Supreme Court’s call for adequate funding. To fund both the budget shortfall and the public school system, they were faced with the necessity of passing a tax reform plan even more far-reaching than the one Brownback had already vetoed. Many wanted to undo Brownback’s rate cuts by reinstituting a third bracket, raising rates closer to pre-2012 levels, and most of all, eliminating the LLC loophole. The challenge they faced was how to align enough Democrats and Republicans to vote for a package that was substantial enough to satisfy the former and frugal enough not to dissuade the latter.

Sitting in his third-floor office on the first Monday in May—the start of the wrap-up session—Jim Ward, the Democratic House leader, sounded optimistic about the chances of cobbling together a veto-proof majority. In his first legislative session as the party’s House leader, he was shepherding the largest House Democratic caucus in seven years through one of the most consequential moments in the state’s history. Along with his colleague, Senate Democratic leader Anthony Hensley, he wielded more leverage in the Topeka statehouse than Democrats have had at any prior point in Brownback’s tenure.

I asked if he thought the votes were there.

“Yes, I do,” he quickly replied. “Now, whether they’re here today or next month ... at some point in time, it’ll be who blinks first.”

The optimism wasn’t limited to Ward and his caucus. Many moderate Republicans were fed up with Brownback’s intransigence and eager to get something done—a feeling compounded by the fact that the state’s public schools were now at the center of the political battle.

“There’s a growing group of us who see things differently [than prior legislatures],” Melissa Rooker, an influential moderate House Republican from Johnson County and a longtime public schools advocate, told me on the first day of the veto session. “I just don’t think it

t h a d a l lt o n / t h e t o p e k a c a p i ta l-j o u r n a l v i a a p i m a g e s

more political leverage than at any point during Brownback’s governorship. They’ve sought to get the tax structure as close as possible to pre-2012 levels and ensure that school funding is restored and increased, particularly to the school districts that lost the most to the cuts.

Passing a budget that accomplished these goals was anything but easy, since overcoming a Brownback veto requires two-thirds support in each house, and the House speaker and Senate president were both staunchly opposed to tax hikes. The moderates’ and Democrats’ task was eased, however, by a collapse in Brownback’s popular support. In 2016, a Morning Consult poll found him to be the least-popular governor in the country, with only 26 percent of the surveyed Kansans approving of his job performance. This year, the only governor less popular with his constituents was New Jersey Governor Chris Christie, bogged down in Bridgegate and the anti-Trump backlash.

gets resolved until the House has proven a few to Zero, and reinstituting a third tax bracket times over that, in this veto session, we’re not with higher rates across the board. One facwilling to accept something that will be sub- tor that brought Ward and the Democrats on par and leave us with annual battles—because board was that the bill reinstated a number of we’re tired of it. And it’s time to put the budget tax credits benefiting poor and middle-income back on a sustainable path.”

Kansans (including a child tax credit), which Still, the political gymnastics required to Brownback had scrapped. The legislature also cobble a veto-proof majority were daunting. passed a school-financing plan that would “It’s trying to get a sense for where everyone is direct nearly $300 million more to schools and then running that as an option to see if we over the next two years while tethering future are getting the right sense of the body,” Steven aid to the rate of inflation.

Johnson, a moderate Republican from a small In a matter of hours, Brownback announced town in central Kansas who chairs the House that he would veto the tax rollback. tax committee, told me in the capitol rotunda as it was becoming clear that, once again, House leadership would After Brownback became governor in 2011, economic growth in not bring a tax proposal to vote on the Kansas (red line) fell behind even neighboring Missouri. floor. “This is a year where I don’t think 130 any one of us is driving the bus, so it california is work trying to get together to find

outburst of cheers on the floor when the House vote came in and Brownback’s tax cuts were officially wiped away. There was a quiet murmur as lawmakers talked amongst themselves.

While it was a major relief for the state, it was just the first step on a long path.

“We will need many years to recover, rebuild the fiscal stability that has been wiped out by Brownback’s tax policies,” Rooker told me the day after the vote. “By that I mean, healthy ending balances, catching up on delayed payments, paying off bond debt and raising the capital Kansas needs to maintain and improve our infrastructure.”

Just two days after the cuts were undone, Moody’s revised its outlook for the state from “negative” to “stable,” declaring it a “major step forward.”

The lessons of Sam Brownback’s disastrous experiment have become all 125 where we have the necessary majority.” the more important nationally as Presiu.s.

There was also a sense among many dent Trump, whose economic doctrine 120 is cut from the same cloth napkin on lawmakers that Republican House which Arthur Laffer first sketched his Speaker Ron Ryckman and Senate 115 supply-side curve more than 40 years President Susan Wagle—both staunch ago, tries to advance a similarly radiconservatives who didn’t want to be 110 kansas cal series of tax cuts in Washington. associated with any sort of substantial missouri (Indeed, Brownback flew Laffer out tax hike (Wagle is rumored to be run105 to Kansas in 2012, where he was paid ning for Congress in 2018)—were try$75,000 to advise the legislature on ing to drag out the process and pass a 100 the wisdom of slashing taxes, promischeaper, short-term alternative. ing astounding dividends of economic One month later, Democratic House Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Leader Ward was still holding out for growth in exchange.) Trump’s proposed Source: federal reserve bank of philadelphia more funding, having rejected various budget echoes the Kansas experiplans that didn’t pass revenue-raising ment, slashing income tax rates for the muster. His decision to oppose a substantial tax wealthiest few and calling for a drastic rate cut Later that night, the Senate approved a veto reform package, which many moderates saw as override by a one-vote margin. “I don’t want to for pass-through entities—a move that would their best possible chance at a deal, was testing be disrespectful to the governor. He still believes inflict Brownback’s LLC debacle on the nation. the strength of the coalition. Ward and other in it. I don’t,” Republican Senate Majority LeadBrownback’s should be a cautionary tale, Democrats were adamant that the package er Jim Denning said during the floor debate. of course, for the Republicans in Congress didn’t raise close to enough for schools, which “I firmly believe this wasn’t about creating and the White House. Should they slash the would mean the legislature would need to come jobs,” said Democratic Senator Tom Holland, provision of affordable health coverage to cut back for a special summer session if the Supreme who ran for governor against Brownback in taxes for the rich, should they decimate govern2010. “We should have got off this crazy train ment services while eliminating taxes on the Court rejected the school-financing plan.

As the session spilled into June, the leg- a long time ago.” wealthiest Americans, all their invocations of islature was approaching the record for lonThe heavier lift was in the House, where the trickle-down economics—that the rich will gest legislative session in the state’s history. tax plan had passed 15 votes shy of the veto invest their tax savings in job-creating enterIn the very early hours of June 5, the legisla- override level. This time, however, a number prises, a theory disproved again, again, and ture passed a tax plan that rolled back Brown- of conservatives who had voted against the again—ultimately won’t win them popular supback’s tax policy and would raise about $1.2 bill switched their vote, declaring it time to port. The fate of Sam Brownback—scorned by billion over the next two years by doing away move on. The override ultimately passed with his state, overridden by his legislature, rejected with the LLC exemption, ending the March four votes more than needed. There was no by his party—should make that crystal clear. index

The Failure of Trickle Down

Summer 2017 The American Prospect 55

Private Equity:

The New Neighborhood Loan Sharks Veterans of the Contract Buyers League hit the doors again.

By C hu c k C o llins

M

ike Gallagher double-checks the address on his smartphone and walks up the cement steps of the brick two-story house on Detroit’s west side. He rings the doorbell, and after waiting a minute knocks loudly on the door. A dog barks and a shirtless black man in his mid-thirties cracks open the door.

“Good afternoon. I’m Mike from the Home Savers group. We’re talking to people who have a land contract from Harbour Portfolio. Is that your situation?”

“Yes,” says the man, whom the visitor may have just woken up. He cautiously looks at Mike, who is white with unruly short white hair.

“A lot of people are finding these rent-to-buy loans may not be such a good deal. Sometimes they’re worse than being a tenant, since you have to pay for all repairs and maintenance. But you don’t build any wealth until you make the last payment. How long is your contract loan?”

“Thirty years.”

Gallagher learns the man’s name is Antoine and that he paid $30,000 for a house that Harbour Portfolio bought for about $6,000.

Antoine has paid $410 a month for four years.

He works a night-shift job and has struggled to make the payments.

“If you miss a payment, all this money you are putting into the house will be lost,” Gallagher cautions. “They can evict you, without the protections a homeowner often has.”

Gallagher invites Antoine to an organizing meeting on Monday night. “You could meet other

56 WWW.Prospect.org Summer 2017

neighbors who have these contract-for-deed situations and learn how to protect yourself.”

“Jeez,” says Antoine, shaking his head. He is fully awake and is smiling now. “Yeah, I could stop by on my way before heading to work.” He takes down the information about the meeting.

They say goodbye and Gallagher enters information into the app on his phone. He heads on to the next house, this one apparently abandoned.

He has seen this before. As a much younger man in the 1970s, Gallagher helped to organize Chicago residents around predatory “contracts for deed.”

“I was one of Jack’s Scouts,” Gallagher explains, referring to Jack Macnamara, a former Jesuit seminarian who helped co-found the Contract Buyers League in Chicago. The scouts were college students and seminarians who knocked on hundreds of doors to jumpstart the league. Between 1967 and 1977, the league worked to stamp out predatory contract practices through organizing and lawsuits.

“By 1977, we thought the plague was gone,” says Gallagher. Until last year. Like a virulent contagion that was thought eliminated, contracts for deed have resurfaced. This time, however, the perpetrators are not “mom and pop speculators,” as Gallagher calls them, but Wall Street private equity firms.

Gallagher is retired now and lives in Boston, after over two decades working for the Service Employees International Union. But one morning in February 2016, Gallagher got a call from Jack Macnamara in Chicago. “Did

you see the story?” Macnamara asked, referring to a front-page article in The New York Times, “Market for Fixer-Uppers Traps LowIncome Buyers.”

In that article, investigative reporters Matthew Goldstein and Alexandra Stevenson described the return of contract-for-deed abuses. “Lured by the dream of homeownership, these seller-financed transactions can become a money trap that ends with a quick eviction by the seller, who can flip the home again.”

On that winter morning, 50 years after the founding of the Contract Buyers League, Macnamara told Gallagher it was time to get the band back together. Their work was not done.

Contract for What?

A contract is shorthand for “contract for deed,” also advertised as “rent to buy,” “seller financing,” or “installment land contracts.” These are not inherently predatory, as any northern Midwesterner will tell you. Land contracts are common ways to finance real estate, especially in rural areas without many banks.

In 2009, the last year such data was collected, the U.S. census reported that about 3.5 million people bought their homes through a land contract, more than 4.5 percent of all homeowners.

This probably underestimates the number, as many buyers don’t understand the transaction well enough to report it to the census. Most states require that land contracts be recorded, but many sellers do not bother to do so.

Yet the opportunities for abuse are plentiful.

Most contracts for deed (CFDs) are not subject

photos courtesy of chuck collins

Rent-to-Buyer Beware: Mike Gallagher goes door-to-door on Detroit’s west side, alerting people who have contract mortgages with Harbour Portfolio, a private equity firm.

to the Truth in Lending Act and other consumer protections that most traditional mortgage borrowers enjoy. Under a CFD arrangement, the buyer has all of the responsibilities and headaches of a homeowner, including repairs and paying property taxes and insurance, without actually owning anything. Yet buyers have fewer rights even than tenants, who can at least call the landlord to fix a busted toilet or broken lock.

“These contracts exist in a regulatory ‘noman’s land’ between tenant protections and homeowner protections,” says Sarah Mancini, an attorney with the National Consumer Law Center and co-author of a 2016 report about contracts for deed, “Toxic Transactions: How Land Installment Contracts Once Again Threaten Communities of Color.” “These aspiring homeowners have neither,” she says.

Assuming all the risk, if contract buyers miss a payment, they can lose all their previous payments and investments they’ve made in maintaining the house. Because they are technically not owners, buyers may be quickly evicted under forfeiture procedure, without the increased protections of foreclosure law afforded to homeowners. Think “repo” of a car, not a home.

“These land contracts are built to fail, as sellers make more money by finding a way to cancel the contract so as to churn many successive would-be homeowners through the property,” according to Mancini’s “Toxic Transactions” report. In the case of mortgages, in which the buyer becomes a homeowner subject to a lender’s lien, the bank usually requires an appraisal in order to prove a property is not overpriced

and provides adequate collateral to secure the loan. And in most jurisdictions, real-estate agents representing sellers are often required to disclose the condition of major systems and advise prospective buyers to get an inspection.

(In some states, they must sign a waiver if they chose not to have an inspection.) And after the 2009 mortgage meltdown, homebuyers have gained additional disclosures and protections, thanks to Dodd-Frank financial reforms and the creation of the Consumer Financial Protection Bureau (CFPB).

A home inspection ensures that basic systems are working and that buyers won’t immediately get clobbered with unexpected costs.

Usually lawyers for lenders, sellers, and buyers review the agreements to protect their clients.

The buyer gets a form summarizing the loan

Summer 2017 The American Prospect 57

terms and the total cost of the purchase over the life of the mortgage.

Contrast these protections with the experience of Adrian Cortez Hamilton. In January 2015, Hamilton saw a “rent to own” property close to his mother’s house in the West Pullman neighborhood of Chicago. He called the number on the sign, for Vision Property in South Carolina, which informed him the installment contract sale price was $20,000.

Hamilton was given a lockbox combination at the house so he could walk through the property without a seller’s representative.

He called back to get the house, putting down a $1,000 initial payment. Paperwork for a 15-year installment contract was sent to him, which he signed and returned. Hamilton had no legal representative on his behalf to review the contract and to ensure that Vision owned the property and that the title was clear of liens.

Shortly after signing the contract, a build-

servatorship and given the job of disposing of these vast inventories of foreclosed properties in order to recoup taxpayer funds. Many were sold to homebuyers looking for a “DIY ” fixerupper or to small investors buying up five to twenty units. But Fannie Mae also disposed of thousands of units in bulk sales to Wall Street private equity firms, some with fingerprints leading back to the original subprime mortgage scandal that fueled the meltdown.

The Dallas-based Harbour Portfolio Advisors was the biggest purchaser of properties from Fannie Mae’s bulk sale program. Between 2010 and 2014, they bought more than 6,700 homes mostly in Michigan, Ohio, Illinois, Pennsylvania, Georgia, and Florida. Most of these were sold with contract mortgages and serviced by the South Carolina–based National Asset Advisors. Other Wall Street firms made substantial investments in companies like Battery Point Financial, Apollo Global Manage-

Dallas-based Harbour Portfolio Advisors, a private equity company, was the biggest purchaser of distressed properties from Fannie Mae’s bulk sale program. ing inspector showed up at Hamilton’s house telling him the house was condemned and slated for demolition. Hamilton went to Chicago demolition court where he was ordered to pay for repairs. As his contract stipulated, he was now on the hook for repairs in addition to his monthly contract payments. He and his wife scrambled, eventually spending $12,000 to bring the property up to code.

Private Equity Players Resell Foreclosed Properties

Between 2007 and 2011, millions of people lost their homes in the wake of the subprime mortgage scandal. In 2009 alone, more than three million homes went into foreclosure.

Hundreds of thousands of these properties eventually became owned by Fannie Mae, a private corporation formerly known as the Federal National Mortgage Corporation.

In 2008, Fannie Mae was placed in con-

58 WWW.Prospect.org Summer 2017

ment, and the South Carolina–based Vision Property Management.

These private equity funds found CFDs to be a good mechanism to unload properties in poor condition without investing a nickel in repairs. These companies promote seller financing as an alternative path to homeownership in communities without access to traditional credit. Many Rust Belt communities are credit deserts, as banks and mortgage companies are reluctant to lend in some communities or make loans under $50,000. As a result, there has been a surge in contract-for-deed transactions. Contract sales in Minnesota’s Twin Cities increased 50 percent between 2007 and 2013, according to an investigative report by the Star Tribune.

Deploying contracts for deed, sellers receive an income stream from run-down properties that would be unbankable with traditional mortgages and unsuitable for renting because of

code violations. In the most predatory scenario, sellers unload dilapidated houses on unsophisticated buyers with a contract for deed, locking them into an inflated purchase price and high interest rate. After paying out tens of thousands for repairs, a defaulting buyer loses all their equity. The contract lender gets back the house in better condition and repeats the cycle.

Stories of wealthy and powerful real-estate interests manipulating newcomers are hardly new. The Jungle, Upton Sinclair’s 1906 novel about the scandalous conditions of Chicago’s meatpacking industry, also depicts the predatory use of a contract-for-deed mortgage. Sinclair’s protagonists, Jurgis and Ona Rudkus, are newlyweds and recent immigrants from Lithuania in search of the American dream.

But a shady landlord takes advantage of their limited English skills and signs them up for a contract loan that plunges them into debt servitude, forcing the couple to work 12-hour days in gruesome conditions to survive.

During the Great Migration after World Wars I and II, millions of black families moved from small towns and rural Southern communities to resettle in Northern cities. Unscrupulous real-estate agents “block-busted” stable working-class white neighborhoods, stoking racist fears that black neighbors would lead to declining real-estate values and crime. Snapping up housing at fire sale prices, these realestate sharks resold homes to black families at inflated prices with contract-for-deed mortgages. Between 1940 and 1970, an estimated 30,000 blacks bought their homes with CFD mortgages in Chicagoland alone.

Beryl Satter, whose father was a white attorney who fought against contract-for-deed loan sharks, estimates that 85 percent of properties sold to blacks during these same years were on contract. Her 2009 book, Family Properties: How the Struggle over Race and Real Estate Transformed Chicago and Urban America, is the definitive history of the Contract Buyers League. “These sales stripped black migrants of their savings during the very years when whites of a similar class background were getting an immense economic boost through FHA-backed mortgages that enabled them to purchase new homes for little money down,” wrote Satter.

Indeed, white homebuyers, thanks to these subsidized federal mortgage loans, got on the

express train to middle-class wealth and prosperity. Blacks were not only barred from traditional loans and a seat on the wealth-building train, they were pushed into the predatory loan market where what wealth they built was stripped away.

jesuit bulletin, december

1968

Getting the Band Back Together

In 1967, Jack Macnamara, a 30-year-old Jesuit seminarian, moved to Chicago to work with Monsignor Jack Egan, a legendary social action priest who had marched with Dr. Martin Luther King Jr. in Selma and worked alongside Saul Alinsky as a board member of the Industrial Areas Foundation. Egan was serving the Presentation Church in Chicago’s Lawndale neighborhood, a predominantly black community. Egan enlisted Macnamara to recruit seminarians and college students to knock on doors and build a community organization block by block. These young men became known as “Jack’s Scouts.”

Some, like Peter Cassady, Jim Devanney, and Mark Splain, were graduates of St. Xavier High School in Cincinnati, where Macnamara had taught Latin and Greek and encouraged social action. Others were students at Catholic colleges looking to get college credit for a year of community organizing. One recruit was Mike Gallagher, 21, who had recently graduated from Holy Cross and moved to Chicago to work full-time for the cause. Gallagher joined the team and spent hours a week in the mindnumbing activity of looking up property deeds.

Between 1967 and 1969, these seminarians and students knocked on hundreds of doors. “None of us knew anything about contract arrangements,” says Macnamara. “But our approach to community organizing was to knock on doors and listen to the concerns people had.” One recurring theme they heard from residents was about high monthly house payments—much higher than mortgages in white neighborhoods—and an unusual lease contract arrangement.

The goal of the organizing was to build “indigenous leaders” from Lawndale. These young white male organizers understood it was not their role to lead this effort, but to support local leaders. It didn’t take long before Lawndale community residents Clyde Ross, Henrietta Banks, Charlie Baker, and Ruth Wells

stepped forward to found the Contract Buyers League (CBL) and direct its strategies and tactics, including picketing the sellers’ real-estate offices twice a week.

“Initially some families were hesitant to share how they had been snookered,” recalls Macnamara. But local leaders quickly brought their neighbors together in larger meetings to build an organization and make a plan. By 1969, the CBL had grown to more than 1,000 families on Chicago’s West and South Sides.

They enlisted pro bono help from several law firms to file a federal lawsuit, and fought evic-

sellers to renegotiate the terms of the contracts.

Each month, buyers would make out money orders to themselves for the amount of their monthly contract payment, and would bring them to the CBL office to be put in a safe deposit box. Because these local real-estate sharks had incurred debts to purchase these properties, they felt the pressure and came to the negotiating table. More than 450 contracts were renegotiated, with an average principal reduction of $13,500, about $97,000 in today’s dollars.

“Many years later, I got obsessed with how much money was stolen from Chicago’s African American community,” says Macnamara, who created an Excel spreadsheet and worked from data he collected from CBL records. “I calculated about $500 million based on inflated sale prices and abusive interest rates”—more than $3 billion in private wealth in today’s dollars. “It was a tax on being African American.”

“This was the result of government policy,” Macnamara adds. “Because blacks were excluded from FHA housing programs, families were pushed into these predatory lending situations.”

Motor City Is Ground Zero

Full Circle: Seminarian Jack Macnamara moved to Chicago in 1967 to become a community organizer working with Monsignor Jack Egan, a legendary social action priest.

tions by moving furniture back into houses after the sheriff had moved families out.

At one point, Macnamara mapped a fourblock area where 20 families had contracts for deed. He estimated that each of these black families from Lawndale were paying $20,000 more to acquire a home than white families because of both inflated sale prices and higher interest costs. And many black families were evicted when they missed a payment and were stripped of their wealth.

One of CBL’s most effective tactics was a payment-withholding strategy. More than 500 families put funds in escrow to pressure the

Jack Macnamara did get the band back together. On December 1, 2016, a group of alumni from the Contract Buyers League met in Chicago to assess the situation. They created a database of property transactions involving some of the bigger Wall Street firms.

“We felt we needed to get into the field again,” says Mike Gallagher, who attended the meeting. “We wanted to talk to people and listen.” In April 2017, a segment of the group met up in Pittsburgh, Youngstown, and Akron to knock on doors of people they knew had contract arrangements.

In May, the ad hoc group calling themselves “Home Savers” reconvened in Detroit around a large wooden conference table at the United Auto Workers Local 600 offices. The UAW office sits across from the sprawling River Rouge Ford plant in Dearborn, surrounded by halal meat markets. On the wall is a portrait of John F. Kennedy and historical photos from 80 years of labor organizing, including the 1937 “Battle of the Overpass,” when Walter Reuther and other striking workers were beaten by thugs.

Over five days, the UAW office has served as a meeting place to orient volunteers before

Summer 2017 The American Prospect 59

being dispatched for an afternoon and evening of door-knocking. Joining Jim Devanney and Mike Gallagher is veteran organizer Wade Rathke, who founded ACORN in 1970, and his daughter, Dine’ Butler, who adapted a smartphone app to enable canvassers to track properties and track data. “From what we can tell, Detroit appears to be ground zero for contractfor-deed abuse,” Gallagher tells me.

“There were more land contracts recorded in Detroit than conventional mortgages,” observes Rathke, citing Wayne County data showing 834 land contracts and 710 mortgages filed in 2016. This number greatly underestimates land contracts because there is no law requiring them to be filed with county officials.

The Home Savers team has spent several weeks combing through online data from the Wayne County Assessor’s Office, looking for properties convened by Harbour Portfolio, Vision Property, and a local group, Detroit Property Exchange. They now have addresses for 250 homes in Detroit and 250 homes in surrounding cities, including Inkster and Taylor.

tenants. The National Consumer Law Center has suggested a number of public policies that states could implement to stem the tide.

One reform would be to require sellers using a land contract to stop pushing provisions that require buyers to make repairs in order to make the house habitable. “It is fundamentally unfair,” says Mancini, “to force a buyer who doesn’t even have a deed to risk being saddled with expensive repairs.”

This intervention, in Mancini’s opinion, would eliminate one of the driving forces for Wall Street firms pushing land contracts—the ability to manipulate low-income buyers into providing an income stream to investors while

tracts fall through, the lawsuit alleges that Harbour “churns the property through the process anew.” Cincinnati is attempting to prevent Harbour from selling additional homes until the firm remedies outstanding violations.

The national Consumer Financial Protection Bureau (CFPB) cannot change state property laws, but it could issue regulations requiring contract-for-deed transactions to abide by consumer protection laws against deceptive practices.

In May 2016, six members of Congress, led

by Connecticut Senator Richard Blumenthal, wrote to CFPB director Richard Cordray: “Because CFD s can lead to increased debt,

Stopping the Next Wave of Predatory Practices

“This trend of Wall Street investors backing predatory contract-for-deed transactions reminds me of the subprime lending boom that led to the mortgage crisis,” says attorney Sarah Mancini. Mancini splits her time between the National Consumer Law Center and Atlanta Legal Aid, mostly assisting homeowners facing foreclosure.

As the first news accounts of contracts for deed surfaced in February 2016, Mancini started to get calls at her Atlanta office. “People had these contracts and didn’t understand what they had signed. We started to look into it and realized it is a huge and growing problem.”

“These contracts are the next wave of abuses motivated by corporate profits,” says Mancini, who started practicing law in 2007 and sees the parallels. “They are exploiting the same communities of color that were devastated by the subprime crisis. This is just the latest predatory product.”

To deal with the unfairness of these transactions, state laws should ensure that until buyers have all the rights of homeownership, they at least have the protections provided to

60 WWW.Prospect.org Summer 2017

Don’t Evict—Organize: The “Home Savers” group (including veteran organizer Wade Rathke and his daughter Dine’ Butler on the left side of the table) use the UAW office in Detroit to orient volunteers for afternoon and evening door-knocking.

shouldering all the burdens of home repairs.

Lawmakers in Michigan are exploring a law requiring sellers to get an inspection and a certificate of occupancy to prevent an uninhabitable house being sold through a contract for deed. And the Illinois Senate passed a law aimed at regulating land contracts and requiring greater protections for buyers.

In April, the city of Cincinnati began cracking down on contracts for deed, filing a lawsuit against Harbour Portfolio for unpaid fines and violations and “predatory and unconscionable” contracts. The lawsuit alleges that Harbour “intentionally fails to disclose known defects about properties, including building code order and other violations.” When con-

financial instability, and eviction for hardworking American Families,” they urged the CFPB to “examine the use of CFDs and determine how the Bureau may provide consumer protections to cover these transactions.” Shortly after this request, the CFPB began investigating Harbour and, in February, a federal judge ordered Harbour to comply with the bureau’s subpoena for documents.

Federal lawmakers have also called on the Federal Housing Finance Agency to stop Fannie Mae and Freddie Mac, the two mortgagefinance companies in federal conservatorship, from selling foreclosed homes to firms such as Vision Property and Harbour Portfolio that are engaged in predatory contract-for-deed

mortgage practices. On May 23, Fannie Mae announced it had terminated sales to Vision Property after reviewing the firm’s rent-toown program.

Democratic Representative Elijah E. Cummings of Maryland, who sits on the Oversight and Government Reform Committee, wrote to Vision Property CEO Alex Szkaradek, raising “grave concerns about the physical and financial well-being of tenants” with Vision leases. A lawyer for Vision said “the letter’s escalated rhetoric does nothing to assist Americans without access to traditional mortgage loans to achieve homeownership, which Vision works to do every day.”

According to the National Consumer Law Center, very few laws have been changed at this point. “I don’t know anyone else who is doing community organizing on this, aside from Jack Macnamara and this group,” says Mancini, referring to the Home Savers retirees.

“I prayed a lot,” says Smith, grinning through her Plexiglass door.

“So it was never vacant,” Gallagher replies.

“That was lucky. And if you had missed a payment, you would have lost it?”

“Yes,” says Smith, smiling. “I was holding my breath the whole time.”

“So you bought this house twice?” Gallagher asks.

“Yes. But I can’t afford to buy it again,” she says, laughing. “They tried to take it from me but I’m still here.”

The canvassers reconvene at the UAW Hall to compare notes. After knocking on more than 100 doors, they wonder if what they are seeing is a new twist on predatory homeownership or an extension of the overall affordable-housing crisis, at least in Detroit.

“There’s no doubt there is lying, deceit, fraud, and all manner of predatory behavior here,” says Rathke, who also canvassed with the

“We’re not trying to build an organization,” says Mike Gallagher. “We’re too old for that.

But like a lot of retirees, we could use some walking-around money, just to be able to buy food for some of our volunteer door-knockers and pay some expenses.” The group is volunteering their time, paying for plane tickets and rental cars out of their own pockets. Most of them slept at a Jesuit residence at University of Detroit High School.

The retirees see their role as doing the R&D phase of a major campaign, trying to test out a grassroots organizing model. “A lot of the community-organizing networks are stretched and not able to do this initial legwork,” says Gallagher. “So we’re doing the first phase of door-knocking and organizing residents to incubate this for someone else. Our hope is we take it to the PICO community-organizing network or People’s Action, with a strong proof of concept and a fundable, winnable campaign.”

I join Gallagher and another canvasser,

retired Teamsters union activist Dave Eckstein.

We climb into Eckstein’s blue pickup truck and head to west Detroit with 17 addresses to visit.

The first address is a vacant lot, the house recently demolished. The second house is abandoned.

In search of the third house, we drive down West Parkway, a street that has burned-out shells of houses, tall prairie grass, and determined outposts with one or two inhabited homes on each block. At number 15814, we approach the house on foot, unable to positively identify the address because shrubs have grown up in front of the door.

“This is it,” says Gallagher, pointing to the partially obstructed house number. “Look, there is even a sign that says Vision on the window.”

At one house, Lena Smith answers the door.

She is a black woman in her forties, and she tells us her story. Smith owned this house in 2014 but fell behind in property taxes, owing $6,000 to the city of Detroit. The city sold the property to Detroit Property Exchange (DPE) for $5,000, which then resold the property back to Smith for $30,000 with a five-year contract for deed. Smith made payments of $500 a month for four years—and then paid off the balloon loan of $7,000, taking title to the deed for a second time.

“Wow,” says Gallagher. “That’s amazing.

How did you do that?”

In April, the city of Cincinnati began cracking down on contracts for deed, filing a lawsuit against Harbour Portfolio for “predatory and unconscionable” contracts. team in Pittsburgh, Akron, and Youngstown.

“But increasingly it appears this is a con on desperate renters, people unable to get Section 8 vouchers or get off the waiting lists of public housing. Or their incomes are too unstable for higher rents and they lack access to credit to be able to buy. So they are going for what they can afford, regardless of the condition, because it’s the best they can do, and maybe, like playing the lottery, they might even win something, and get to own the thing.”

You could be doing anything right now, I suggest to the retirees. You could be playing golf or fishing.

“I hate golf,” says Gallagher resolutely. “And I’ve never successfully caught a fish. Listen, you don’t know what retirement is like. You need something to do.”

Yes, but door-knocking in Detroit?

“I’m doing exactly what I want to be doing,” says Macnamara, who turns 80 this year.

“These days, I only do the things I am willing to die for. I’d be willing to die for this.”

Retirement

This present-day CFD scandal presents an organizing challenge, as the houses are spread across a larger area of the northern Midwest and dispersed throughout communities. On the other hand, the fact that several large Wall Street firms are the perpetrators makes it possible to bring public pressure on regulators and the firms themselves. But how will this work happen?

Chuck Collins directs the Program on Inequality and the Common Good at the Institute for Policy Studies, where he co-edits Inequality. org. He is author of several books on wealth inequality, including Born on Third Base: A One Percenter Makes the Case for Tackling Inequality, Bringing Wealth Home, and Committing to the Common Good.

Summer 2017 The American Prospect 61

Who Is Wilbur Ross?

From bankruptcy king to Trump’s king of commerce

By Ro semary Bat t and E ile e n A p p e lbau m

62 WWW.Prospect.org Summer 2017

T

c h r i s k l e pa n i s / a p i m a g e s

he Senate confirmed Wilbur Ross as Trump’s new secretary of commerce by a vote of 72 to 27, with Democrats closely divided.

Democrats are understandably conflicted over this appointment.

A private-equity billionaire, Ross has also done deals with unions.

He poses as a friend of labor, a savior of bankrupt companies, a creator of jobs, a turnaround wizard. He can sound like an economic nationalist. Now, as secretary of commerce, he is the architect of government policies to create jobs in this country. What will that mean?

Ross is worth an estimated $2.5 billion to $2.9 billion, according to various industry estimates. He has made his billions by buying up struggling or bankrupt companies on the cheap. He has used bankruptcy laws to dump health and pension benefits for workers when buying distressed companies. He has relied on the North American Free Trade Agreement and the World Trade Organization to offshore manufacturing jobs to Mexico and Asia; and has taken advantage of tax laws that privilege debt-financing and allow private-equity returns to be taxed at the low capital gains rate. Now as the architect of Trump’s infrastructure investment strategy, his stated policy plan would use billions in federal tax dollars to subsidize Wall Street tycoons like himself.

As an early “innovator” in the art of distressed investing, Ross built his skills over 25 years at the New York office of the Rothschild investment bank, where he ran the bankruptcy restructuring unit until he left in the late 1990s. There, he witnessed the revolution in the debt markets, as “junk bonds” were increasingly used to finance highly leveraged buyouts of companies. And as over-leveraged companies collapsed, he saw that bondholders were forced to accept pennies on the dollar.

Ross became the leading Wall Street bankruptcy adviser for the worst bankruptcies of the era—and learned that a lot of money could be made as a bottom-feeder. He represented the creditors in the 1990 bankruptcy case against Trump’s Taj Mahal casino, when it went bankrupt after borrowing $675 million in high-risk junk bonds. He brokered the deal that allowed Trump to keep a major stake in the property. According to Ross, “Bondholders are like workers in a factory. … On their own they have no leverage. But if someone pulls them together, they can negotiate with anyone.” Ross organized them, and learned how

to turn Chapter 11 bankruptcies into profitmaking machines.

With this expertise, he opened the private equity firm WL Ross & Co. in 2000—with $440 million from wealthy backers. In 2001, he launched his first hedge fund, and by 2002 his second private equity fund. His private equity and hedge funds focused entirely on distressed investing—buying up companies that were already bankrupt, or buying the debt of distressed companies headed toward bankruptcy in order to snap them up soon after.

His funds were well positioned to pick up the pieces of companies following the 2001 stock market crash, the September 11 attack, and the global recession. By 2003, his private equity firm managed $1.6 billion in assets.

Ross’s strategy was to buy up at least onethird of the debt of a bankrupt company he intended to bid on. The debt could be purchased for pennies on the dollar, and Ross would become the largest creditor, giving him a lot of power in the bankruptcy proceedings.

This positioned him as the strongest bidder to take the company out of bankruptcy—paying for the purchase by forgiving the loans he had made to it. At the end of the day, the debt he held would be wiped out, but he would now be the biggest or only shareholder in the company.

Buying companies out of bankruptcy is also profitable because Chapter 11 of the Bankruptcy Code allows a company to reduce its debt to as little as pennies on the dollar and to dump millions or billions in health-care and pension liabilities. Creditors, shareholders, and workers suffer the losses, and the new owner gets valuable assets on the cheap. The logic behind Chapter 11 bankruptcies is to allow otherwise healthy companies to re-emerge and continue to be productive; but in recent decades it has become a path for private equity and hedge funds to get rich quick.

How Ross Does It

One of Ross’s private equity firm’s first targets was the failing steel industry, which he studied for more than two years before going after it in 2002. He negotiated with the United Steelworkers union in 2001 to get his desired concessions. He claimed credit for saving the U.S. steel industry by buying up bankrupt steel companies and rolling them into a platform called the International Steel Group, which he then sold to the Indian-owned multinational Mittal Steel Company in 2005. Union leaders called him a pragmatist—a straight-shooter whom they could deal with—no nonsense, no drama.

But the steel deal came at a heavy price: Ross made $4.5 billion—14 times his investment, and exactly equal to what retirees lost in pension and health-care benefits. In February 2002, he used his bankruptcy strategy to buy several LTV steel facilities that were in liquidation, so he didn’t have to assume health or pension costs. He paid $90 million in cash plus $235 million in assumed liabilities—that is, the deal was 75 percent debt. That payment equaled 3.6 percent of the $2.5 billion value of the assets on the books. After several more buyouts of bankrupt mills in 2003 and 2004, he controlled 20 percent of the industry. Ross bought the mills on condition that health coverage for retirees and those workers targeted for layoff would be eliminated, and that pension liabilities would be shifted to the federal Pension Benefit Guaranty Corporation (PBGC), with workers receiving substantially lower benefits than they otherwise would have. His turnaround of the companies also depended on government trade protections: Ross was aware that then-President George W. Bush was about to impose tariffs on imported steel to offset illegal dumping by foreign steelmakers. A 30 percent tariff went into effect in March 2002—a month after his initial steel mill acquisitions—providing a critical window for Ross to restart steel production.

Ross repeated this strategy in the textile industry. In 2001, he identified Burlington Industries as a potential target. Through his hedge fund, he started selling the Burlington stock short. When the company filed for bankruptcy in 2003, he had positioned himself to buy up the remaining bonds (which had fallen to 11 cents on the dollar), allowing him

Summer 2017 The American Prospect 63

to become the company’s largest bondholder and to take over the company. His next textile acquisition was the bankrupt Cone Mills, where he positioned himself as both a major bondholder and bidder on its assets. Board members and stockholders accused him of a conflict of interest, arguing that he pushed the company into an unnecessary bankruptcy in order to buy it up cheaply. But Ross prevailed. In both cases, debt was slashed, the mills resumed operations, and a portion of workers returned to their jobs—but only after Ross extracted major union concessions and shifted pension liabilities to the PBGC. These companies became the platform for the International Textile Group, which Ross later sold in 2016 to the private equity firm Platinum Equity for an undisclosed amount.

In 2003, he used the same tactics to move into coal. Ross formed Newcoal LLC and expressed

record to suggest that he really cares about U.S. workers. He has no ideological position vis-à-vis unions, labor, or U.S. economic development. A deal is a deal—as long as it pays him high returns.

Supporting Free Trade to Offshore Jobs

While Ross supported protectionism when it came to the steel industry, he flipped to a freetrade advocate for his auto and textile empires.

His supporters refer to his approach to trade as “pragmatic” and “flexible.”

When he invested in distressed steel and textiles, he lobbied for and applauded Bush’s protectionist tariff against foreign dumping of cheap steel, and he argued against China’s entry into the WTO. He helped found a powerful protectionist lobbying group—the Free Trade for America Coalition—made up

An early “innovator” in the art of distressed investing, Ross became a leading Wall Street bankruptcy strategist—and learned that a lot of money could be made as a bottom-feeder. interest in buying the non-union operations of Horizon Natural Resources—but not its six union properties. The United Mine Workers of America charged that Ross conspired with Horizon to orchestrate the bankruptcy. Horizon, which had about $1 billion in assets and $1 billion in debt, sought a Chapter 11 bankruptcy to protect itself from its creditors. It also asked the judge to void its union contracts on the grounds that they prevented the company from finding potential buyers. In an unprecedented decision, the judge agreed, ruling that Horizon did not have to honor the guaranteed health-care benefits for 800 active and 3,000 retired coal miners. This allowed Horizon to sell about two dozen mines to Ross for only $786 million. Ross bought additional coal properties and rolled them into the International Coal Group, forming the fifth-largest coal company in the United States. In 2011, Ross sold the corporation for $3.4 billion to Arch Coal, which went bankrupt four years later.

In sum, there is nothing in Wilbur Ross’s

64 WWW.Prospect.org Summer 2017

of an odd mix of corporations, labor unions, and agribusiness. But when he moved into the auto-parts industry in the mid-2000s, he favored free trade—the kind that exposes U.S. workers to unfettered global competition. He supported NAFTA and took advantage of the deal to offshore jobs to Mexico and other countries. He also became a key lobbyist and organizer of industrialists to support the passage of the Central America Free Trade Agreement (CAFTA)—basically extending NAFTA to Caribbean and Central American countries.

Taking advantage of these free-trade agreements, Ross formed the International Automotive Components (IAC) Group in 2006, a platform that merged the auto interior businesses of Collins & Aikman and the Lear Corporation. Soon after, he began offshoring jobs to Mexico and China. In one case, when the union at a Pennsylvania auto-parts factory refused to accept concessions of more than 25 percent of workers’ pay and benefits, Ross shuttered the plant and sent the jobs offshore.

But even when unions made concessions, Ross sent at least a portion of production abroad.

A year after the formation of IAC, his plant in Hermosillo, Mexico, employed 1,700 workers.

By 2015, Ross’s company had eight factories in Mexico and expected production there to continue to expand. At that time, Ross boasted in an interview that he had built IAC through 14 acquisitions—“all distressed”—and employed 27,000 employees in 17 countries. Ross made similar choices for his textile plants. After buying textile plants out of bankruptcy, extracting union concessions, and dumping health and pension benefits, he nonetheless built new factories in Mexico, China, and Vietnam—creating jobs there, not at home.

Now, as commerce secretary, Ross will oversee the International Trade Administration (ITA), responsible for trade deals such as NAFTA . Ross has seemingly flipped his position on trade again—now backing Trump’s campaign pledge to renegotiate trade deals that will protect and restore blue-collar jobs in communities decimated by the kind of offshoring that Ross himself grew rich on. In his confirmation hearings, Ross said that his first priority was to undo NAFTA , increase U.S. exports, and bring jobs back to the United States.

But the initial details of the Trump reforms suggest the opposite. A draft letter from acting U.S. Trade Representative Stephen Vaughn to Congress, leaked on March 30, provided details on the Trump administration’s approach to reformulating NAFTA . That approach would largely benefit investors and large corporations—not workers. According to the letter, the administration planned to tweak NAFTA to move it closer to the provisions included in the Trans-Pacific Partnership (TPP) agreement that Trump trashed as a candidate and disavowed as president.

The changes, for example, would make NAFTA’s provisions on copyright and e-commerce mirror those in the TPP. The United States wants NAFTA to require stronger laws on the enforcement of intellectual property rights and to require NAFTA countries to eliminate national laws that impede cross-border data flows or digital trade in goods and services. The administration also intends to keep the controversial Investor-State Dispute Settlement (ISDS) provisions of NAFTA, which allow foreign companies

to challenge legislation and court decisions that go against their financial interests in special tribunals. These changes would increase, not decrease, protection of the interests of American multinational corporations and, if anything, would enhance the advantages realized by multinationals in offshoring jobs. These changes could also hurt consumers, for example, by bolstering the high price of drugs. Provisions that would protect the interests of blue-collar workers were striking in their absence. The administration backed away from the leaked draft letter as soon as public scrutiny emerged, but its contents are suggestive of the direction that Ross and his colleagues want to go in as they renegotiate NAFTA’s terms. On May 18, the Trump administration triggered the 90-day countdown to renegotiation talks, which ends on August 16.

Ross could turn the taxes on management fees (taxed at the corporate income rate of up to 39 percent) into capital gains taxes (paid at 20 percent). The limited partners went along with this scheme only to find out that Ross cheated them out of their fair share of portfolio company fees.

Between 2001 and 2011, Ross kept $10.4 million in fees that he should have returned to the limited partners, according to the Securities and Exchange Commission. An SEC enforcement action required Ross to return the fees, but without admitting guilt; and the SEC charged him a modest $2.3 million penalty.

Ross’s behavior as the general partner of a

corporate boards, to reduce conflicts of interest. But he will not divest his stake in his most valuable recent investments, most notably in real-estate financing and in the international shipping industry, an industry that he is now charged with overseeing. He is maintaining his investment in Diamond S Shipping, which he tried to take public in 2014, but failed to get the price he needed. The company’s fleet includes 12 crude-oil tankers and 33 refined-product tankers. During his confirmation hearings, Ross was questioned about conflicts of interest arising from his investments in oil tankers, which may pose environmental risks to the oceans,

mart y lederhandler / ap images

Making Money Every Which Way

Wilbur Ross’s private equity firm had estimated assets under management of $8 billion in 2013, according to PitchBook, an industry research and data analytics firm. At the time, his firm had raised $8.6 billion in 12 investment funds over a 15-year period—54 percent of those investments from public pension funds. The firm had a total of 56 total investments and 39 active investments on its books.

It had moved out of basic industries like steel, coal, auto parts, and textiles, and into more lucrative sectors like international shipping and financial services.

Ross represents a class of people who put their own individual interests first, above all else. Their gains come at the expense of others—not only workers, suppliers, or creditors, but their own investors as well. While Ross was profiteering from bankruptcy proceedings at the expense of creditors and taking health and pension benefits from workers, he was mistreating his own investors as well. Like many private equity general partners, Ross began using a scheme known as a “management fee waiver” to extract extra cash from his private equity fund. In these fee-waiver agreements with his limited partners, Ross agreed to waive a portion of the investors’ management fees in exchange for giving himself a priority claim on the fund’s profits. In addition, he promised the investors a share of the fees that Ross required his portfolio companies to pay. Through this sleight of hand,

Deal Artists: Ross (center) represented the creditors in the 1990 bankruptcy case against Trump’s Taj Mahal casino.

private equity fund was not unusual. The private equity model relies on taking risks using other people’s money. Private equity general partners (GPs) typically put up less than 2 percent of the equity in an investment fund while the limited partners put up 98 percent. Yet the GPs pocket a disproportionate share of the returns—20 percent of the profits over a given hurdle. They also require limited partners to pay an annual 2 percent management fee over the ten-year life of the fund, and require portfolio companies to pay millions in monitoring, advisory, and transactions fees, often for services never rendered.

In assuming the job of secretary of commerce, Ross has divested himself of the vast majority of his investments as well as seats on

which Commerce also oversees through the National Oceanic and Atmospheric Administration. When pushed, he only agreed to recuse himself from conflicts if they directly involved his own fleet of ships—a response that did not satisfy environmentalists or some Democrats.

Moreover, his remaining investments completely lack transparency. His funds are registered in the Cayman Islands, with little or no information about which private companies or industries he continues to invest in. When private equity GPs buy companies, they take them private and are free to manage them without government oversight or even accountability to their investors, who are not privy to the details of how the portfolio company is managed or

Summer 2017 The American Prospect 65

how fund returns are evaluated. Private equity firms themselves are required to submit only minimal annual reports to the SEC; under the Dodd-Frank Act, these are not available to the public. So it is still unclear what types of conflicts of interest remain for Ross as he oversees the monitoring and enforcement of industry standards and regulations.

Privatizing Infrastructure with Public Dollars

As commerce secretary, Ross will be the architect and administrator of Trump’s infrastructure investment plan. Already, before Trump was elected, he teamed up with Peter Navarro, now director of the White House National Trade Council, to devise an infrastructure development plan for the administration. The plan relies heavily on private-sector investment, which they believe will reach up to a trillion

a much-reduced tax of just 10 percent when they repatriate these profits to the United States. A company that repatriated $1 billion would owe $100 million in taxes. But if it invested $121 million in an infrastructure project, the 82 percent tax credit would wipe out the repatriation tax.

The company would have an equity investment of $121 million in an infrastructure project that would pay it dividends over a 20- or 30-year period, and no tax bill.

Private-sector financing also means that only projects that generate significant cash flow— toll roads, bridges, rail systems, airports—are likely to receive funding. Ross and Navarro estimated that infrastructure investment requires an annual return of 9 percent to 10 percent in order to cover “… operating costs, the interest and principal on the debt, and the dividends on the equity.” But infrastructure projects typically yield a return of only 5 percent, according to Tax Foun-

As commerce secretary, Ross is architect and administrator of Trump’s infrastructure plan, which is already attracting private equity investors looking to own public facilities. dollars over a ten-year period. In June, Trump announced that his “trillion dollar” infrastructure program would include $200 billion in public money and $800 billion in tax-subsidized private investment. But even that $200 billion, when we subtract Trump’s $139 billion in planned budget cuts for transportation infrastructure, boils down to just $61 billion.

Relying on the private sector poses other problems. Prudent lenders will not lend more than five times the equity in a project undertaken by private investors. That means it would take $167 billion in equity to finance a trillion dollars of infrastructure investment. That’s a lot of money for private investors to come up with, so the Ross-Navarro plan provides an incentive to the private sector—a federal tax credit equal to 82 percent of the equity amount to subsidize investors, at a cost to taxpayers of more than $131 billion. This subsidy interacts with another Trump incentive scheme, which would allow multinational corporations that have parked profits in low-tax countries to pay

dation Senior Fellow Stephen Entin. As a result, many needs will go unmet. Rebuilding aging public schools, replacing pipes and removing lead from drinking water, or maintaining roads and highways would not meet this criterion.

Finally, the Trump plan, as proposed by Ross and Navarro, would provide “maximum flexibility” to the states—widely understood as code for rolling back labor and environmental protections. This would include the weakening of prevailing wage rules and environmental rules in order to accelerate these investments.

It did not take long for Ross’s fellow privateequity chiefs to recognize the money-making opportunities in this infrastructure investment plan. In late January, Joe Baratta, global head of private equity at Blackstone Group, the largest private equity firm in the world, talked about raising an infrastructure fund of as much as $40 billion in equity. This would be Blackstone’s largest fund ever. And Baratta and Blackstone President Tony James have raised the possibility of achieving returns in the 40 percent

range. Plans for this fund have moved closer to implementation. On the heels of Trump’s visit to Saudi Arabia in May, the Saudi Arabia Public Investment Fund committed $20 billion to Blackstone. With the addition of debt-financing, the Blackstone fund is expected to make investments totaling $100 billion. Some private equity firms have already launched large infrastructure funds. Global Infrastructure Partners recently raised $15.8 billion for what is currently the largest infrastructure fund. Brookfield Asset Management Inc. raised $14 billion in 2016 for its third infrastructure fund. These firms are poised to take advantage of huge growth opportunities for infrastructure investing.

Nonetheless, the plan was soon met with skepticism, not only from the left, but also from free-market Republicans who believe there aren’t that many attractive opportunities that will yield the level of returns that private investors demand. But this is expected to change.

Infrastructure investment may lead to high returns in the future because key players in the Trump administration are likely to position government agencies to partner with private equity firms to do major infrastructure projects. In addition to Wilbur Ross at Commerce, Trump has appointed Blackstone Group cofounder Stephen Schwarzman to lead the president’s Strategic and Policy Forum; Global Infrastructure Partners’ managing partner, Adebayo Ogunlesi, is also a member of the forum, which advises Trump on how to promote economic growth and jobs, and is expected to focus on infrastructure investment.

As Wilbur Ross takes over Commerce, the real question is how he will use the power of government and taxpayer dollars to subsidize the wealthy class that he is a part of. His decisions in conjunction with the other Trump billionaire agency heads are at risk of locking in longer-term privileges for the investor class that will contribute even more to the growing inequality of wealth and power in the country.

Rosemary Batt is the Alice Hanson Cook Professor of Women and Work at the Industrial and Labor Relations School, Cornell University.

Eileen Appelbaum is a senior economist at the Center for Economic and Policy Research. This article draws on their book, Private Equity at Work: When Wall Street Manages Main Street.

Summer 2017 The American Prospect 67

The Great

Los Angeles

Revolt

Against Cars

L.A. voters have chosen to tax themselves to build a citywide rail system. Can rail also resurrect the city’s long-vanished middle class?

By Dav id Day en

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Mobility

opposite: r jphoto1 / istock by get t y; t h i s pa g e : d av i d r u m s e y h i s t o r i c a l m a p c o l l e c t i o n

O

n May 20, 2016, residents of downtown Los Angeles boarded a passenger rail car and traveled 15 miles west to the water’s edge—something no Angeleno had been able to do since the early 1950s. The new Expo Line extension, colored aqua because of its connection to the ocean, prompted memories of the old Pacific Electric streetcar, which traveled practically the same route before the line was shut down in 1953. “My grandparents talked about going to the beach on dates from MidCity,” says Los Angeles Mayor Eric Garcetti. “I wanted to do that for my grandkids.”

Denny Zane was on the Santa Monica platform at 4th Street and Colorado Avenue that day. He’d been mayor of the beach town in 1990, when the Los Angeles County Transportation Commission (later known as the Metropolitan Transportation Authority, or Metro) had purchased the Expo Line right-ofway from the Southern Pacific Railroad. City fathers had been so sure the new line would get built that they bought space for a maintenance yard at Bergamot Station, temporarily leasing it out as an arts center. Twenty-six years later, nobody wanted to evict the galleries. “So the maintenance yard gets put on Stewart and Exposition, across the street from my house!” Zane says. “I’m really having to be the good citizen.”

The persistence of regional leaders has finally paid off. After the success of two recent taxhiking ballot measures, Los Angeles County can finally embark upon “the largest local infrastructure initiative in this nation’s history, times two,” as Garcetti likes to say in speeches. Over the next 40 years, the region’s transportation map will be transformed, with $120 billion in tax revenue generated for 37 light rail, subway, bus rapid transit, bike, and highway improvement projects.

The voters who approved those measures clearly want relief from two of L.A.’s signature problems: smog and traffic. But the measures’ architects seek an even more fundamental transformation—a plan that would foster economic no less than spatial mobility. From local hiring initiatives to transit-oriented development, their goal is to reinvent the city, using transportation as both a job creator and a solution to such problems as inequality and gen-

trification. “It’s kind of a big-picture, modern Marshall Plan for Los Angeles,” says Madeline Janis, executive director of Jobs to Move America, a transit jobs advocacy coalition.

As politicians from Donald Trump on down profess a desire to rebuild America through infrastructure investment, Los Angeles can serve as a model for how to do it in a way that benefits riders, workers, and businesses alike.

But can Los Angeles meet all these lofty goals?

Or will remaking L.A. crash into the same neighborhood inequities, political infighting, and lack of Washington support that has bedeviled the city for decades?

One reason for optimism: Despite all the moments when it never looked more distant, Los Angeles rail has become the little engine that could.

At one time, Los Angeles actually hosted

the most extensive urban rail network in the world. In the late 1800s, real-estate developers like Henry Huntington wanted to entice homebuyers to move to far-flung properties across southern California. They built the Pacific Electric Railway in 1901, privately operated streetcars that enabled homeowners to commute into job centers. The red and yellow cars stretched farther than any system envisioned today, spanning four counties and hundreds of miles.

A popular conspiracy theory, most vivid-

ly illuminated in the animated classic Who Framed Roger Rabbit, suggests that a consortium of oil, auto, and tire interests bought up streetcar companies and dismantled them, building freeways where the trolleys once rode.

The truth is more mundane but no less tragic. Real-estate tycoons developed the region haphazardly, using streetcars to connect diffuse populations to dispersed centers of work, rather than to the kind of dense downtown that characterized older cities. Paradoxically, a region designed for mass transit ended up receptive to sprawl.

“Automobile technology took over like smartphone technology,” says Ethan Elkind, a law professor at UC Berkeley and UCLA , and the author of Railtown, a history of Los Angeles mass transit. Beset by fare hikes, strikes, and slowness, and lacking public subsidies, the streetcars couldn’t compete with cars and freeways. Public money for infrastructure went to build roads for auto-hungry residents, not to rescue rail. The Pacific Electric took its last trip in 1961; buses became the only mass transit option left in the city.

Legendary Mayor Tom Bradley swept into office in 1973 promising to break ground on a high-speed rapid transit system within 18 months. But the public refused to support it; county voters rejected three separate ballot measures from 1968 to 1976. Suburban opponents didn’t feel they’d reap the benefits. “If

Summer 2017 The American Prospect 69

voters had stepped in and agreed to fund it in ’68, there was an 80 percent federal matching grant on the table,” says Elkind. “Things were cheaper back then. The system would be two to three times larger than it is today.”

By the time voters finally approved a halfcent sales tax for transit in 1980, federal dollars had dried up considerably. And congestion had increased so pervasively that the 88 cities of Los Angeles County each vied for the relief that rail could bring. It took five years from the voters’ approval to even start a rail line, amid bureaucratic knife fights between the many competing interests, cities and neighborhoods. The first project, the Blue Line that connected the county’s biggest cities (Los Angeles and Long Beach), came about because it ran through powerful Supervisor Kenneth Hahn’s district. The Green Line resulted from an environmental lawsuit during the construction of the Century Freeway, which freed up a median

and effectiveness. The ban didn’t get lifted for a generation.

In 1990, voters narrowly approved an additional half-cent sales tax, enabling Metro to purchase old rights-of-way from the streetcar days and move into the next phase of transit development. (This is why so much of L.A.’s transit is light rail without grade separation; existing corridors were already available, without the need for costly tunneling or elevated tracks.) But mismanagement and squabbling hampered progress. “Not in my backyard” community activists shut down proposed lines. A tunnel fire and a sinkhole along the Hollywood Boulevard section of the subway generated bad press. A decade-long legal fight between Metro and a coalition representing bus riders, who argued rail was a racist benefit for wealthy commuters at the expense of poor people of color, delayed construction, too. A resulting consent decree increased the bus fleet and improved

The average Los Angeles commuter spends 104 hours in traffic per year. “You only had to sell the plan, because the need slaps you in the face every day.” strip on the freeway for rail. But the Green Line veered left as it approached LAX, the city’s carcongested mega-airport, delivering its riders instead to the aerospace factories of the South Bay. By the time the line was finished, however, the Cold War had ended and the aerospace plants had closed.

Meanwhile, the densest corridor in the western United States, along Wilshire Boulevard, couldn’t get a subway after a March 1985 methane gas explosion under a Ross Dress for Less store, which injured 23. Henry Waxman, the powerful congressman who represented the area, deemed the tunneling unsafe. Most experts thought the subsequent precautions planned for the Red Line subway ensured the line could proceed safely, but many suspected Waxman used safety as a pretext to side with constituents who didn’t want to give low-income, minority residents easy access to their communities. Waxman authored congressional legislation barring the subway from venturing into his district, stunting its reach

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service for existing riders, but did not appreciably increase ridership, and diverted money from other transit improvements.

By the turn of the millennium, Metro was debt-ridden, distrusted, and cowed into scaling back ambitions. Amazingly, most rail fares were based on the honor system; the city couldn’t afford turnstiles, and had scant personnel to check if riders actually paid. While a few lines did move forward—the subway from downtown to Hollywood, light rail to Pasadena and East L.A., and bus express service in the San Fernando Valley—they did little to reduce congestion or improve air quality. A growing population was sinking from the weight of too many cars. Something needed to change.

“I was stuck in traffic on Olympic,” Denny Zane says, recalling a moment in 2007. The worsening gridlock called to mind an image of ice cubes freezing. “You could see the future and it sucked.” As he sat, Zane heard on the radio that Metro had no available funds

for new projects for the next 30 years. “I knew we had three million more people expected. It would be just as if Chicago came here today— we’re in near gridlock and Chicago descends upon us. Third-world status, here we come.”

Two years earlier, Antonio Villaraigosa had become the first Latino mayor of Los Angeles in more than 130 years, having pledged repeatedly during his campaign to build a “Subway to the Sea.” Villaraigosa had served on the Metro board in the 1990s, supporting bus riders in the bus-versus-rail fight. But he’d evolved on the issue. “What I was saying [during my mayoral campaign] was we have to reimagine L.A.,” Villaraigosa says. “If you can’t move around you can’t work.”

Early in his first term, Villaraigosa got Waxman to agree to lift the ban on tunneling under Wilshire Boulevard. But he knew that without revenues, it didn’t matter. And there had been one big change since 1990, the year of the last successful initiative for transit funding.

Thanks to the notorious Proposition 13 and a separate ballot measure in 1996, local tax increases required a two-thirds majority of voters, far beyond what any transit initiative had ever received in Los Angeles. “You can exit the European Union with a bare majority, but you can’t get rail [in Los Angeles] without two-thirds,” quips Elkind.

The high threshold demanded a broad coalition, and that required more than just a subway to the sea. Transit advocates needed something comprehensive to appeal to voters throughout the county, a full-service measure to improve all modes of transportation, from railways to freeways. And it had to be specific: Vague notions of “improving transportation” would not fly.

But supporters had two things going for them. First, there was L.A.’s traffic nightmare.

The city remains the world’s most congested, with the average commuter spending 104 hours in traffic per year. “You only had to sell the plan, because the need slaps you in the face every day,” says Gary Toebben, president and CEO of the Los Angeles Area Chamber of Commerce.

Second, the upcoming 2008 election promised high Democratic turnout, the best demographics for progressive initiatives in decades.

Zane got to work building the coalition. He brought together environmentalists looking

t y r o n e wa s h i n g t o n / o f f i c e o f m ayo r v i l l a r a i g o s a

to reduce carbon emissions from cars, labor unions seeking good jobs building rail, and business groups wanting better quality of life for employees and customers. He called the new organization Move LA. “We could have been laughed off, but we weren’t,” Zane says. “The first meeting, I invited 35 organizations and 34 showed up.” Some of these groups hadn’t worked together in years, if ever. They spent close to a year developing a workable plan.

Subsisting on a shoestring—this transformation of regional infrastructure for millions of people required Zane to scrounge a $15,000 grant for meeting space and $25,000 for a poll—the transit advocates got to work. With a county of ten million residents and overlapping jurisdictions at the city, county, and even state level, reaching consensus over which projects would get built appeared impossible, yet it was a necessary task. Light rail and busways proved more popular than subways, because they were cheaper and could be rolled out more quickly.

Projects with the best ridership projections were subordinated to those that could help win voter support. Villaraigosa acknowledges that he put the Gold Line extension, in a relatively less populated corridor of the San Gabriel Valley, atop the list because the coalition couldn’t afford to lose those voters. Even certain stations were added as political compromises: Farmdale Station on the Expo Line was intentionally inserted to slow down the trains near two area schools, to ease the concerns of parents of kids who’d be crossing the tracks.

Move LA’s plan proved compelling enough to persuade the Metro board to devise Measure R (for “relief”), which would go before voters on the November 2008 ballot. Metro’s board settled on a 30-year, half-cent sales tax increase, raising $30 billion to $40 billion for 12 specific rail, subway, and road projects. Zane initially balked at the regressive tax choice, but studies showed that businesses and tourists paid more than half of all sales taxes because of California’s many exemptions for necessities.

Even then, Measure R had to survive several near-death experiences. The state legislature needed to sign off, but two East Los Angeles lawmakers, Gil Cedillo and Gloria Romero, tried to block it, seeking better guarantees for their districts. Minutes before the deadline to qualify the measure for the ballot, Cedillo

and Romero lifted their objections. Then the powerful county Board of Supervisors, whose support was required to place the measure on the November ballot, voted three to two against doing it. Metro had prepared a lawsuit to force Measure R onto the ballot, but then Supervisor Don Knabe changed his vote to yes.

Villaraigosa raised the lion’s share of the funds in the eight weeks before the election.

At the same time, however, Lehman Brothers failed, the financial crisis exploded, and many thousands of Angelenos lost their jobs or homes, just as they were being asked to tax themselves for a distant hope of a modern

Reimagining L.A.: Denny Zane (presenting a t-shirt to thenmayor Villaraigosa, left) formed a group called Move LA in 2007 to advocate for comprehensive public transportation throughout Los Angeles County.

transit system. “We all think the measure has no chance, it’s dead, but the spots are paid for, we’re going through with it,” Zane recalls.

More optimistically, the Chamber of Commerce’s Gary Toebben believed that the recession provided an opportunity to argue that the region needed Measure R, not only to fix transit but to create economic stimulus in difficult times.

On election night, Measure R started out short in early returns. “It looked like it was going to go down,” Villaraigosa says. “I was ready for Plan B, ready to put it up again, figure something out.” But late that night, the measure crept past the two-thirds threshold. The outsized Obama turnout saved the day; Mea-

sure R passed with 67.9 percent of the vote.

The revenues gave Metro the ability to double its transit footprint. Almost immediately, Villaraigosa sought to accelerate construction, going to the federal government with a plan called the 30/10 Initiative, seeking a loan advance on sales tax revenue to shorten the time required to build projects from 30 years to 10. The government could offer far more favorable terms for those loans than the bond market. “I sat down with Obama. He said, ‘It’s an earmark.’ He kind of laughed me out,” the former mayor says.

Undaunted, Villaraigosa found champions in Congress, even after Republicans won the 2010 midterms. Led by Senator Barbara Boxer, a version of 30/10 called America Fast Forward got slipped into a 2012 transportation bill, expanding loans through the Transportation Infrastructure Finance and Innovation Act (TIFIA). Accelerating Measure R’s projects would prove critical to future ballot measures—though not in 2012.

In that year, concerned about running out of revenues, transit advocates hastily assembled a new proposition, Measure J, to extend the sales tax increase by another 30 years. Not only did lower presidential election turnout hurt, but the lack of a defined plan also made Measure J more vague than its predecessor. In the end it fell short of the required two-thirds support by about 15,000 votes.

“Losing J that way was the best thing that could have happened,” says Zane. “Metro would have had more money for operations, but J had no more projects funded.” A new proposition in 2016, Measure M, was more ambitious. It not only made the Measure R sales tax permanent and added an additional half a cent to the levy.

Like Measure R, it also specified a new group of projects it would fund. The Move LA coalition collected ideas from nine sub-regions of the county, and ventured into new terrain: expanding into fare discounts for students and the elderly, and funding bike paths and pedestrian walkways, too. They even added a “local return” program to give cities a revenue stream for fixing potholes and synchronizing traffic lights. “Every city did a project dump; every capital improvement project they ever thought of got in,” Zane says.

Metro took these ideas and refined them

Summer 2017 The American Prospect 71

The creation of so many new jobs has also impelled L.A.’s social justice advocates to ensure that a sizable share of them goes to the city’s poor and minority communities. Madeline Janis, whose earlier work at the Los Angeles Alliance for a New Economy had created the living-wage ordinances and communityhiring agreements that hundreds of American cities subsequently enacted, was particularly intrigued. In 2013, Janis founded a new group, Jobs to Move America, to ensure the new industry’s workforce reflected the city’s diversity, and that its jobs provided L.A.’s working poor with a path out of poverty. “We were asking, how do

The economic benefits of mass transit are

numerous. Saving commuters time on the road increases productivity and worker morale.

New job opportunities await workers who previously considered some commutes impractical. Transit helps break a mental barrier, the feeling people had that they were virtually imprisoned in their communities after midday.

“You have communities of color living closer to the ocean than 99 percent of America, that had never been to the beach,” says Garcetti.

This freedom of movement can increase economic development along the lines, bringing with it new residents, customers, and workers.

Investments in walkability and bike paths create a more livable and vibrant city. “Commercial areas will flourish where they have been stagnant before,” says Representative Karen Bass, regarding the new Crenshaw rail line through her district. “Tom Bradley struggled for 25 years to get a grocery store in here.”

The hundreds of miles of planned transit projects also should generate a full-fledged transportation industry for Los Angeles, creating careers rather than one-off construction project gigs. Citing a report from the Los Angeles County Economic Development Corporation, Garcetti expects 465,000 jobs—245,000 in construction—from Measure M improvements in future years.

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Building The City Of The Future: Phil Washington (here with Mayor Garcetti, right) has been Metro’s CEO since 2015.

you harness the power of public purchasing and investment as part of larger strategy to rebuild the economy in a better way?” Janis says.

Initially working through community redevelopment agencies, Janis promoted a program that included multi-employer apprenticeships, which trained local workers for permanent construction careers. The apprenticeships would last between two and five years, with some of the funding for the apprenticeships borne by the workers themselves, who devote a portion of their wages to the program. “Especially with Measure M, people are able to raise families on these careers,” says Janis. Government agencies, she adds, could even lower the disproportionate cost of infrastructure projects in the United States by

making project management more efficient.

Metro immediately recognized the benefits.

“I grew up on the South Side of Chicago; I saw people building infrastructure in my community and they didn’t look like me,” says Metro CEO Washington, who is African American.

Metro’s project labor agreement targets hiring 40 percent of its workers from residents of high-poverty ZIP codes in L.A. County; likewise 20 percent of workers must come from the apprenticeship programs, and 10 percent from a pool of “disadvantaged” workers, such as the homeless or recently incarcerated. Metro also funded community outreach and job coordinators for each project. “There’s nothing better than us going out on the Crenshaw project and seeing people living around the corner working on it,” Washington says.

The big stumbling block to getting these programs off the ground was a restriction on using federal dollars for projects that prioritize local hiring. Federal money is almost always used to top off transportation projects, either through the “New Starts” program that supplements local funding, or discretionary grants. Representative Bass introduced legislation to give cities the flexibility to prioritize local hiring.

“It was a bipartisan issue,” Bass says. “Republicans want to reduce regulations where they are a burden.” In 2015, Bass got her bill passed as an appropriations rider, and the Obama administration adopted local hire as a pilot project. It later got extended to 2022.

Janis didn’t stop there; she wanted to extend local hiring to procurement—a particular knotty challenge, since no U.S.-based company manufactures rail cars. That said, in transportation infrastructure, 70 percent of all public dollars go to private companies.

Jobs to Move America and other organizations created the U.S. Employment Plan, something government purchasers can insert into their bidding process as an extra credit on proposals.

The plan commits manufacturers to prioritize local jobs with good wages and benefits, along with workforce training and hiring of disadvantaged and low-income employees. After a winning bid is selected by a transit agency, Janis and her colleagues negotiate a community benefit agreement that includes all these factors, with the goal of building a pipeline of permanent jobs.

o f f i c e o f m ayo r g a r c e t t i

into a coherent initiative, promoting it as a plan to build the city of the future. “I said in my previous life in the military, soldiers don’t charge a hill for money. People have to be inspired,” says Phil Washington, who’d been installed as Metro’s CEO in 2015. He specifically tied the build-out to economic opportunity. “When you start talking economic development, job creation, the ability through transportation investment to create a new middle class, you begin to talk people’s language,” he says.

Thanks to the 30/10 acceleration, in the months before Election Day 2016 four major projects rolled out, extending existing rail and express bus lines into East L.A., the northern San Fernando Valley, the San Gabriel Valley, and of course, including the Expo Line to the sea. “Delivering those on time and on budget, just before the vote, showed voters it was real,” says Garcetti, who led the campaign. Measure M ended up garnering 71.1 percent of the vote.

he adds, are “people who had to vacate their homes during the recession. They now see a pathway to good jobs for their children without a college degree.”

Three more transit projects should come

online in the next decade: two phases of the Purple Line extension of the subway down Wilshire, the Crenshaw Line through South Central Los Angeles, and the regional connector downtown, which will allow commuters to go from Long Beach to Pasadena, or East L.A. to Santa Monica, without a transfer.

The system will also finally make it to LAX, along with a people mover to get travelers from the Metro stop to their terminals. There are already as many feeder lines into downtown Los Angeles as there are into Chicago, with more improvements on the way. The holy grail of mass transit in L.A., scheduled for a later date, is a north-south route along the clogged

c i t i z e n o f t h e p l a n e t / e d u c at i o n images / uig via get t y images

Hire Local: Metro’s project labor agreement targets hiring 40 percent of its workers from high-poverty ZIP codes in L.A.

Having adopted the U.S. Employment Plan in 2012, Metro gave a billion-dollar contract to Kinkisharyo, a Japanese rail car manufacturer, to build a factory in the L.A. County high desert town of Palmdale, creating 400 permanent union jobs averaging $21 an hour, with a notably diverse workforce (80 percent nonwhite, a quarter of whom were African American). This March, Metro signed a deal with China Railway for 64 new subway cars, which requires the company to build a new factory in the Los Angeles area for component parts, exceeding “Buy America” requirements that 60 percent of the parts be made domestically.

Another company with a Metro contract, New Flyer, opened a factory in the L.A. exurb of Ontario to build Metro buses, supplementing its St. Cloud, Minnesota, facility. But after buying a competitor in Alabama, New Flyer moved most of its work there, breaking its local jobs promise. Jobs to Move America rallied to prevent Metro from hiring the firm again for a clean-bus proposal currently accepting bids.

In addition to demanding local job creation, environmental justice activists want to fully electrify the city bus fleet, ending Metro’s current reliance on compressed natural gas vehicles. Expanding transit could tangibly con-

The hundreds of miles of transit projects should generate a full-fledged transportation industry for L.A., creating careers rather than one-off construction project gigs. tribute to better breathing, especially with a zero-emissions switch. (Eliminating cars from the gridlocked 405 Freeway for road maintenance one weekend in 2011 caused an 83 percent improvement in air quality.) With Los Angeles committed to the goals of the Paris climate agreement, clean transit is practically a necessity.

The requirement for sustainability augments the economic development strategy from the transit build-out. Metro’s 2016 contract with BYD, a Chinese firm, calls for building an electric bus factory in Lancaster, 75 miles northeast of Los Angeles, set to host up to 1,200 jobs. If Los Angeles can become the center for zero-emissions transit, it can flourish as a manufacturing hub, increasing the potential economic benefits.

“In Palmdale and Lancaster, [the new railcar manufacturers] are working in old aerospace hangars,” says Garcetti, who chairs an infrastructure task force of the U.S. Conference of Mayors. Many of the workers there,

405 Freeway in the Sepulveda Pass; virtually every major highway feeds into the 405, and relieving congestion there would ripple out across the region.

In January, the city received $1.6 billion in federal support for the Purple Line, and Mayor Garcetti has asked the Trump administration for more, to move up subway completion from 2035 to 2024, in time for that year’s Summer Olympics, for which L.A. is one of the two finalists. “We have become the infrastructure capital of the world,” says Phil Washington. “With two NFL teams, a rail spur to that stadium, the possibility of the Olympics, it creates this economic bonanza, what I call a modern-day WPA [Works Progress Administration].”

But one possible drawback to this strategy now lives at 1600 Pennsylvania Avenue.

Though President Trump has talked up $200 billion in investments to “rebuild our crumbling infrastructure,” his first budget actually contained a net reduction in infrastructure spending, including a wipeout of the popular

Summer 2017 The American Prospect 73

TIGER grants and the New Starts program.

“I’m not confident at all, that’s why I’m working so hard,” says Garcetti.

Trump’s main infrastructure plan would encourage public-private partnerships (P3s) to give private investors equity stakes in infrastructure projects that could yield a long-term return. Los Angeles hasn’t shied away from considering P3s, with Washington insisting that all sources of funding need to remain in his toolbox. But Washington doesn’t envision the granting of equity stakes; he favors operations and maintenance contracts, with agreed-upon, performance-based payouts. “If they build a substandard facility, they’re not going to recoup,” he vows. If federal money dries up, however, and more aggressive P3s become the only way to access funds, Metro may be forced to undermine the promise of using public infrastructure for the public good.

Early ridership statistics show better-than-

and principle of Metro’s mission statement.”

Metro is concerned enough about the situation to begin a comprehensive review of bus fleet supply and route configuration, its first in 30 years. “We need to look at the connections, and see if we’re going to the right place,” says Washington. The response may include “microtransit” systems, loops that serve high-density communities with more frequent buses.

In coming years, dedicated bus lanes along Vermont Avenue and in Pasadena will improve ride times significantly. The city has also added 150 police officers to Metro to make bus riders feel safer, a major concern. Most buses should be Wi-Fi-enabled within a couple of years. And Metro has installed 32 solar-powered “smart benches” at bus shelters, with Wi-Fi hotspots, USB chargers, and real-time arrival information. There are also plans for jungle gyms and art exhibits to make the stops more attractive.

Because much of the city’s light rail runs at

The goal is for 20–25 percent of the region’s residents to regularly use public transit.

But that might happen only if L.A. tackles a final step: transit-oriented development. expected numbers for newer routes, like the Expo Line to the sea. But while 1.29 million boardings happen every weekday systemwide, that reflects a significant drop from two years ago. The culprit is bus ridership, which accounts for virtually all the decrease, and a 16 percent drop over the past three years.

Bus ridership is down nationally as well.

You can come up with a lot of reasons: riders substituting rail for bus rides, cheaper gas prices, slow service from rising traffic, a state law allowing undocumented immigrants to acquire driver’s licenses. But the combination of a 2014 fare increase and the rise of Uber and Lyft for last-mile service could also be pricing the most vulnerable passengers off the bus, raising questions about a transit divide in Los Angeles. If rail continues to cannibalize the bus system, the poorest communities without access could be left behind. “My mother rode the bus all her life,” says Villaraigosa, now a candidate for California governor.

“We’re going to have to put equity as a value

74 WWW.Prospect.org Summer 2017

street-level, even these non-car trips stop for traffic lights and can be unnecessarily long, making them unattractive to potential riders.

The Expo Line trip from downtown Los Angeles to Santa Monica takes about 50 minutes, the same amount of time it took the Pacific Electric 60 years ago. Elkind believes that trains should get signal preemption on busy routes, or even that the stations with fewer passengers be eliminated to improve travel times. “It’s a controversial step,” he says, “but if it’s in a low-density area and there are no plans to provide more riders, why should everyone have to stop?”

Washington is aiming for a doubling of “transit mode share” (which measures how many people take which modes of transportation) in the next five years. Eventually he wants 20 percent to 25 percent of the region’s residents to regularly use transit; right now that number is around 7 percent.

But that might happen only if Los Angeles tackles the final step in its transformation:

transit-oriented development. The city’s inattention to building housing over the last several decades has led to a housing crisis, with rents rising at rates as high as anywhere in the nation. Homelessness jumped 23 percent last year, amid scarce options for the poor. The rise of transit provides an opportunity to reverse this trend by building large developments close to rail service, not only providing more housing supply but eliminating cars from the road.

Locating office development near transit can also improve congestion.

Garcetti has noted that 35 percent of housing on Metro-owned land along transit lines must be affordable, in accordance with a Metro-­adopted policy. Already, some historically low-rise neighborhoods, among them Hollywood and Koreatown, have grown higher as a result of significant transit-­a djacent development. But affordable-housing advocates raise legitimate concerns that new luxury housing near transit lines, like that in the city’s now hip and gentrifying downtown, is pushing out the residents most dependent on public transportation. Cities like Santa Monica and the neighborhoods of West Los Angeles, moreover, are maintaining or even lowering height limits in transit corridors. If it was tough to get neighborhoods to accept rail lines, the perennial resistance to housing density could prove even more intractable. How housing policy interacts with transit could determine the shape of the new Los Angeles, as it did when developments sprouted up next to streetcar lines in the 1900s, or subdivisions near freeways in the 1950s.

If housing and office development can flourish around the lines, if more front doors open to a transit stop, if neighborhoods become hubs of economic activity, if local hiring creates a generation of middle-class transportation workers, the opportunity exists to revolutionize how people live in what was considered the ultimate home of the car. “It’s going to take time to change travel patterns,” says Gary Toebben. “But I have no doubt that the culture is changing in our city.”

David Dayen is a contributing writer to The Nation and author of Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud.

Mobility

Charlie and the MBTA

Massachusetts Governor Charlie Baker’s privatization initiative at greater Boston’s transit authority has realized short-term savings— but the cure is still adequate public investment.

By G ab rie lle G u rle y

L

steven senne / ap images

‘‘

et the governor know that you are out here!”

That shout went up under a hot morning sun in mid-May, as orangeshirted transit union workers and their labor, community, and political allies spread out on the pavement below the Massachusetts State House in Boston to protest the latest privatization proposal by the Massachusetts Bay Transportation Authority, the Boston-area transit agency, known as the T. This one involved outsourcing its bus maintenance work to a private company, a move that would eliminate many jobs.

But Republican Governor Charlie Baker wasn’t around to hear the cheering or the speeches. He had decamped to the other side of town for a ribbon-cutting marking the opening of a new, privately financed commuter rail station in Allston-Brighton—one underwritten by New Balance, the Boston-based athletic shoe company.

The theme here is a reliance on the private sector to underwrite or partially operate public services at a time of perceived budget squeezes.

Are these moves truly more efficient, or mainly a shift in earnings from workers to entrepreneurs?

The State House protest marked the latest round in the fight over contracting out publicsector work at the country’s fifth-largest transit agency. With billions in debt and delayed maintenance costs at the MBTA , Baker administration officials have promoted outsourcing as one remedy among many. But in their drive to contract out bus mechanic jobs, the administration may have overplayed its hand.

Privatizing segments of the Boston area’s public transit operations obscures a key fact that no one in the Bay State transportation sector disputes, no matter what their political leanings: The MBTA’s modest cost savings will not solve the authority’s decades-long cycles of underfunding, austerity budgets, and underinvestment that have made traveling around the region by bus, subway, or commuter rail an existential ordeal for riders. That will take adequate public investment.

Today the MBTA is $6 billion in debt—and roughly 25 percent of its annual budget goes to debt service. The authority, which runs America’s oldest subway system, has a $7 billion

“state of good repair” backlog. Fares only cover about 40 percent of operating costs. MBTA’s private, taxpayer-funded retirement fund, long suspected of hemorrhaging red ink, recently announced a $1 billion shortfall. Meanwhile, both the governor and the Democratic House speaker oppose tax increases.

This fiscal mess creates an all-but-irresistible temptation to privatize. MBTA commuter rail has already been partly privatized—with mixed results—while buses and subways remain largely public. This chronic situation became acute when the system was literally snowed under during the winter of 2015. The ensuing public uproar led to the creation of a fiscal and management control board to take over the authority.

Revamping the authority meant taking on the public-sector workers at the heavily unionized authority. “We want to fix the T,” Baker said during the 2015 debate over setting up a control board. “I do not want to privatize. I do not want to slash services. I do not want to lay off hundreds of T employees. I do not want to drive people off the T by making services unaffordable,” he said. “What I do want to do is give the people of Massachusetts and those who pay for the T and those who ride it a reliable, predictable, affordable public transportation system.”

That sounds like a plan, but the devil is in the details. MBTA officials view outsourcing to industry as a key way to cut costs, increase productivity, and kick-start innovation to help put the authority on a course to fiscal stability. However, labor union leaders see politicians with an ideological endgame: weakening public-sector unions by transferring effective control of public

Summer 2017 The American Prospect 75

assets to the private sector. Until recently, Baker’s actions had been applauded in this deeply Democratic state, a marker of the deep dissatisfaction with the MBTA. But the growing rumbling in the legislature over the administration’s dealings with bus mechanics indicates that there are some cracks in Baker’s blue wall of support.

With financial problems plaguing tran-

sit systems around the country, privatization seems like the panacea. President Donald Trump has insisted that tax credits and private capital can fix the country’s multitrilliondollar infrastructure crisis. To understand how a moderate Republican governor faced down powerful public-sector unions and persuaded Democratic state lawmakers (who hold a supermajority in both chambers) to appoint a control board and approve a short-term suspension of a statute that made it difficult to contract out state services, it helps to know something

more reliable than the rest of the network—at least for riders who could navigate treacherous sidewalks, streets, and snowbanks.

A Republican of the fiscal-conservative and social-liberal type attractive to Massachusetts voters, Baker, a former health-care executive and state budget chief, had been sworn in as governor about two weeks before the storms. The MBTA’s collapse hit Baker like a snowball thrown by an unseen hooligan. It was the last straw for mad-as-hell-not-going-to-take-this-anymore riders who could not get anywhere for days.

An outside fiscal control board had occasionally been floated given the authority’s dicey finances and poor long-term revenue outlook, but the idea had never gained public traction.

The snowstorm did what a decade’s worth of commissions and studies had not done—it forced the state lawmakers and the governor to focus. Baker insisted on a control board and the temporary suspension of a so-called “anti-

Some core MBTA operations, including commuter rail, have long been contracted out to private companies—without making a dent in long-term financial problems. about how the winter of 2015 ripped away the force field that impeded reform at the MBTA .

With transit services to more than 170 cities and towns in eastern Massachusetts, the MBTA provides 1.3 million trips on an average weekday. Yet, reliable service even in sunny, warm weather is never assured, and riding the MBTA during New England’s long harsh winters is a test of endurance. During and after snowstorms, riders suffer through commuter rail, subway, and bus delays and breakdowns made worse by aging tracks, railcars, switch, and signal systems that cannot handle blasts of cold, snow, and ice.

The winter of 2015 was the most severe in Massachusetts history. In the 30-day period from January 24 to February 22, 2015, nearly 95 inches of snow pummeled Boston. On-time performance on subway and commuter rail lines cratered and the entire system closed down three times. Inmates, National Guard troops, and just plain folks (at $30 per hour) were enlisted to dig out buses and railways. The transit system took more than a month to recover. Buses proved

76 WWW.Prospect.org Summer 2017

privatization” statute, the Taxpayer Protection Act, popularly known as the Pacheco Law. Not everyone was convinced that the MBTA needed tough love. State Senator Marc Pacheco, author of the 1993 statute—once regarded as the most complex in the United States—says that the Baker administration wanted a waiver in order to get around collective bargaining.

“It’s a way for them, on the one hand, to head in another direction and see if they can’t bully their way to an alternative settlement, instead of just doing what the statute proposes,” he says.

In a state of powerful labor unions that help keep state lawmakers’ war chests full, MBTA unions are among the most formidable. They have been largely insulated from any economic fallout from the decades-long fiscal dramas that have hamstrung the transit authority. The Boston Carmen’s Union, the largest of the MBTA’s 29 unions, representing bus and subway operators, is the only one in the state with recourse to binding arbitration that has supported generous wage and benefits packages for members.

But in a fed-up Boston, the control board was seen as the last best hope for an agency that has been the state’s poster child for bureaucratic inertia, incompetence, and dysfunction. With frequent meetings, frank talk, and a huge dose of transparency that had been absent from largely public conversation about the MBTA , the control board has earned rave reviews in its first 24 months. However, it remains to be seen what gains will be made, given that all of the fixes are on the cost side and new revenues are not part of the board’s mandate.

The MBTA is a $2 billion quasi-public author-

ity that receives 20 percent of the state’s 6.25 percent sales tax as well as additional assistance from the state. But the authority must generate most of its own revenues from other sources such as fares, advertising sales, real estate, and the like for the bulk of its operating expenses.

A public bailout of private failures, the MBTA was not designed to succeed. Ironically, it was the collapse of private bus and private rail companies that led to the establishment of the MBTA in the mid-1960s. But sales tax revenues never met projections, and the authority inherited billions in debt from its predecessor organizations along with red ink associated with the “Big Dig” of the 1990s, the $22 billion central Boston tunnel highway and bridge project that lives in infamy in Massachusetts.

In the MBTA saga, there is plenty of blame to go around—riders, voters, union leaders, governors, state lawmakers, and MBTA managers all share varying degrees of responsibility. The riding public has been at best disinterested; their major interest in the MBTA is as a means of travel. If outsourcing and bureaucratic modernization can produce a better riding experience, riders are largely agnostic about how that occurs.

The public behaves one way as riders, another as voters. In 2014, voters repealed a gas tax indexing provision that state lawmakers had recently passed. But riders and transit advocates continue to clamor for more projects like high-speed rail lines to connect Boston to the southeast and west, and a new tunnel to link the city’s two main intercity train stations—all without any surefire way to fund construction costs or operations.

A “Fair Share” amendment, which will appear on the 2018 statewide ballot, would tax

elise amendol a / ap images

residents who earn more than $1 million at have gotten four of them done by now,” says cal issues, disabled trains, and lengthy delays.

Saddled with the MBTA’s crumbling rail a higher rate. If passed, the monies would go Paul Regan, executive director of the MBTA to education and public transportation. The Advisory Board, an oversight body composed network, it is not surprising that Keolis perDepartment of Revenue found that the initia- of area communities served by the network. forms poorly—and has cost the T millions tive, if passed, would raise between $1.6 billion One of the major promises of privatization is more. Recently, the MBTA agreed to pay the and $2.2 billion in new annual tax revenues. in allowing a public agency to focus on its core company an additional $66 million on top Polls conducted since 2012 by the Boston-based mission rather than ancillary operations, pro- of its original contract in order to have KeoMassINC Polling Group have shown 70 percent viding significant cost savings in the process. In lis add more trains to current schedules and to 81 percent support for regional-financing the country’s large transit systems, paratran- invest in new locomotives and maintenance. ballot initiatives, and two bills that are pending sit vans and cars for the elderly and disabled The company has also incurred millions in in the legislature to allow municipalities and are typically outsourced to private companies. performance penalties, some of which have regional authorities to levy transportation taxes Other operations like cleaning or niche trans- been waived. In January, Baker administration would dramatically alter the revenue landscape. port like ferry service are also outsourced. officials announced that the MBTA’s commuter Under Republican Governor Mitt Romney, Another big potential source of savings from rail contract would be put out to bid before the fares were increased but the financial crisis outsourcing is lower wages or looser labor rules. current agreement with Keolis expires. deepened. His successor, Dem“When we look at the privatiocrat Deval Patrick, crafted an zation of [public] services, all we have to do is look at Keolis—the ambitious transportation revenue on-time response, the quality of package, anchored by a 19-cent the services, and the financial gas tax increase. State lawmakers blunders,” says Pacheco. pared the hike down to 3 cents.

In fact, the MBTA has outTax-averse Democrats, further divided by tensions between the sourced commuter rail operations largely urbanized east and more since its inception. In the mid1960s, when the state took over rural central and western Massafailing private railway and bus chusetts, have avoided addressing the MBTA’s financial woes. companies and created the MBTA , Inside the agency, bureaucratic transportation officials decided to assume ownership of the railspats between MBTA general manroad assets, tracks, locomotives, agers, state secretaries of transrailcars, and other infrastrucportation, and governors have created an atmosphere worthy of ture, and outsource operation and a telenovela. Patrick went through maintenance to private compaLiberal State, Fiscal Conservative: Can Governor Baker fix the MBTA? In 2015, he named a panel of experts in transportation, economic development, and municipal planning to help. five transportation heads and sevnies. Amtrak provided commuter eral MBTA general managers in rail service for the MBTA for many eight years. Low salaries for general managers The open secret about outsourcing at years, followed by Massachusetts Bay Comdown through the mid-level managerial ranks the MBTA is that some core operations, includ- muter Rail, and then Keolis. Union members have hampered the authority’s ability to recruit ing commuter rail, have long been contracted retained their jobs throughout these hand­ and retain talent to manage a complex transit out to private companies—without making overs, thanks to the employment protections much of a dent in long-term financial prob- offered by the federal Railway Labor Act. system.

While some riders and union members like Procurement and contract oversight is lems. Indeed, some contracts, such as the poor—from tenants in subway-system spaces MBTA’s deal with Keolis, a French contractor to curse Keolis, commuter rail is merely a mirthat did not receive electricity bills for more that serves as the commuter rail operator, have ror image of MBTA’s own long-standing probthan two years, to bigger catastrophes like the cost the authority additional millions. lems, such as contract mismanagement and botched extension of the Green line, a conWith commuter rail, the MBTA owns the underinvestment in locomotives, railcars, and tracting failure that once again spotlighted infrastructure, cars, and stations, while Keolis other infrastructure, which contributes to the the agency’s inept oversight. In 1990, the state operates the trains, makes repairs, and main- company’s poor on-time performance record. agreed to build a 4.7-mile light rail line con- tains the system. But Keolis got more than it necting Somerville, Cambridge, and Boston. bargained for in 2014 when it won a $2.6 bil- The Bay State has been down the privaThe line is now projected to cost nearly $3 lion contract, the largest in Massachusetts, for tization road before. Republican Governor billion after the state abrogated contracts with the antiquated system. The MBTA’s commuter Bill Weld (now a Libertarian) came into office the original builders. “Any other agency would rail Twitter feed is a laundry list of mechani- in 1991, determined to find savings in state

Summer 2017 The American Prospect 77

government agencies from health and human services to transportation. One of his chief lieutenants was Baker, who came into the health and human services secretariat from his post directing the conservative Pioneer Institute, a Boston think tank. Weld’s protégé soon moved on to head the state’s budget office, where he oversaw the governor’s privatization initiatives.

Weld administration officials pointed to nearly $300 million in savings early on, gained by closing mental hospitals, contracting out prison health care, and one regional highway maintenance operation. But privatization came under fire from public union members, health care–sector advocates, and Democratic state lawmakers. A 1993 report by the House of Representatives’ watchdog office faulted the administration’s initial savings projection, insufficient planning, and problematic management.

To curb Weld’s and future governors’ enthusiasm for outsourcing, state lawmakers passed the Pacheco Law over Weld’s veto—this after 36 privatizations in nearly three years. Under the measure, the elected state auditor evaluates privatization proposals and “must certify that the cost of performing the service by the private vendor is less costly than having the work done by state employees, and that the quality of services will be equal or better.”

Conservative critics of the plan counter that the law’s sole purpose is to protect unions. Since 1993, 18 privatization requests have been submitted: 13 have been approved and five turned down; two of those five involved proposals to privatize MBTA bus operations and maintenance in the mid-1990s. Despite the push for privatization at the MBTA , which the waiver of the Pacheco Law has facilitated, the Baker administration has only pursued three other privatization plans under the Pacheco Law. “The Pacheco law was put in place to prevent outsourcing based on political philosophy, raw politics, and simple expediency,” says State Auditor Suzanne Bump, a Democrat. “There is an imperative to force agencies to make the business case before they make substantial changes in their operations, especially when a service that formerly was provided by state workers will now be provided by the private sector at a profit to that private-sector entity.”

Transportation Secretary Stephanie Pollack declined a request for an interview. Interim

78 WWW.Prospect.org Summer 2017

MBTA general manager Brian Shortsleeve, who

initially agreed to speak with The American Prospect, later declined, instead issuing a statement that read in part: “The T is partnering with the private sector to perform certain operations and functions in ways that generate both financial savings and improved performance.”

A key piece of leverage for the control board

is to compel the unions to look harder for costsaving efficiencies as an alternative to the blunt instrument of outsourcing jobs. In this respect, the two sides can point to some successes.

With initial projections of an MBTA deficit of $335 million by fiscal year 2018, the control board has shaved off $305 million through aggressive cost-cutting and maximizing existing revenues, driving down the deficit to $30 million. Other privatization initiatives involving money collections and the central warehouse make up $15 million of that total. The authority expects to save $400 million over the next ten years.

The MBTA’s paratransit service, the “Ride,” has been run by private contractors. But with the cost of paratransit skyrocketing, state lawmakers passed legislation allowing Lyft and Uber to conduct a year-long pilot program to serve passengers on demand (previously trips had to be scheduled in advance) at lower prices and faster response times. A private vendor also handles paratransit call-center operations.

The MBTA has slashed its operating expenses growth rates (which had fluctuated from about 10 percent in fiscal year 2009, to roughly 3 percent in 2010, and nearly 8 percent in 2014).

After the control board was established, MBTA operating expenses growth rates declined to zero percent. The authority has also begun chipping away at deferred maintenance.

Privatization supporters also contend that introducing competitive elements into the mix compels public employees to implement cost savings through less-restrictive work rules and other productivity-enhancing goals. The key to securing those efficiencies at the MBTA was the suspension of the Pacheco Law. With the administration free to pursue outside contracts without making a case to the state auditor, the Carmen’s Union decided to re-open their contract early for the first time in 50 years.

Last year, the Carmen agreed to cap the

number of hours union members could work.

Hours that exceed that cap could be outsourced.

New bus routes or expansions (like late-night services that had been eliminated) could also go to a private contractor. The union agreed to outsource its warehouse and cash-counting jobs, which had been staffed by union members who either accepted buyouts or were reassigned. Other concessions included forgoing raises in fiscal year 2018 and accepting lower wages for new employees. The two sides were satisfied enough with the deal that the head of the Carmen’s Union, Jim O’Brien, sat between MBTA acting general manager Shortsleeve and Control Board Chair Joe Aiello at Baker’s state of the state address earlier this year.

Outsourcing, however, has major drawbacks. Surrendering a public asset to a private contractor deprives lawmakers, authority officials, and consumers of transparency regarding finances and operations. Contracts can be skewed by underbids, and private vendors can and do request additional payments. The profit motive dictates that private companies that will provide a significant return on investment may not be interested in services like providing bus routes in poorer neighborhoods or servicing lines with lower ridership.

“It’s not reasonable to have a position that no privatization ever makes any sense,” says Rafael Mares, a vice president with the Conservation Law Foundation, a New England environmental advocacy group. “At the same time, it’s not reasonable to have a position that any problem can be solved by privatization.”

In a bid to outsource a core transit service—bus maintenance—the MBTA opened

up a hornet’s nest. It launched a two-pronged strategy for the authority’s 1,000-vehicle bus fleet. A pilot program at one garage, agreed to by the MBTA and the Carmen’s Union, aims to introduce new work rules—including bringing in the best supervisors, revamping the scheduling, and evaluating available equipment—and increase productivity by matching best practices in private industry.

However, the proposal to contract out maintenance of four other decrepit garages that needed to be rebuilt or completely torn down, combined with the authority’s unwillingness to reopen the machinists’ expiring contract as

they did with the Carmen, has drawn the ire of the Machinists Union Local 264 and state lawmakers. The entire 11-member Massachusetts congressional delegation also weighed in. In a rare move, the group sent a letter to Baker and Pollack noting that “IAM Local 264 seeks only the same opportunity to negotiate.”

Noting that the state’s 15 regional transit authorities also contract out maintenance to private companies employing union labor, the MBTA says the plan would save $26 million in bus costs. The authority also claims that these savings would enable the agency to beef up its long-criticized bus service in bus-dependent minority areas in Boston and surrounding cities.

The MBTA bus maintenance workers enjoy a reputation as a highly skilled workforce that did well at keeping the mostly older buses of different models and technologies roadworthy, especially during the snows of 2015. They have argued that new mechanics would lack the deep experience with the quirky fleet that they had honed over years in poor working conditions.

A March 2017 MBTA report on bus maintenance read like an outsourcing proposal, but provided no data about privatization costs at the state’s regional transit agencies. When the MBTA makes its case for privatization, its data is not as robust as some of its arguments on other issues, according to Mares. “It always is a comparison between ‘This isn’t working’ and ‘The solution is privatization,’” he says. “There should be a third column—fixing it internally.

What does that take?”

The actual cost of MBTA bus maintenance is hotly disputed. The Pioneer Institute has published several public reports in recent years arguing that the MBTA’s costs are the highest in the country. Local transportation advocates like the Invest Now Coalition counter that bus maintenance salaries are less than the average of the top 25 transit agencies in the United States, while the unions say that MBTA buses have the highest number of miles between breakdowns.

Costs are important, but other factors like safety records, route scheduling, neighborhood coverage areas, and customer satisfaction are also critical factors. The dueling data points have clouded the issues, particularly when it comes to the Koch brothers–funded Pioneer Institute, a leading voice on privatization in Massachusetts. Regan of the MBTA Advisory

Board says that Pioneer reports are “accurate enough to get the discussion going,” adding that they “start out with a conclusion and then build their arguments around it.” Nevertheless, Pioneer is well represented within the Baker administration.

This summer, Shortsleeve, who came to the MBTA from Bain & Company and served on the Pioneer Institute board of directors, plans to step down from his current post and take a seat on the control board. Another Pioneer alum, Steve Poftak, the executive director of Harvard’s Rappaport Institute for Greater Boston, will take over as interim general manager until the MBTA identifies a permanent replacement.

Recent bus maintenance outsourcing plans have not been successful. The MBTA signed a contract with the Maine Military Authority, which does bus maintenance, but it ended up adding $8 million to costs when the work proved more complex than anticipated. Larry

tain: Baker does not want to hit the campaign trail tracked by angry union members.

With the state’s current fiscal crunch—a half-billion-dollar revenue shortfall—consuming state lawmakers, grappling with the MBTA will not be high on their legislative priority agenda. While there have been periodic debates over whether the state should assume a portion of the MBTA’s debt, the likelihood of that becoming reality is slim. The state simply has too many other pressing issues, such as education finance and the opioid epidemic, to consider allocating scarce revenues to alleviate the authority’s debt burden. Even if the state were in better fiscal shape, shoring up the MBTA has never been an easy sell.

The control board has shaking up the authority well in hand, but delving into the MBTA’s fiscal problem is in some ways beyond their mandate. Transit advocates have stepped into the breach to continue to push for new revenue

Surrendering a public asset to a private contractor deprives lawmakers, authority officials, and consumers of transparency regarding finances and operations.

Hanley, the Amalgamated Transit Union’s international president, points to the DC Circulator, a private bus route in Washington operated by First Transit (a company that appears in the MBTA’s bus “innovation proposals”), which serves tourist destinations and largely white areas of the city and has been faulted for its poor bus maintenance record and safety lapses.

For Baker, the fight with bus mechanics who are trying to protect wages that put them in the middle class in one of the most expensive regions of the country is bad optics going into his widely anticipated 2018 re-election campaign. (Baker has yet to make an announcement.) To complicate matters, the clock ticking is the Pacheco Law waiver (it expires next year), and in the wake of the bus maintenance controversy, the governor has yet to ask for a waiver extension, nor would the legislature be too inclined to grant one. But some Democrats have stepped up their calls for the waiver to be phased out sooner rather than later—a tantalizing but unlikely prospect. One thing is cer-

generators, such as a regional ballot initiative, that hold the best promise for communities to take matters into their own hands. Voters in the Boston region may be more willing to direct a few cents to the MBTA to fund service improvements, while voters in more rural areas of Massachusetts could zero in on local roads and regional bus fleets. As for the “Fair Share” amendment, it is a popular concept that already has attracted quite a bit of support.

How partial privatization will affect the MBTA in the long run remains unclear. Union members have become privatization watchdogs as they continue to make their case that publicsector union workers are better stewards of public assets. The major peril of privatization for the MBTA is that it gives the appearance of progress even though it does not come close to addressing the authority’s central problem—the underfunding and underinvestment that has contributed to billions of dollars in deferred maintenance and a fragile system. No amount of modest cost savings will solve that headache.

Summer 2017 The American Prospect 79

Will Trump Kill the CFPB? Created in response to the financial crisis, the Consumer Financial Protection Bureau has returned nearly $12 billion to consumers—which may be exactly why it’s now under threat.

By Lis a J. S e rv o n

I

t began by comparing a mortgage and a toaster. That’s how then–Harvard Law School professor Elizabeth Warren made the case for a government consumer financial protection agency akin to the Consumer Product Safety Commission created under President Nixon in 1972. Warren’s 2007 article “Unsafe at Any Rate,” a reference to Ralph Nader’s 1965 book Unsafe at Any Speed, planted the seed for what would later become the Consumer Financial Protection Bureau (CFPB), an agency charged with making “consumer financial markets work for consumers, responsible providers, and the economy as a whole.” Her persuasive argument made the need for such an agency crystal clear to ordinary consumers: It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street—and the mortgage won’t even carry a disclosure of that fact to the homeowner.

Similarly, it’s impossible to change the price on a toaster once it has been purchased.

But long after the papers have been signed, it is possible to triple the price of the credit used to finance the purchase of that appliance, even if the customer meets all the credit terms, in full and on time. Why are consumers safe when they purchase tangible consumer products with cash, but when they sign up for routine financial products like mortgages and credit cards they are left at the mercy of their creditors?

80 WWW.Prospect.org Summer 2017

The financial crisis of 2008 presented the perfect opportunity for Warren’s idea to take hold. The crisis revealed gaps in the regulation of financial products and services that left consumers exposed and vulnerable. When Congress debated how to respond, consumer protection issues emerged as a clear theme. Such practices as subprime mortgages were not just problems for individual consumers; they contributed to systemic risks that led to the near collapse of the economy. The protection of consumers was therefore integral to financial reform. So Congress had good reason to establish the CFPB when it passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010.

In its short life, the agency’s enforcement actions have returned nearly $12 billion to 27 million consumers who were bilked by financial services firms engaging in illegal practices.

The CFPB has outlawed the practice of directing mortgage-seekers to high-interest loans, cracked down on unscrupulous student loan providers, and created a division dedicated to dealing with consumers’ complaints, handling over one million grievances to date. Despite these accomplishments, our nation’s newest federal agency faces challenges to its power and very existence.

The Republican Rollback

On February 3, Donald Trump signed the Presidential Executive Order on Core Principles for Regulating the United States Financial System, putting the first nail in the coffin of an agency that had the support of both the Bush and Obama administrations. While the order promised to “empower Americans to

make independent financial decisions and informed choices in the marketplace,” the White House signaled Trump’s intention to roll back an “unaccountable and unconstitutional new agency that does not adequately protect consumers,” as Press Secretary Sean Spicer described the CFPB. When the president signed that executive order, his chief economic adviser, Gary Cohn, stood right behind him. This is the same Gary Cohn who presided over an imploding Goldman Sachs in 2007. Cohn is one of five former Goldman Sachs executives who have top posts in the Trump administration.

Bank stocks jumped in response to the executive order, a sign of who stands to benefit from a relaxation of the rules. A few days later, on February 6, a leaked memo from Representative Jeb Hensarling, chairman of the House Financial Services Committee, detailed plans for a bill called the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act. Hensarling’s legislation would neuter the CFPB by weakening its leadership and limiting its enforcement tools, denying it the ability to audit financial practices. The bureau would be able to act on wrongdoing only after it came to light through other investigations or channels. The CFPB’s ability to make rules like those that now govern the banking and consumer credit industry would also be severely limited. Big banks would only have to undergo a stress test exercise every two years, rather than annually as they do now.

Trump targeted Dodd-Frank early in his campaign, telling Reuters in May 2016 that the law “has made it impossible for bankers to

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function.” At the same time, he pilloried Hillary Clinton for cozying up to Wall Streeters, asserting that they had “total control” over her. The 2016 Republican Party platform called the CFPB a “rogue” agency that should be eliminated.

If Congress passes legislation neutering or killing the CFPB, this won’t be the first reversal of financial regulation in the past century.

In 1933, Congress passed the Glass-Steagall Act, preventing banks from engaging in both investment banking (what Wall Street does) and commercial banking (what smaller, more local banks that take deposits typically do). Risky investments had led to the stock market crash in 1929, and the law was designed to minimize banks’ ability to take such risks. But, in 1999, the Gramm-Leach-Bliley Act once again permitted banks to engage in both commercial and investment activities, effectively nullifying GlassSteagall. The legislation allowed commercial banks, investment banks, securities firms, and insurance companies to merge and grow, and the industry became increasingly consolidated.

In the early 20th century, Woodrow Wilson and Supreme Court Justice Louis Brandeis warned against dangers stemming from the growth of banks’ and bankers’ self-interested business practices. Brandeis maintained that the financial services system played a different role than other corporate sectors do. The role of finance, he argued, is more like that of a utility, providing essential services for the functioning of the economy, and banks should therefore be required to abide by a different set of rules.

Sometimes Brandeis’s arguments have been heeded and sometimes not: The pendulum has swung back and forth as to whether government should require banks to do more to serve all of us equally in exchange for the economic benefits they get from government. The Federal Deposit Insurance Corporation (FDIC), for example, insures the deposits we keep at banks, up to a limit of $250,000. If banks fail, as they did in 1929, most of us won’t lose our money. Banks also benefit from low-cost loans from the Federal Reserve. Shouldn’t they be required to reciprocate the public’s largesse?

How We Got the CFPB The inclusion of the CFPB in the Dodd-Frank

legislation was hardly a slam dunk. “The bureau seemed like it was on its last legs politically sev-

Gary Cohn looks on as Trump displays his executive order.

eral times during the Dodd-Frank deliberation,” says Raj Date, managing director at Fenway Summer Ventures and one of the first people to work on getting the CFPB up and running.

Even Representative Barney Frank, who chaired the House Financial Services Committee at the time and was one of the chief architects of the legislation, didn’t initially see the consumer protection agency as part of the new law. But Frank’s counterpart in the Senate, Chris Dodd, did want it included, and Frank changed his mind after he appeared with Warren at a forum where she presented her agency idea. While shar-

ing a ride to the airport, Warren seized the opportunity to make her case. “He was trapped in the car,” she recalled. “And I’m relentless.”

Throughout the congressional debate, the proposal for the new agency continued to face intense opposition from inside and outside the government, especially from the banks, which argued that it targeted them unfairly. Supporters of the CFPB skillfully used the financial crisis to pass legislation they thought was long overdue. Other legislators who wouldn’t have dreamed of supporting it before the crisis knew they had to show their constituents that they were doing something to curb the banks.

Public-opinion polls showed that voters wanted policymakers to take a strong stand. Last-minute changes to the legislation, such as an amendment limiting how much money banks can make from retailers for debit-card processing, distracted the bank lobby from the CFPB at a critical moment. And so, against all odds, Warren’s idea became a reality.

Before the creation of the CFPB, six federal agencies—the Federal Reserve, FDIC , Securities and Exchange Commission, the National Credit Union Administration, the Federal Trade Commission, and Office of the Comptroller of the Currency—played different roles in regulating the financial services industry. Did we really need another federal regulatory agency? Add in the state regulators that were the only check on many nonbank financial services such as check cashers and payday lenders, and you get a complex, uneven, and opaque regulatory environment.

The CFPB differs from the other agencies in two critical respects. First, its core mission is consumer protection, a function that has been peripheral at other agencies. Simply put, the CFPB focuses on people. It has absorbed the parts of other federal regulatory agencies charged with consumer protection in order to establsh a single set of regulations that the entire financial industry has to follow. In a speech introducing the idea of the new agency, President Obama declared that the CFPB would

Summer 2017 The American Prospect 81

have “just one job: looking out for ordinary consumers.” If you haven’t spent much of your time knee-deep in bank regulation, this may not seem like such a big deal. But nearly every industry insider calls this moment profound.

The second difference between the CFPB and the other federal regulatory agencies is that it is the only agency that has jurisdiction over the entire universe of consumer financial services providers—banks and nonbanks. Before the creation of the CFPB, many of these nonbank financial services providers such as payday lenders, auto loan lenders, and check cashers were not subject to consistent national regulations, resulting in a patchwork of different rules across the country. The agency was established to create a level playing field for the entire range of consumer financial services providers, including mortgage brokers and private student lenders. It was the most significant expansion of federal financial regulation in decades.

Getting to Work

To set up the new agency, Obama turned to Warren, who had previously chaired the Congressional Oversight Panel that oversaw the Troubled Asset Relief Program (TARP), a key part of the federal response to the financial crisis. As an assistant to Obama and special adviser to the Treasury, Warren assembled a small team at Treasury to organize the CFPB. It’s not every day that a new federal bureau is created. Dodd-Frank established goals with ambitious deadlines for the agency, making it essential to move quickly. Building the agency from the ground up gave it the feel of a startup. Early hires, eager to be part of something new and important, met in the elevator lobby for Warren’s daily pep talks.

The creation of the agency was also something of a merger. Raj Date, the CFPB’s first deputy director, reflects: “We were, after all, putting together authority gleaned from six, seven different agencies, and staff from six or seven different federal agencies plus the Department of Justice, plus the White House, plus a bunch of high-profile state agencies. Usually in a post-merger environment you know who’s buying whom. This was just a lot more difficult.”

Warren’s charismatic personality and skills as a recruiter drew impressive talent, but her tone also alienated lifetime bureaucrats who

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were brought in from other agencies. Her publicly expressed interest in hiring “new, young staff” made veterans feel that their experience wasn’t valued. The aggressive deadlines, high proportion of ambitious go-getters with no government experience, and consensual mode of making decisions differed radically from the management styles to which older officials were accustomed. In only 17 months, the CFPB went from zero to 1,073 employees, warp speed for a government agency.

Although Warren was the obvious choice to be the agency’s first director, her penchant for straight talk and reputation for attacking big banks rankled too many in both industry and

The CFPB is the only agency that has jurisdiction over the entire universe of consumer financial services providers—banks and nonbanks. the government. Obama’s decision not to nominate her was a blow to the agency’s supporters and an early win for its opponents, though the decision ultimately proved a blessing in disguise for Warren when she ran for the Senate in Massachusetts and won a national platform. In place of Warren, Obama nominated Richard Cordray, who was already serving as the bureau’s chief of enforcement. Previously attorney general of Ohio, Cordray had recovered more than $2 billion for consumers from financial predators. But despite his less-controversial profile, it took two years for the Senate to confirm him, slowing the agency’s work since it needed a confirmed director to perform key functions such as supervising nonbank entities.

Since being confirmed, Cordray has been an effective leader. New standards set by the CFPB for the mortgage market in 2013 required lenders to verify borrowers’ income and their ability to repay loans and discouraged high-risk

mortgages, such as offers boasting introductory “teaser” rates. In October 2015, the agency mandated lenders to simplify the disclosure agreements that borrowers sign when they take out a loan. These moves earned high praise from consumer advocates and financial journalists.

Student loan programs have been another focus of CFPB’s efforts. A report issued in May calls for federal student loan programs to undergo significant modification in order to focus more on economically vulnerable borrowers.

Earlier this year, the agency sued Navient, the nation’s largest provider of federal and private student loans “for systematically and illegally failing borrowers at every stage of repayment” by providing incorrect information, misprocessing payments, and failing to respond to borrowers’ complaints. According to the CFPB, Navient deliberately steered struggling borrowers away from lower repayment options, causing them to overpay for their loans. When Navient sought to have the case dismissed in court, it declared, “There is no expectation that the servicer will act in the interest of the consumer.” Navient also sought to undercut the lawsuit by arguing that the CFPB is unconstitutional. Unsurprisingly, CFPB data show that Navient ranks seventh on a list of the nation’s most complained-about financial companies.

Much of the CFPB’s work concerns “financial justice,” a term that has only recently become part of the political lexicon, even though racial minorities have always had less access to affordable financial services and lenders long targeted African Americans at higher rates than whites for debt collection. In its effort to hold financial services firms accountable for racially discriminatory practices, the CFPB fined American Honda and Toyota $24 million and $21.9 million respectively for practices that led minority borrowers to pay higher interest rates than white borrowers for auto loans, without regard to the borrowers’ creditworthiness.

In June 2016, the bureau announced a joint action with the Department of Justice against BancorpSouth Bank for discriminatory mortgage-lending practices that harmed African Americans and other minorities. The complaint alleged that BancorpSouth engaged in numerous discriminatory practices, including illegal redlining in Memphis and implementing an explicitly discriminatory loan-denial

policy. The bank settled the case for $10.6 million. The CFPB also focuses on protecting other at-risk groups from illegal financial practices through its offices for older Americans and members of the armed services and veterans.

The CFPB has broadened the discussion of financial inclusion, shifting the focus from whether consumers have a bank account to whether they are financially healthy. To that end, the agency has created a financial wellbeing scale, which measures four attributes of financial health: control over one’s finances, capacity to absorb a financial shock, having financial goals and being on track to meet them, and being able to make choices that allow one to enjoy life. The CFPB has created a questionnaire and scoring sheet to be used by researchers and practitioners to better assess consumers’ financial health and to target particular deficits. This change in emphasis from being banked to being financially healthy helps to illuminate how challenging it is to achieve financial well-being in an economy characterized by slow-growing wages, an increase in income volatility, and reduced job-based benefits and public social provision.

expensive and less available in many instances” and that “the record is replete with instances where [the CFPB] has abused or exceeded its statutory authority.”

Cordray, whose term ends in the middle of 2018, has shown no inclination to quit despite rumors that he plans to run for governor of Ohio.

At a January 2017 event hosted by The Wall Street Journal, he maintained that Trump’s election has no effect on his job. “We have an independent mandate to do what we do and we’ll continue working to protect consumers,” he said.

At this point, Cordray seems unlikely to be

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Fighting for Survival Debates about the CFPB, like practically every-

thing else about government, have become increasingly polarized. Despite some initial bipartisan support for the bureau, Republicans have been trying to weaken it since its inception.

The CFPB is an “independent bureau” overseen by a director with a five-year term, who is removable by the president only “for inefficiency, neglect of duty, or malfeasance in office.” Although no evidence supports such claims about Cordray, rumors about his imminent sacking flooded the internet shortly after Trump took office. A number of conservative columnists called for his firing, and others speculated that dismantling the CFPB would be a top priority for the new administration. Congressional Republicans have been working to build a case against Cordray, claiming that some of his regulatory and enforcement decisions overstep his mandate.

On April 5, the House Financial Services Committee held a five-hour hearing at which Cordray was the sole witness. Hensarling opened the hearing by arguing that Cordray was responsible for making “credit more

Obama picked Richard Cordray to lead the bureau.

sacked, but the CFPB could be disempowered in other ways. One strategy under discussion among conservatives would be to change the agency’s structure, replacing its sole director with a small commission. Roland Brandel, a consumer financial services lawyer and supporter of this move, argues that the “give and take of those commissioners should result in decisions superior to those that would be made by a single director,” while opponents maintain that a commission model would be a recipe for inaction. The Federal Election Commission is a notorious example of a perpetually paralyzed agency; other independent commissions, such as the Federal Communications Commission, have a majority from the party that occupies the White House and usually act in line with the president’s views.

The second way detractors aim to diminish

the agency’s power is to change its funding. The budget for the CFPB curently comes from a designated fund generated by the Federal Reserve System, independent of the congressional appropriations process. Opponents want to put the CFPB’s budget into the appropriations process and thereby give Congress direct control.

That’s the easiest way to kill a regulator, and it’s been done before. The Consumer Product Safety Commission, the Federal Trade Commission (FTC), and the Securities and Exchange Commission have all been subjected to congressional budgetary control. Ellen Seidman, a senior fellow at the Urban Institute, believes this change would be much more damaging to the CFPB’s work than altering its leadership structure. “Making the CFPB subject to congressional appropriations could be deadly,” Seidman says. “The FTC and CPSC were powerful agencies that have been essentially neutered by not getting sufficient appropriations.”

There is plenty of evidence that the work of the CFPB is far from done. Despite the more intense scrutiny of financial services since the 2007 crisis, illegal and unethical behavior in the industry has continued. In 2015, the CFPB ordered Citibank to refund $700 million to consumers and pay $70 million in fines for illegal and deceptive credit card practices, and in 2016 the agency fined Wells Fargo $100 million for opening sham accounts. The CFPB also ordered TransUnion and Equifax to pay fines for deceiving consumers about credit scores and credit products.

It took Congress 66 years to undo GlassSteagall in 1999. It may take less than a decade to undo the reforms brought about by DoddFrank, including the CFPB. Republicans may kill the agency entirely or neuter it through structural and budgetary changes, or they may just wait for Trump to replace Cordray and weaken it from within—unless consumer and resistance groups make the strength and survival of the CFPB a major public issue. Whatever happens in the short run, the CFPB will have demonstrated the value of clear-headed and determined consumer financial protection.

Lisa J. Servon is a professor of urban policy and management at the New School, and author of The Unbanking of America: How the New Middle Class Survives.

Summer 2017 The American Prospect 83

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State-Enforced Segregation and the Color of Justice Jim Crow was the descendant of Southern slavery. More shocking is the legacy of government-enforced racism in the North. By Randall Kennedy b

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overnment action consigning African Americans to separate and inferior housing has damaged not only their prospects for residential accommodations; it has also harmed their prospects for financial accumulation, access to employment, educational advancement, and social acceptance. The housing crises imposed upon blacks by government and other forces have been studied and explained by

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commentators for decades with a sobering repetitiveness. In 1967, the Report of the National Advisory Commission on Civil Disorders (the Kerner Commission) famously declared that “[w]hat white Americans have never fully understood—but what the Negro can never forget—is that white society is deeply implicated in the ghetto. White institutions created it, white institutions maintain it, and white society condones it.”

Twelve years later, in a wonderfully comprehensive law review article revealingly titled “Apartheid in America,” James A. Kushner showed how, to a large extent, residential “racial isolation is a result of government policies.”

In 1993, in American Apartheid, Douglas S. Massey and Nancy A. Denton argued that “racial segregation—and its characteristic institutional form, the black ghetto—are the key structural factors

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responsible for the perpetuation of black poverty.” Residential segregation, Massey and Denton maintained, “is the institutional apparatus that supports other racially discriminatory processes and binds them together into a coherent and uniquely effective system of racial subordination.”

Arnold R. Hirsch diagnosed the pathology of residential segregation in post–World War II Chicago in Making the Second Ghetto: Race and Housing in Chicago, 19401960, while Thomas J. Sugrue did the same for Detroit in The Origins of the Urban Crisis: Race and Inequality in Postwar Detroit.

In A Way Out: America’s Ghettos and the Legacy of Racism, Owen Fiss described the ghetto as “more than a place where the underclass happens to live. It is a social structure that concentrates and isolates the most disadvantaged and creates its own distinctive culture, and thus is integral to the perpetuation of the underclass. It is the paramount mechanism through which a historically subordinated group continues to be kept far beneath others in terms of wealth, power, and living standards.” Indicting governments at all levels, Fiss contends that “for the better part of the twentieth century … the state played an important role in creating and maintaining the ghetto, and is thus duty-bound to use its powers to remedy the present-day consequences of that action.”

An instructive new participant in this tradition is The Color of Law: A Forgotten History of How Our Government Segregated America. In it, Richard Rothstein, a research associate at the Economic Policy Institute (and occasional Prospect contributor), documents the predominance of governmental action in the baleful skein of influences that have produced racial residential separateness and inequality. Rothstein is careful to distinguish between the actions of private parties and

Summer 2017 The American Prospect 85

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the actions of government officials because, under the “state action doctrine,” it is only the latter that triggers the federal Constitution’s Fifth and Fourteenth Amendments, the provisions that require the federal government and the states to provide to all persons due process and the equal protection of the laws. A private party who discriminates against someone racially may commit an infraction under the common law or under state or federal statutory law. But that private party has not violated the Fifth or Fourteenth Amendments, since the Supreme Court has interpreted them as protecting persons only against governmental action.

Chief Justice John Roberts recently averred, for example, that “[t]he distinction between segregation by state action and racial imbalance caused by other factors has been central to [the Supreme Court’s] jurisprudence. …

Where [racial imbalance] is a product not of state action but of private choices, it does not have constitutional implications.” Rothstein demonstrates that blacks’ racial isolation and deprivation in housing is mainly attributable to state action and thus properly seen as an unconstitutional blight that the government is obligated to remedy. The Color of Law can be read as a rebuttal to the widespread assumption that racial separation in housing is mainly attributable to forces wholly independent from governmental policy.

Rothstein vividly catalogues the

ways in which governments have constricted the residential choice of black Americans. Early in the 20th century, certain cities—Baltimore was the first—enacted ordinances that aimed to create racially homogeneous neighborhoods. Blacks were prohibited from moving into areas where whites predominated, while whites were prohibited from moving into areas where blacks predominated.

In 1917, in Buchanan v. Warley, the Supreme Court invalidated Louisville, Kentucky’s racial zoning ordinance as an infringement on property rights.

But some cities, Rothstein notes, just ignored Buchanan.

Another tool deployed to untangle

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racially mixed neighborhoods and to compel racial separateness was the racially restrictive covenant—a contract in which parties promise to abide by provisions that forbid certain sorts of people from purchasing or occupying covered properties. A covenant in Daly City, California, declared The real property above described … shall never be occupied, used or resided on by any person not of the white or Caucasian race, except in the capacity of a servant or domestic employed thereon as such by a white Caucasian owner, tenant, or occupant.

Racially restrictive covenants blanketed thousands of neighborhoods across the nation.These devices empowered private bigotry to be sure. But they also advanced the aims and manifested the power of public officials. “Government at all levels,” Rothstein observes, “became involved in promoting and enforcing the covenants.”

In 1934, when President Franklin Roosevelt’s Federal Housing Administration (FHA) designed underwriting manuals to guide appraisers in determining which properties were eligible for government-backed mortgages, it determined that the presence of racially restrictive covenants were a positive sign of lowered risk.

Valorizing all-white communities, the FHA applauded racially restrictive covenants for halting the “infiltration” of “inharmonious” racial groups. When the FHA collaborated with developers in building housing for defense industry workers during World War II and then, under the Veterans Administration, for veterans, it often required racially restrictive covenants in the deeds to the properties sold. In St. Louis, for example, to obtain FHA-sponsored financing for the suburban community he sought to build, a developer was made to include language in deeds stating that “no lot … shall be sold, leased, rented or occupied by any other than those of the Caucasian race.”

What happened to realtors who fought the sway of restrictive covenants? State certification boards

The Color of Law: A Forgotten History of How our Government Segregated America

By Richard Rothstein

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disciplined them for unethical conduct. What happened to developers who eschewed restrictive covenants so that African Americans might be permitted to enjoy the benefits of new, affordable housing? Government agencies cut them off from funding and harassed them with adverse decisions regarding variances and other routine requests. What happened to blacks who occupied properties notwithstanding restrictive covenants?

They were hauled by white neighbors into courts in which judges assessed damages against them or ordered them evicted from properties they had bought. In 1947 in Los Angeles, a judge jailed a black man who refused to leave the house he had purchased.

In 1948 in Shelley v. Kraemer (a St. Louis case) and Hurd v. Hodge (arising from Washington, D.C.), the Supreme Court held that it was unconstitutional for judges to empower private prejudices by ousting people from properties they had bought in defiance of racially restrictive covenants.

Five years later in Barrows v. Jackson, a case arising from Los Angeles, the Court ruled that it was unconstitutional for judges to enforce racially restrictive covenants through the award of money damages. Shelley and its progeny, however, by no means ended governmental complicity in anti-black housing discrimination. Two weeks after the Court announced Shelley, an FHA commissioner declared that that decision would “in no way affect the programs of this agency,” adding that it was not “the policy of the Government to require private individuals to give up their right to dispose of their property as they [see] fit, as a condition of receiving the benefits of [federal assistance].”

Governments continued to team up with private parties to exclude blacks, on an expressly racial basis, from housing opportunities and, even worse, to remove them from old housing to make way for new housing for whites only. New York City, for example, collaborated with the Metropolitan Life Insurance Company in creating a 9,000-unit housing complex, Stuyvesant Town. The city cleared 18 square city blocks, razing a low-income neighborhood that

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had been racially mixed, and granted Metropolitan Life a 25-year tax abatement even though the developer stipulated that the housing would be available only to whites. Despite Shelley, courts refused to intervene.

The state of New York subsequently prohibited such deals, but the consequences of past misdeeds linger.

Rothstein notes that according to the 2010 census, only 4 percent of Stuyvesant Town residents are black in a metropolitan area that is 15 percent African American.

Governments have deployed other means of racial purification and monopolization. Rothstein relates the plight of a black couple in 1959 who attempted to build a house in a white town in Missouri. Upon discovering that the couple was black, whites offered to purchase the property (reprising a scene from Lorraine Hansberry’s classic play A Raisin in the Sun, which dramatized a similar attempted buyout in a white Chicago neighborhood). After the black couple demurred, town officials seized the property pursuant to eminent domain, claiming that the land was needed for a park.

In numerous cities, officials eradicated black neighborhoods by demolishing them for purposes of “slum clearance” or highway construction.

Although these campaigns of “Negro removal” were notorious and deeply resented among African Americans, they often proceeded without much resistance or documentation. An exceptional report by the New Jersey attorney general’s office in the 1960s casts light on what was, unfortunately, a widespread injustice. Commenting on the destruction of 3,000 housing units in Camden, the report remarked that it was “obvious from a glance at the … transit plans that an attempt is being made to eliminate the Negro and Puerto Rican ghetto areas by … building highways that benefit white suburbanites, facilitating their movement from the suburbs to work and back.”

Rothstein rightly emphasizes how “police-protected violence” has long been used to exclude blacks from certain neighborhoods. He tells the story, for example, of a black Navy veteran,

Realtors who sold or rented to black families were hauled before state certification boards and disciplined for unethical conduct.

Wilbur Gary, who bought a home in 1952 in a suburb outside of Richmond, California. Soon after the Gary family arrived, they were met by a mob of 300 whites who shouted epithets, hurled bricks, and burned a cross on the lawn. For several days the local police, sympathizing with the mob, refused to intervene—deliberate inaction that deprived the Garys of the equal protection of the law. The same thing happened to another black veteran, Bill Myers, when he moved his family into Levittown, Pennsylvania.

While hundreds of white protesters pelted the Myers family with rocks, police stood by idly. “What the Gary and Myers families experienced,” Rothstein observes, “was not an aberration. During much of the twentieth century, police tolerance and promotion of cross-burnings, vandalism, arson and other violent acts to maintain residential segregation was systematic and nationwide.”

Remarkably, victims of racially motivated violence found themselves prosecuted by state authorities. When Harvey Clark, an African American bus driver, rented an apartment in Cicero, Illinois, police prevented him and his family from moving in. When a judge ordered the police to desist, a white mob of thousands invaded the apartment, setting the family’s belongings ablaze. No one was arrested. But soon thereafter, Clark and the white landlady who rented the apartment to him were arrested on

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charges of inciting a riot and conspiring to lower property values. These episodes, Rothstein makes clear, represented more than stray eruptions of racism; they represented a pervasive risk that discouraged countless blacks from even considering living in locales deemed to be off-limits.

The Color of Law updates the history of residential racial segregation, relates it to contemporary outbursts of racial enmity, particularly the alienation between blacks and police that is so evident in many poor African American neighborhoods, and humanizes the consequences of racial division in housing. He recounts the stories of individuals who have been harmed and movingly describes unhealed, recurrent injuries. He details, for example, how housing segregation has made black workers spend more time and money on commutes made longer by segregation that disabled them from securing housing near their workplaces. Rothstein introduces the reader to hardworking black people who continue to suffer disadvantage because their “parents and grandparents were denied participation in the equity-accumulating boom of the 1950s and 1960s.” He simultaneously brings home the reality of white privilege, a concept that the right has, alas, been all too successful in discrediting. Rothstein delineates how, unencumbered by the historical burdens blacks carry, “white families are more often able to borrow from their home equity, if necessary, … send their children to college, retire without becoming dependent on those children, aid family members experiencing hard times, or endure brief periods of joblessness without fear of losing a home or going hungry.”

Rothstein’s focus on segregation in the eras of the New Deal, World War II, and the postwar period is a useful contribution to the ongoing debate over reparations. Many reparationists stress the horrific atrocity of enslavement in making the case that the United States ought to do something dramatic to compensate African Americans, or at least those with a plausible claim of ongoing deprivation.

In The Case for Black Reparations,

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metropolitan area, the federal government should purchase the next 15 percent of houses that come up for sale in Levittown at today’s market rates (approximately $350,000). It should then re-sell the properties to qualified African Americans for $75,000, the price (in today’s dollars) that their grandparents would have paid if permitted to do so.

The government should enact this program in every suburban development whose construction complied with the FHA’s discriminatory requirements.

Levittown, PA, 1957: An ugly crowd gathers as the first black family moves in.

however, Boris Bittker urged reparationists to focus more on the wrongs of the Jim Crow era than the slavery era.

To concentrate on slavery, he wrote, “is to understate the case for compensation, so much so that one might almost suspect that the distant past is serving to suppress the ugly facts of the recent past and of contemporary life.” Foes of reparations note the obvious fact that all of the slaves and slave-masters are long dead. But millions of black Americans directly harmed by stateenforced segregation remain alive, as do millions of white Americans directly privileged by racially discriminatory governmental policies. Focusing on segregation underscores that the wrongs in need of righting are not antiquarian misdeeds; they are relatively recent injustices whose awful layers we are still in the process of discovering.

Rothstein’s final chapter, “Considering Fixes,” reviews some of the policies undertaken or proposed to prevent, deter, and redress fresh racial discrimination in housing markets and to rectify the effects of past racial

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Slaves and slavemasters are long dead.

But millions of black Americans directly harmed by stateenforced segregation remain alive.

wrongs. It is the least-developed part of The Color of Law. Rothstein writes, “It is not difficult to conceive of ways to rectify the legacy of de jure segregation.” He is wrong. It is difficult to conceive of efficacious and plausible means by which to redress the huge, complex, and ever-evolving problem that Rothstein vividly depicts. Overcoming that intellectual obstacle is a mission on which progressive analysts should be embarked, especially at this Trumpian moment during which, in many locales, they are exiled to the political wilderness. Having a decent sense of shame and guilt rooted in an awareness of our ignominious history is essential. So, too, is having a sense of generosity and a desire to assist in creating a more just society. Essential, as well, however, is careful, knowledgeable, wise planning.

Rothstein writes that we might contemplate the following: Considering that African Americans comprise about 15 percent of the population of the New York

Rothstein avers that he presents this idea “not as a practical proposal but only to illustrate the kind of remedy that we would consider and debate if we disabused ourselves of the de facto segregation myth.” Rothstein has disabused me of that myth, the fiction that racial separateness springs mainly from non-official sources, including causes that, in the words of one Supreme Court justice, are “unknown and perhaps unknowable.” Rothstein convinces me that racial discrimination facilitated by government—de jure segregation— has played the major role in constructing the residential crisis that ensnares so many African Americans. I wish, though, that Rothstein had been more deliberate in educating me about the reform he posits. How much would it cost? What sector of the African American population would be able to take advantage of it? What objections are likely to be voiced and what are the best responses?

Policy prescription, however, is not the main mission of Rothstein’s enterprise. His main mission is identifying and dramatizing a neglected feature in the construction of American racial injustice: governmental complicity in racial residential exclusion, isolation, and deprivation. In The Color of Law, he accomplishes that mission ably.

Randall Kennedy is a contributing editor to the Prospect and professor at Harvard Law School. His several books include The Persistance of the Color Line: Racial Politics and the Obama Presidency.

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Fiscal Purgatory in New York

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ortunes made in finance, real estate, and media give New York City more billionaires than any other single locale worldwide. With nearly half its population either in poverty or near poverty, it is not surprising that New York has the greatest income inequality among the 25 largest U.S. cities. Generally, inequality goes hand in hand with low mobility, but paradoxically, New York is the exception. Certain of the city’s public institutions and its tax policies provide opportunities for those starting in the lower income range. New York City has among the highest rates of upward mobility among all U.S. cities.

Research by the Equality of Opportunity Project shows that the publicly supported City University of New York has one of the highest bottom-to-top mobility rates of any university, public or private, in the country. The city has one of the highest earned income tax credits of all cities, as well as extensive public hospital and mass-transit systems, and subsidized child care.

These policies reflect a long tradition of expansive and egalitarian local government. New York’s liberal political order has also created a hospitable environment for immigrants and strivers from the world over.

This legacy came under severe assault during the 1975 fiscal crisis, as Kim Phillips-Fein makes abundantly clear in her masterful new book, Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics. PhillipsFein, a historian teaching at New York University, challenges the conventional view that most New Yorkers were united in “repudiate[ing] an older tradition of irresponsible altruism” and “accepted the need for austerity and chipped in.”

Rather, as she painstakingly documents using a trove of archival material, Phillips-Fein shows that the leaders of the large New York City banks and corporations teamed with President Gerald Ford’s conservative

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economic advisers to use the city’s debt and budget crisis to roll back an expansive government and the liberal impulses undergirding government economic intervention.

The occasion was the inability of New York City to roll over its debt in financial markets. In his October 1975 National Press Club speech refusing federal aid (which prompted the New York Daily News headline “Ford to City: Drop Dead”), Ford complained about public-sector pay, the “extravagance” of the city’s municipal hospitals, and free tuition at the City University of New York. As PhillipsFein writes, Ford’s message was that “refusing aid to New York meant taking the entire nation in a new direction, leading it away from the reckless spending of the Great Society.”

In June before Ford’s speech, New York Governor Hugh Carey, under the tutelage of financier Felix Rohatyn, set up the Municipal Assistance Corporation (MAC) to deal with the flood of maturing short-term city debt by issuing long-term bonds backed by city sales tax collections. MAC ’s initial foray in credit triage met with limited success, and over the course of the summer and into the fall, as the city teetered on the edge of bankruptcy, the major creditor banks eventually saw an opportunity to assert control over the city budget and insist on stringent austerity measures. The opportunity was realized in early September with the passage of state legislation establishing the Emergency Financial Control Board (EFCB) that stripped Mayor Abe Beame of his budget control.

While the seven-member EFCB included the mayor, and the city and state comptrollers, the governor had a seat and appointed three private citizens, giving him control that was essentially wielded by the three corporate chieftains he appointed. Until 1986, the EFCB had veto power over revenue forecasts, labor and other

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contracts, borrowing, and the total size of the city budget. The mayor and city officials retained authority to decide priorities within the budget total.

Budget control by unelected corporate leaders was the price demanded by the bankers and their political allies in exchange for agreeing to stop-gap financing and for Ford to eventually consent to federal loan guarantees, which happened in December of 1975.

Austerity ensued on a monumental scale—more than one in five city jobs, including police, fire, and sanitation, were cut; the school budget was slashed (class size skyrocketed and arts and sports programming was terminated); child-care centers and neighborhood health clinics and drug treatment programs shuttered; and free college tuition ended. Mass-transit maintenance and capital spending were derailed. Phillips-Fein describes the battles waged by average New Yorkers in protesting these attacks on everyday quality of life and public safety—stories rarely told in narratives about the city’s fiscal crisis and its aftermath. She also examines the desperation, anger, and hopelessness that boiled over in the riot during the 1977 blackout.

How New York’s budget crisis was used to roll back expansive government By James A. Parrott b

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Was New York City living beyond

Fear City: New York’s Fiscal Crisis and the Rise of Austerity Politics

By Kim Phillips-Fein

Metropolitan Books

its means? Certainly, Mayors John Lindsay and Abe Beame failed to keep municipal spending in reasonable alignment with revenues and recklessly relied on borrowing to fund operating expenses. As a novice mayor, Lindsay headed off public worker strikes with generous settlements. But like most severe fiscal crises, forces beyond the control of the city were a big part of the story. Federally subsidized housing and highways fueled residential and corporate suburbanization, and a once-extensive manufacturing base was both pushed and pulled away from urban centers by broader developments. The broader economy weakened in the early 1970s, reducing city tax revenues. Even before austerity set in, forces were well under way that reduced New York’s population by a million and cost over half a million jobs during

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the 1970s. Changes in the financial sector and in regulations opened up wider investment vistas for commercial banks, lessening the attractiveness of municipal bonds.

Phillips-Fein marshals a strong case that there was nothing inevitable about the austerity response to fiscal crisis. The financing provided by the Municipal Assistance Corporation could have been combined with federal assistance and more generous sharing of financial responsibility for Medicaid or public assistance. Policies such as these would have moderated the severity of retrenchment.

But the mid-1970s was a period when financial and corporate chieftains banded together to push back against regulatory and economic policies at all levels of government that they saw as standing in their way as they eyed emerging global opportunities. This was a period of the forceful assertion of corporate influence in the political sphere that, among other things, thwarted the union movement’s push for federal labor law reform under Jimmy Carter and paved the way for a Reagan presidency, marking the end of a semblance of broadly shared prosperity and ushering in the post-1970s era of the concentration of income gains at the top.

The 1970s saw the transformation of liberalism as much as the consolidation of conservatism. While Phillips-Fein’s book illuminates President Ford’s decision-making on the question of aiding New York City, she devotes relatively little attention to the policy options considered by Governor Carey in ultimately proposing and signing the legislation that shifted city budget control to the bank-dominated EFCB. Carey’s voting record in Congress was that of a liberal Democrat; his actions as governor reflected the ascendance of an unabashed business agenda and the eclipse of New Deal–Great Society liberalism.

Nor does Phillips-Fein’s narrative shed new light on the discussions within New York’s labor movement that led to its acquiescing in austerity, beyond the fact that AFSCME District Council 37 leader Victor Gotbaum feared that municipal bankruptcy

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Only with Mayor Bill De Blasio’s universal prekindergarten program did the city again start thinking big and bold— after a fourdecade pause.

could lead to the abrogation of the city’s collective-bargaining agreements. The billions in pension fund capital that municipal unions invested in MAC bonds might have made the difference in staving off bankruptcy and in securing federal loan backing. Eventually, Gotbaum and his fellow labor leaders joined with David Rockefeller and other business leaders in support of an economic policy paradigm consisting of business property tax breaks, personal income tax cuts, and a decidedly pro–real estate local economic-­ development agenda.

While they might have had some promising policy ideas, liberals and their labor allies obviously were not able to marshal the political support within the city or in Albany to avert the austerity solution.

Core components of New York’s expansive approach to government, while somewhat shrunken, continued in the aftermath of the fiscal crisis.

In the years since, city leaders have assiduously balanced the budget, but at costs to the city’s tradition of egalitarian public institutions. While city government staffing levels gradually rebounded, urban ambitions remained constrained, particularly for the 20 years under Mayors Rudy Giuliani and Michael Bloomberg.

It was only with Mayor Bill de

Blasio’s establishment in 2014 of universal pre-kindergarten covering all 75,000 four-year-olds that the city started thinking big and bold—after a four-decade hiatus. On the other hand, the near-complete deference to real-estate interests established in the wake of the fiscal crisis continues as if it were a skyscraper anchored to Manhattan bedrock.

A young Donald Trump makes an appearance in Fear City when he secured one of the lucrative property tax breaks the city continues to dole out to developers. The taxpayer tab for Trump’s 1976 deal to build the Grand Hyatt Hotel came to $360 million as of 2016, a sum surpassed many times over courtesy of property tax breaks Bloomberg extended to developers in the Hudson Yards district beginning

in 2005. Curiously, the justification provided by Bloomberg’s budget director was that Manhattan developers had come to expect such tax breaks, so therefore they must be provided, The Bond Buyer reported.

While de Blasio might have moved beyond New York liberalism’s embrace of austerity, the current Democratic governor, Andrew Cuomo, has touted his adherence to a 2 percent state spending cap and a rigid local property tax cap (applicable to schools and municipalities outside of New York City) set at the inflation rate or 2 percent, whichever were lower. His rationalization is that state taxes had grown faster than personal income over the 50 years from 1960 to 2010, and that this had stifled growth.

Ironically, if you start that analysis at 1975 or later, income has grown faster than taxes. In essence, Cuomo is justifying Albany’s current budget austerity because state spending grew faster than income from 1960 to 1975, mostly years when a free-spending Nelson Rockefeller, later Ford’s vice president, governed the state. As part of budget horse-trading, Assembly Democrats have acquiesced to Cuomo’s austerity. That austerity has led to thousands of teacher layoffs and sharply diminished funding for community colleges, youth and senior services, public health, and public safety.

The budget discipline mandated by the act establishing the EFCB has left the city with one of the most transparent budget processes of any large government in the country, and its borrowing practices are closely scrutinized. Other than the area of budget process, the fiscal crisis era did not impose any lasting restrictions on the city’s budget authority.

The state constitution has long limited the city’s authority to change tax policy, except for setting the property tax rate. Governors and the Republican-dominated state senate typically keep New York City mayors on a short leash, partly because it helps them raise campaign contributions from real-estate and financial interests. In recent years, that has meant killing mayoral proposals to fund pre-kindergarten and affordable housing with a progressive city income tax hike or a

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“mansion tax” on high-valued property transactions.

In mandating paid sick days and acting in other ways to improve pay and opportunities for low-wage workers and to provide protections for freelance workers, New York City’s progressive mayor and city council are taking steps to move beyond the longstanding “hands off” economic paradigm. Wage growth in the lower half of the distribution has been better than the national average in recent years, the official unemployment rate is the lowest in the 40 years of Bureau of Labor Statistics record-keeping, poverty has come down, and this is the first local recovery since the 1960s not dominated by a Wall Street speculative boom.

In the wake of New York City’s turn toward austerity and the ascendance of corporatist national economic policies, the richest 1 percent captured two-thirds of all income growth in the city, boosting their share of total income from 12 percent in 1980 to nearly 38 percent in 2010. New York City’s austerity politics weren’t solely responsible for the post-1970s rise in income inequality, yet they were certainly a contributing factor. The top 1 percent’s share has continued to rise in the first half of this decade, reaching a little over 39 percent in 2015, but the concentration of income gains taken by the top has been a little under half. A small step, to be sure, but at least one headed in the right direction.

To further escape the austerity mind-set, the city needs to keep using budget and other policies to build on institutions providing avenues of upward mobility, but also policies that raise wages and incomes and reduce poverty. And given President Trump’s vicious anti-immigrant actions, the city also needs to remain vigilant in protecting its vast immigrant community, which has played such a critical role in reenergizing New York’s neighborhoods in recent decades. Reasserting the best of its egalitarian legacy may finally enable New York City to close the book on Fear City.

James A. Parrott is senior fellow at the Center for New York City Affairs at the New School.

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The Long Arc of Protest While digital media make it easier to spread activist messages, today’s movements face many of the same problems their forerunners did. By David Karpf b

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nly a few years ago, the prospects for progressive social movements looked more auspicious than they do today. In 2011, aided by new digital technology, massive street protests were on the march from the Arab Spring to the Occupy movement and the takeover of the Wisconsin State Capitol. Digitally organized protests continue in 2017, but the earlier optimism is gone. Authoritarian regimes and civil wars have replaced the revolts of the Arab Spring, right-wing nationalist parties have gained strength across the globe, and the daily excesses of Donald Trump dominate American politics. An iconic sign from the Women’s March in January read: “I can’t believe we still have to protest this crap.”

From where we stand today, history seems more like a drunkard’s aimless stumble than the arc of the universe that Martin Luther King Jr. promised would be long but bend toward justice. No one said that the work of mass social movements would be easy. The bizarre twists of these past few years, however, have left many to wonder whether digitally infused movements are missing some crucial ingredient.

Sociologist Zeynep Tufekci has been observing digital protest since the mid-1990s Zapatista movement in Mexico, and in her book Twitter and Tear Gas, she explores the promise and peril of the new tools available to political activists. Drawing from interviews and firsthand observations among activists who participated in the Arab Spring, Occupy Wall Street, and the 2013 protests against the Turkish government in Istanbul’s Gezi Park, Tufekci ruminates on a central tension between protest action and protest power: On the one hand, digital technologies have made it much easier to spread activist messages, voice dissent, and gather a crowd. The opportunities for mass political action have never been greater or more attainable. One can now accomplish

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in days what might have taken months or years in a previous era.

But on the other hand, the hard, slow work of mass political action in the past had a generative quality that is being lost. Amid the plodding work of protest-planning, Tufekci argues, activists used to form shared identities and develop political skills. The speed and simplicity of digital tools, in contrast, may not produce that solidarity. As a result, digital media are both a blessing and a curse, resulting in a vibrant digital protest culture that does not necessarily produce an enduring impact.

Tufekci’s core argument echoes an observation by Clay Shirky a dozen years ago, in an essay titled “Exiting Deanspace.” Shirky had been swept up in Howard Dean’s 2004 presidential candidacy. Like many observers, he looked at the massive crowds and record fundraising numbers and believed that they signaled an inevitable victory in the Democratic primaries. After the Dean campaign was scuttled in Iowa and New Hampshire, Shirky realized that his “mental model” had been wrong. “Support isn’t votes …

Fervor isn’t votes … Effort isn’t votes …

Money isn’t votes. … Sometimes votes aren’t even votes (depending on who’s counting).” The internet, he realized, had lowered the coordination costs for inciting a mass volunteer base. As a result, volunteer enthusiasm provided a weaker indicator of the candidate’s mass appeal than it previously did.

Likewise, Tufekci warns that the effectiveness of social movements cannot be measured through the sheer numbers of people they are able to turn out. Instead, the strongest movements are the ones that develop “narrative capacity,” “disruptive capacity,” or “electoral and/or institutional capacity.” Narrative capacity is the ability to attract public attention and introduce new issues or frames into the political debate. Disruptive capacity is the ability to interrupt the normal workings

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of political or economic institutions.

Electoral capacity is the ability to punish or reward elected officials at the ballot box. Social movement tactics are meant to signal these capacities to governing elites. (Activists do not have to kick all the bums out of office … they simply need to convince elected officials that they could.)

Tufekci is at her finest when discussing the strange, still-emerging technological universe we now inhabit. There is a Tom Friedman–like quality to her writing, as she illustrates her points through globe-traveling personal stories and firsthand accounts.

The book includes compelling discussions of the quasi-monopolistic power that Facebook and Google hold in public life. The final chapter on government censorship, surveillance, and misinformation campaigns seems particularly timely in the aftermath of the 2016 election. She also artfully introduces key sociological concepts like technological affordances—the distinctive characteristics of different media that favor some uses over others—to deepen her readers’ understanding. The book reveals both why digital technologies are vital tools for social action and how they create new obstacles to political change.

Tufekci offers one warning to present-day activists that I don’t find wholly convincing. Unlike social movements in the past, she argues, today’s fast-forming, fast-dissolving movements are liable to “tactical freeze,” in which they fail to develop the internal deliberative capacity to shift tactics in response to changing circumstances. She illustrates this possibility with examples from the Turkish protests in Gezi Park and the Occupy movement, both of which had a distinctly anarchist ethos. But other social movements don’t fit this pattern.

Digital activist organizations such as MoveOn.org and ColorOfChange.org have demonstrated substantial tactical versatility over the years, relying on a culture of testing and analytics that has helped them adapt to a fast-changing media and political landscape.

Similarly, in the 2014 People’s Climate March, which attracted 300,000plus protesters to New York City just before the U.N. Climate Summit, the

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convening groups were able to change tactics and shift their focus to increase their impact.

Adaptation and flexibility are not new challenges for social movements, as Tom Hayden’s book Hell No reminds us. Hayden was a lifelong activist from the early 1960s, when he was president of Students for a Democratic Society, through decades as a leader of the peace movement and other causes. Hell No, published just months after his death last October, serves as a final and forceful act of remembrance and as a lesson about how frustrating, complex, and incomplete social movements are … even when they eventually win.

The movement against the Vietnam War spanned over a dozen years and four presidential administrations.

During that time, protest actions became more disruptive and the movement expanded even as it suffered from severe internal divisions. Like today’s digital movements, the Vietnam peace movement leaned heavily on the media of its day. As the war dragged on, the national media slowly turned against it (though never in favor of the protesters). Some of the media affordances of that time helped the antiwar cause.

The entire nation “watched the same television news, and began to question the official propaganda. … Everyone was equally lied to.” But in other respects, the media technology of the time was limiting. In 1962, Hayden and his fellow SDS leaders issued the “Port Huron Statement,” a manifesto that would come to be seen as marking the birth of the New Left of the 1960s.

But it was originally mailed, he recalls, to only about 65 people. Movementbuilding was slow and arduous. The strategic capacity that Tufekci credits to pre-digital movements was fleeting and sometimes wholly absent.

But the peace movement persevered and adapted, displaying all the capacities that Tufekci enumerates— narrative, disruptive, and electoral— though never at the scale necessary to stop the war. Instead, the movement had to capitalize on broader social forces as they emerged. Hayden repeatedly mentions the crucial work of Vietnam veterans who opposed the war once they returned home. The

Twitter and Tear Gas: The Power and Fragility of Networked Protest

By Zeynep Tufekci

Yale University Press

Hell No: The Forgotten Power of the Vietnam Peace Movement

By Tom Hayden

Yale University Press

war itself produced disillusionment and social friction, and the strategic challenge for the movement was capturing the energy from that friction and turning it toward politics. Take away the draft, and you have a weaker social movement. Take away the military failures, and you have a weaker movement. But take away the movement itself, and you have dramatically different government policies. Movements often affect history in ways that go uncredited.

What, then, do these two authors tell us about our current wave of protest movements? From Tufekci, the reader can garner a clear sense of how digital technologies help and hinder social movement activists.

From Hayden, the reader is left with a sense of historical perspective. The failings and limitations of Occupy in 2011 and Gezi Park in 2013 were not so different from those of the Vietnam War peace movement in 1968 or 1971.

Tufekci is right to warn that social movements must develop the strategic capacity to learn and adjust to changing circumstances. But, as Hayden reminds us, the tactical insights of past movements came slowly and were accompanied by many missteps.

Indeed, there is reason to believe that the strength of today’s protest movements comes from exactly the sort of tactical learning Tufekci suggests is necessary. The founders of the Black Lives Matter movement clearly paid close attention to the limitations of the Occupy movement, developed a strategic critique, and adapted new political strategies as a result. The anti-Trump efforts staged by the Indivisible movement have borrowed from the Tea Party’s most successful tactics.

Successful social movements rarely travel along a linear route toward victory, or a fast one. Even with new digital media, organizing for change requires all the old virtues.

David Karpf is the author of The MoveOn Effect: The Unexpected Transformation of American Political Advocacy and Analytic Activism: Digital Listening and the New Political Strategy. He is an associate professor in George Washington University’s School of Media & Public Affairs.

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Goodbye to All That Democracy Can our constitution co-exist with extremes of economic inequality? By Zephyr Teachout b

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“An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” —plutarch (c. 46–120 ce) “We can either have democracy in this country or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

—louis d. brandeis, u.s. supreme court justice (1856–1941)

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here ought to be a German word for the unpleasant feeling that comes when one’s dire predictions come true. Schmerz-Prognose: pain in premonition. Something like that feeling likely overcame Vanderbilt law professor Ganesh Sitaraman at around 10 p.m. on November 8, 2016, when a demagogue with kleptocratic tendencies won the White House. Sitaraman essentially predicted as much—and worse—in his new book, The Crisis of the Middle-Class Constitution.

There are plenty of theories for Donald Trump’s victory: misogyny, nativism, cultural anxiety, economic insecurity, and the decline of shared cross-partisan media sources. Sitaraman doesn’t rebut any of these, but makes a different, more dire structural argument: inequality and stable democracy don’t mix.

According to Sitaraman, in an epically unequal society, with a constitution built for equality, we won’t last long. Unless something changes quickly, we may experience revolution, instability, coup attempts, and violence, common fates of unequal societies. More likely, he writes, “either the republic will transform into an oligarchy, or the people will be seduced by an authoritarian demagogue.”

Just how unequal are we? For generations, the American middle class was the majority of Americans—no more, as of 2015. The top 1 percent owns more than 30 percent of America’s wealth. The poorest half owns just 2.5 percent. Wall Street bonuses

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alone are twice the amount of all the combined earnings of minimumwage workers in this country. We are grotesquely, bizarrely, grossly unequal—unequal in cash, health care, schooling, and access to clean air and water. Unequal in our access to power. And we are becoming more unequal by the year: Since Ronald Reagan became president, the income of the wealthiest 1 percent of Americans has doubled.

Sitaraman posits that we simply don’t have the right kind of constitution to withstand this degree of inequality. He argues that there are two kinds of constitutional structures: Class Warfare Constitutions and Middle-Class Constitutions.

Class Warfare Constitutions—like those of ancient Rome, England, and Florence—assume inequality. These constitutions were designed with an eye to channeling a natural antagonism between the very rich and the poor into nonviolent mechanisms for negotiation. Both rich and poor accept these channels as conditions for the freedom from violence and instability that threaten the rich, and the freedom from despotism and arbitrary power that threaten the poor. Some used devices like class-specific representative chambers to give different classes political clout; some used devices like lotteries to ensure that even the poor get a voice.

The second kind of constitution, the Middle-Class Constitution, depends upon relative equality across the classes, and especially a strong middle class. Representation is designed to channel different cross-class interests, not warfare between the classes.

America, Sitaraman says, has this kind of constitution. For instance, we have a Senate and House, but no property requirements for either, no expectation that elective office will be filled by the wealthiest. We don’t use lotteries to choose our representatives, only our jurors. Unlike other countries

James Harrington: 17th-century prophet of property equality

The Crisis of the Middle-Class Constitution: Why Economic Inequality Threatens Our Republic

By Ganesh Sitaraman

Knopf

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with other constitutions, we cannot survive inequality, because we were not planning for it.

James Harrington, a utopian 17th-century thinker, appears throughout the book as the underappreciated visionary behind the American Constitution.

In Harrington’s book, The Commonwealth of Oceana, he laid out a plan for society, one where property is evenly distributed. Harrington’s basic law of politics is that power follows property ownership: unequal property ownership leads to unequal power, and vice versa. Harrington appears to go one step further than Sitaraman—he argues that freedom depends upon an equal distribution of property. Unlike Sitaraman, he countenances only one kind of successful constitution—the middle-class kind.

Harrington believed that inequality introduces luxury, and luxury leads to displacing reason and justice.

The early Americans could be Harringtonian—as defined by Sitaraman— and avoid a class warfare constitution because of the astonishing equality that already existed in the country. In revolutionary America, the country was thinly populated with a strong agrarian base. It had neither extreme wealth nor extreme poverty, no titles of nobility or hereditary aristocracy. Sitaraman calls on a huge array of colonial thinkers from across the country and the European continent, emphasizing the classlessness of America, and the special chance for freedom that it provided.

These economic conditions, he argued, meant that American republicanism and American liberalism were simply different than the same strains of thought in old Europe. Because of these different material realities, “[t]he Harringtonian tradition merges republican and liberal themes” in America, and we need not see liberalism and republicanism as opposite to each other.

Throughout American history, Sitaraman demonstrates a common

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thread that connected the Jacksonians, the Republicans during Reconstruction, the populists, the 20th-century progressives, and FDR’s crew, in which otherwise divergent thinkers have tied our Constitution to our economy. Even if he is cherrypicking—and sometimes conflating different strands of thought—there are bucketloads of great cherries.

He recounts the great Daniel Webster, arguing in 1820 that America’s heritage was founded on equality, and that the “natural influence” of unequally distributed property was to despotism or violence.

Sitaraman, who is a policy adviser to Elizabeth Warren and senior fellow at the Center for American Progress, brings a fresh eye and an impressive range of historical thinking to an ageless question: What are the conditions for freedom? He tours the intellectual struggles of the 19th and early 20th centuries, as progressives worked to reconcile industrialization and democracy. He gives us a glimpse of episodes that led to the progressive creation of the income tax, the development of antitrust laws and enforcement, the creation of a welfare state … and through the demise of those achievements—a generation in which we’ve reduced taxes, stopped investing in public infrastructure, and stopped enforcing antitrust. According to Sitaraman, we’ve lost the policies essential to the preservation of the middle class.

So what do we do when the conditions upon which a country was founded no longer hold? We could give up on equality, and adopt a classwarfare approach, which Sitaraman opposes, or we can ring the alarm bells

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and adopt massive structural change across society. He argues that structural reforms are the key. While Sitaraman is convincing in his analysis, he is most convincing at the broad level— support labor, break up monopolies— and least convincing when it comes to the precise structural changes he suggests, because they seem small next to the depth of the crisis he has terrified us with. Reinstating Glass-Steagall, while important, seems unequal to the task of reviving American egalitarianism. When it comes to funding elections, he explains how privately funded elections corrupt policymaking, but does not propose shifting to publicly funded elections. Instead, he explores ways to limit the revolving door and provide lobbying services to underserved communities. This seems like weak gruel for a society in crisis, especially when he reminds us that Rome went from a stable republic to civil war in just 53 years.

The book is at its finest when addressing the structure of public thought and how it has changed. Sitaraman tells the stirring story of FDR’s attack on plutocracy, and also how FDR believed that the “common task of statesmen and businessmen” was the “creation of an economic constitutional order.” By separating economic and constitutional thinking, the crisis of voting and the crisis of inequality, we betray both our history and basic truths about society.

Perhaps one of the most difficult and interesting areas is one that Sitaraman skips over too lightly. What is the distinction between property and wealth? Sitaraman assumes that property and wealth play the same

According to Sitaraman, we’ve lost the policies essential for the preservation of the American middle class.

role in democratic theory. He argues that one of Harrington’s flaws is that he speaks only of property, not wealth, and ascribes the mistake, as he calls it, to the way in which wealth presented itself in Harrington’s time.

But perhaps Harrington’s focus on property, not wealth, is not an accident. Property and wealth, though related, have played different roles in democratic theory throughout history. For instance, in The Human Condition, Hannah Arendt traces the modern tendency to conflate the two. Property, according to Arendt, historically created conditions for citizenship by creating a private space for the citizen, and creating conditions of freedom. “[P]roperty, as distinguished from wealth and appropriation, indicates the privately owned share of a common world and therefore is the most elementary political condition for man’s worldliness.”

Wealth was both less permanent and less privacy- and freedom-giving.

Whatever one thinks of Arendt’s critique, Sitaraman’s book would have benefited from a fuller development of the complicated relationship between property and wealth. Harrington wrote, “Such as is the proportion of property in land, such is the nature of the empire,” not “Such as is the proportion of wealth, such is the nature of the empire,” and it is not at all obvious that these are the same sentences or express the same political theory.

The political implications of the difference are not trivial. Redistribution of wealth through taxation is not the same as structural property regimes that lead to distributed property, such as egalitarian inheritance

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laws or egalitarian intellectual property regimes.

Sitaraman is surely correct that unequal financial wealth also leads to despotism, yet there is something structurally different between solutions that focus on property laws as the key to power and those that address themselves to redistribute accumulated wealth. The book, having leaned so heavily on property law theorists, would have done well to look at modern property laws and structures, and the current inequality of property ownership—including intellectual property—in our own society.

The current structure of copyright and patent laws tends to a high degree of concentration of ownership—and the freedom that accompanies ownership—in our society. The patenting process, for instance, is expensive and labor-intensive, meaning that big firms more easily acquire and defend patents than small firms. Patent owners use their monopoly property ownership to make profits, which they then use to lobby for greater protections and greater property rights. But their property ownership also allows them to govern realms of thought and action, and to exclude others from realms of thought and action. Property rights are not interchangeable with the right to use financial wealth.

When Sitaraman wrote his book, Trump was not president. But for those unhappy with our current president, the implications of this argument are significant: Not Trump’s mistakes, nor charismatic Democratic candidates, nor better civics classes will make a difference in the long term. They could help Democrats win an election or two, but they will not help all of us save our democracy. We do not need better messaging, or better ground game. Instead, we need all hands on deck to address inequality in a structural way.

Zephyr Teachout is a law professor at Fordham University and author of Corruption in America: From Benjamin Franklin’s Snuff Box to Citizens United.

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Gift Horse or Trojan Horse?

The mixed record of America’s new rich as often self-interested philanthropists By Benjamin Soskis b

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uring the first Gilded Age, the public response to the birth of modern philanthropy was intense ambivalence. The nation had long celebrated individual acts of generosity. Many appreciated that the new, enormous industrial fortunes, some of which were channeled into private foundations, could be applied to the pressing social needs brought on by urbanization and mass immigration. But the belief that those piles of wealth threatened the nation’s egalitarian traditions was equally strong.

For some of the most astute observers of American society, philanthropy simultaneously represented a social good and a social menace.

The Congregational minister Washington Gladden summed up this uncertainty in a 1910 sermon. “Never before have such colossal fortunes been heaped together in so short a time and never have such gigantic plans for gratuitous distribution of wealth been conceived.” Gladden cautioned that this new phenomenon warranted careful monitoring. “Nothing like this has ever happened to the people of any nation. What it will do for us no one can be sure.”

For much of the rest of the 20th century, the major players that dominated the philanthropic scene remained largely the same. In the last few decades, though, the landscape has experienced a dramatic transformation with the arrival of a corps of hands-on living donors, the product of the overcharged and inequitable wealth creation of recent years. The capacities and ambitions of these new philanthropists now rival, and in many respects surpass, the older legacy foundations. The Gates Foundation dwarfs the Rockefeller Foundation; the resources pledged to the newly formed Chan Zuckerberg Initiative greatly exceed those available to the Ford Foundation. And what these

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new philanthropists will do for us no one can be sure.

In his important new book, The Givers: Wealth, Power, and Philanthropy in a New Gilded Age, David Callahan offers a survey of this landscape, suffused with the same ambivalence, uncertainty, and moral hedging that has characterized much of the best work on American philanthropy. Many of the names in his book will be familiar to the general reader: Gates, Buffett, Soros, Koch. But the cast of characters that Callahan, the founder and editor of the online journal Inside Philanthropy, features is much broader. It includes hedge-fund billionaires like John Arnold (who has funded pension and criminal justice reform) and Jim Simons (a major backer of basic scientific research), techies like Tim Gill (a leading champion of LGBT causes), and old-economy onepercenters, such as Amos and Barbara Hostetter (cable TV moguls who have supported arts organizations and environmental work in Boston).

It’s a Star Wars cantina of megadonors, a dramatis personae that defies easy generalizations or narrative coherence. But this complexity is itself worthy of note. Unlike a halfcentury ago, as Callahan argues, there no longer is a single, cohesive, and homogeneous philanthropy establishment. That makes the job of any surveyor that much more difficult.

In approaching his subject, Callahan

has positioned himself between the poles that define most contemporary discourse surrounding philanthropy.

He tacks between commendation and condemnation, between the messianism of the philanthro-capitalist crowd, who believe that “the rich can save the world,” and the irreconcilability of many academic and political critics, who link philanthropy to broader systems of exploitation and

volume 28, number 3. 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 © 2017 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.

Summer 2017 The American Prospect 95

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inequality, and often seem reluctant to concede that it can provide any social benefit whatsoever.

What makes Callahan’s account distinctive is that he does not stake his claim entirely in either of these camps.

He borrows from each, often presenting their contending perspectives in a single paragraph. The result is less a synthesis than a stalemate—one that is not always analytically satisfying but that honestly reflects the unstable grounds of philanthropy’s legitimacy in the United States. “In many ways, today’s new philanthropy is exciting and inspiring. In other ways, it’s scary and feels profoundly undemocratic,” he writes in one typical passage. “The deeper I’ve dug into today’s mega-giving, the more I’ve come to feel whiplashed between hope and fear,” he writes in another (and the reader could say the same).

The reasons for hope and for fear that Callahan offers stem from the same fundamental dynamics. First there is the issue of increased scale.

As Callahan demonstrates, with the requisite references to Piketty and the Forbes 400, the massive concentration of wealth we’ve witnessed over the last few decades has produced an unprecedentedly large and varied class of potential mega-donors, able to drop multimillion-dollar gifts with little damage to their bank accounts.

Second, the philanthropy of many of these donors has become increasingly sophisticated and politically aggressive, abetted by a mushrooming of policy-oriented nonprofits and surging hyper-partisanship. In fact, it’s policy-oriented philanthropy that attracts much of Callahan’s scrutiny and apprehension. Finally, the growth of this politicized philanthropy has coincided with a decline in the status of and resources available to public systems of governance.

On the one hand, the rise of mega-philanthropy can be regarded as a blessing—at precisely the moment when discretionary government funding has reached historically low levels, philanthropy is stepping in to fill important

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By David Callahan

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The Gates Foundation dwarfs older legacy philanthropies like the Rockefeller Foundation.

gaps. Callahan is willing to acknowledge the inadequacies and inefficiencies of government and to recognize that philanthropy can play a role in circumventing entrenched interest groups, bypassing gridlock, advancing pluralism, and promoting the interests of groups ignored by majoritarian preferences.

But he is never entirely convinced by these arguments, at least not enough to override his suspicion that the intervention of “super-citizens” constitutes a severe threat to democratic institutions and norms. In the strongest formulation of this claim, he gestures toward a causal relationship between increased political philanthropy and decreasing civic engagement. The rising power of the philanthropic elite, he writes, necessarily “push[es] ordinary Americans to the margins of civic life.” In making this claim, Callahan discounts both the power of the bogeyman partisan benefactor—think Koch or Soros—to mobilize grassroots activism, and the impact of philanthropic investment on civic engagement and democracy-building, which according to the Foundation Center has totaled some $3.6 billion since 2011. Then there’s the fact that the resistance to Trump’s presidency has been fed by grassroots activism that has relied relatively little on major donors.

Which is not to say that Callahan’s critique is without real merit. There has always been a democratic challenge to private philanthropy, and it grows stronger when you are dealing with even more zeroes at the end of a gift. His argument gains particular force when it is directed across the entire ideological spectrum. Unlike Jane Mayer, whose investigations of the Koch network proceeded from the assumption that libertarian philanthropy was uniquely suspect, but did not consider the threat to democracy posed by progressive philanthropy, Callahan has an issue with

unaccountable philanthropic power and privilege, even when directed toward causes he favors.

Ultimately, these concerns lead Callahan to insist that the damage philanthropy does to civic equality outweighs the fact that it is likely “a net positive in its substantive effects on U.S. society.” He ends with a series of lightly sketched reforms meant to make the philanthropic sector more transparent, accountable, responsive—and less aggressively political. Some are reasonable—more oversight from state regulators, for instance. Others seem quixotic, such as the establishment of an independent federal office of charitable affairs that would analyze the effectiveness of philanthropic giving.

Still others are intriguing but need more time in the conceptual oven, such as his call to strip nonprofits working to shape policy of their ability to receive tax-deductible donations, even if they operate outside the political arena—or “upstream,” in the realm of ideas and public education.

Yet Callahan, in the book’s final paragraphs, also appreciates the limits of these modest reforms. Only the inauguration of a “new era of economic democracy” will truly reduce the influence of private donors over public life. But how will that age come about, and what paradoxical role should philanthropy have in bringing it on? Callahan leaves this question unresolved.

But it’s an important one that has its own Gilded Age precedents.

One way the early 20th-century philanthropists dealt with their own ambivalence to philanthropy was to dedicate their philanthropy to the project of ending the need for philanthropy.

Sometimes this meant searching for the root causes of social ills; sometimes it meant seeking to transform the economic system that made the accumulation of wealth possible. What Callahan’s book calls out for is a philanthropy that would mitigate, and even undermine, its own political power. It is, at the least, a worthy ambition, if one not likely to be realized anytime soon.

Benjamin Soskis is a research associate at the Urban Institute’s Center on Nonprofits and Philanthropy and the co-editor of HistPhil.

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A Clarion Call for Democracy

By Randi Weingarten, President AMERICAN FEDERATION OF TEACHERS he conservative columnist Peggy Noonan wrote recently: “The president needs to be told: Democracy is not your plaything.” She is so right. Donald Trump has warmly welcomed despots to the White House, suggested that reporters who publish classified information should be jailed, and may have obstructed justice by firing the man leading the investigation into possible collusion between Trump and the government of Russia. The first months of this presidency underscore the necessity of the checks and balances the Founders wrote into our Constitution and the importance of the institutions of democracy that have evolved over time.

Those checks have shifted into overdrive. Trump’s Muslim ban has been stopped while the courts consider its legality. The media are investigating and reporting matters of urgent public interest, in spite of Trump’s almost daily diatribes against the press. And the most important check—the will of the public—is evident in the activism Americans are displaying in protests, town halls and other forums from coast to coast.

But one check on the executive branch has been notably lacking: the Republican leadership in Congress.

Their response to everything from controversial tweets to a potential constitutional crisis? It ranges from sticking their heads in the sand to this anemic statement from Senate Majority Leader Mitch McConnell: “We could use a little less drama from the White House.”

in Ohio—patients whose advanced cancer could be cured with access to healthcare. Millions of people with pre-existing conditions may be one reoccurrence away from bankruptcy or death. Reduced funding for Medicaid would be devastating for students like Evan, a 6-year-old from Souderton, Pa., with Down syndrome.

Medicaid enables Evan to receive occupational, physical and speech therapy and other services that are vital to his growth and independence. Trumpcare would also strip $117 billion from Medicare for seniors. All of this to pay for a tax cut for the top 2 percent of earners.

And the way the House Republicans rammed the AHCA through steamrolled the government mechanisms intended to create trust and transparency. No time for the Congressional Budget Office to score the bill’s impact and cost, no time for House members to read it, no amendments, and less than three hours of debate. Enormous changes to the healthcare Americans rely on and a law affecting one-fifth of the economy require transparency so Americans know what their representatives are doing.

The president is displaying increasingly unbalanced, dangerous and authoritarian behaviors. Every member of Congress takes an oath of office—not to party or president, but to uphold the Constitution.

That sworn oath is mere words unless exercised.

In On Tyranny: Twenty Lessons from the Twentieth Century, Yale historian Timothy Snyder takes readers through three times when Europeans confronted authoritarian regimes: the end of World War I, the end of World War II and the fall of communism. Until recently, most Americans had only been spectators to assaults on democracy. “We might be tempted to think that our democratic heritage automatically protects us from such threats,” Snyder writes. “This is a misguided reflex.”

This is no time to lower our defenses or sit on the sidelines. With an increasingly erratic president and members of his party who refuse to act as a check on his power, it is we, the people, who must serve that function to protect democracy—at town halls, rallies and, ultimately, at the ballot box.

Members of Congress swear an oath, not to party or president, but to uphold the Constitution.

That’s not to say congressional Republicans haven’t been busy. While Trump’s pyrotechnics dominate news cycles, GOP lawmakers are pushing hard for legislation that hurts working families, such as their proposals to repeal the Affordable Care Act. After the House of Representatives narrowly passed the American Health Care Act, or Trumpcare, House Republicans headed to the White House, where the Rose Garden provided a picturesque backdrop for a perverse celebration. The president, vice president and a phalanx of GOP lawmakers beamed as they congratulated each other on passing a bill that will take health security away from millions of people in the United States. No wonder the public’s trust in political leaders is at a new low. Only 21 percent of Americans approve of the Republicans’ healthcare plan, and voters are much less likely to support representatives who voted for it.

It’s hard to know which is worse—what Trumpcare contains, or the way it was passed.

Under Trumpcare, 24 million people would lose health insurance in the coming decade. People like the patients Toria Harris sees as an oncology nurse

Photo by Matthew Jones

Weingarten speaks at the Women’s March on Washington on Jan. 21, 2017.

Follow AFT President Randi Weingarten: www.twitter.com/RWeingarten

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