The American Prospect

Rethinking Immigration

John B. Judis

Trump, NAFTA, and the Liberals Maude Barlow

The New Health Care Agenda Paul Starr • JAcob S. Hacker

Restorative Justice: An Alternative to Jail Lara Bazelon

Winter 2018

Return of the Octopus How New Media Masters Choke Our Democracy

Breaking the Stranglehold of the Tech Giants

David Dayen • Sabeel Rahman

Rescuing Newspapers from Private Equity Robert Kuttner and Hildy Zenger

Fighting Every Day for Our Freedom at Work The AFL-CIO proudly represents 12.5 million working people and fights for workplace freedom for all. We believe all working people deserve good jobs and the power to determine their wages and working conditions. We know that when working people come together and speak up, we make things better for everyone. At the AFL-CIO, we join together, fight together and win together!

RICHARD L. TRUMKA President

ELIZABETH H. SHULER Secretary-Treasurer

TEFERE GEBRE Executive Vice President

contents

volume 29, number 1 Winter 2018

Columns 4 prospects the democrats: Exorcizing Ghosts and Looking Forward by Robert Kuttner

notebook 7 The Other Imperiled Immigrants by Manuel Madrid 10 Donald Trump Is No Friend of a Better NAFTA by Maude Barlow 12 The Full Employment Solution by Mark Paul, William Darity Jr., and Darrick Hamilton

Features 14 Big Tech: The New Predatory Capitalism by David Dayen 22 Saving the Free Press from Private Equity by Robert Kuttner and Hildy Zenger 30 The New Reformer D.A.s by Justin Miller 34 The Two Sides of Immigration Policy by John B. Judis 38 A Fabulous Failure: Clinton’s 1990s and the Origins of Our Times by Nelson Lichtenstein 46 The Forgotten Origins of the Constitution on Campus by Randall Kennedy 50 special Report Health Reform 2020 51 A New Strategy for Health Care by Paul Starr 58 The Road to Medicare for Everyone by Jacob S. Hacker 67 The Next Big Thing in Health Reform: Where to Start? by Jeanne Lambrew and Ellen Montz 70 Capping Provider Payment: An Alternative to a Public Option by John Holahan and Linda J. Blumberg 72 Health-Care Reform’s Disability Blind spot by Harold Pollack 77 Buying into Medicaid: A Viable Path to Universal Coverage by Michael S. Sparer 80 Redemption for Offenders and Victims by Lara Bazelon 84 The Battle of the Georgetown Mill by Max Rose 90 Gateway to Nowhere on the Hudson by Gabrielle Gurley 94 The Congressional Review Act: A Damage Assessment by Thomas O. McGarity

culture 101 The Poverty on Disney’s Doorstep by Kalena Thomhave 104 Up Against Big Tech by K. Sabeel Rahman 107 Is Manufacturing’s Future All Used Up? by Harold Meyerson 110 No Big-Game Hunting at Justice by Ronald Goldfarb Cover art by Victor Juhasz

1

from the Editors

T

he American Prospect Writing Fellows program, now celebrating its 20th year, is one of the best things we do. The magazine invites young journalists to spend two years as full members of our staff, working with the Prospect’s senior editors. The fellows write everything from blog posts to investigative features to cover stories. The program has been called the best starter job in journalism, and our 33 former fellows have gone on to work for The New York Times, The Washington Post, Slate, Salon, Mother Jones, and so on. Three Prospect fellows even invented new forms of media: Josh Marshall at Talking Points Memo, and Ezra Klein and Matt Yglesias at Vox. Our two newest fellows are Manuel Madrid and Kalena Thomhave . Manuel worked as an editorial intern before becoming a fellow. His notable pieces have addressed America’s Kafkaesque immigration and asylum system, the rise of the fossil fuel divestment movement, and the renewable energy industry in West Virginia. In this issue, he recounts the story of two immigrants to illuminate the callousness and folly of the Trump administration’s decision to rescind Temporary Protected Status for tens of thousands of Central Americans. Manuel grew up in Pompano Beach, Florida, the child of Venezuelan immigrants. He studied finance at Virginia Commonwealth University and worked in Southeast Asia and Europe before joining the Prospect.

Madrid Kalena Thomhave was an Emerson National Hunger Fellow where she conducted research on welfare policy at New America in Washington, D.C., and coordinated an initiative to limit the impact of SNAP cuts in Pittsburgh. She was also an AmeriCorps VISTA volunteer in Baton Rouge, and worked on Child Nutrition policy at the USDA’s Food and Nutrition Service. Originally from Northwest Florida, Kalena graduated from Louisiana State University with degrees in political science and English. Her current piece is a review essay on Sean Baker’s film The Florida Project, Thomhave relating the movie to real policy decisions on welfare and housing.

Kalena’s other Prospect pieces have dealt with Medicaid, TANF, and the abuses that the purveyors of telephone services inflict on prison inmates.

Hildy Zenger is the pen name of a writer who works for a newspa-

per owned by a private equity firm. As newspaper buffs will recognize, Hildy is for Hildy Johnson, star reporter for the fictitious Examiner in the Hecht-MacArthur classic, The Front Page. And Zenger if you took 11th grade American history, you know that John Peter Zenger was the printer who won the 1735 court case establishing freedom of the press.

Robert Kuttner collaborates with “Hildy Zenger” in an investigative piece about private equity and newspapers. In a companion piece, David Dayen investigates the predatory impact of large platform monopolies such as Google, Facebook, and Amazon. There are two notable areas of overlap. One of the forces driving newspapers into the ground and into the arms of private equity owners is the fact that the Google and Facebook duopoly take far too large a share of digital ad revenue from content generated by newspapers. The other ironic overlap is that Amazon’s billionaire CEO Jeff Bezos is a black hat in his role as incipient platform monopolist, and a presumed white hat for his reinvestment in The Washington Post. Pick your poison.

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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 Manuel Madrid, Justin Miller, Kalena Thomhave proofreader susanna Beiser editorial interns Jordan Ecker, Lia Russell Digital Engagement intern Victoria Sheridan 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, John B. Judis, Randall Kennedy, Bob Moser, Karen Paget, Sarah Posner, Jedediah Purdy, Robert D. Putnam, Richard Rothstein, Adele M. Stan, Deborah A. Stone, Michael Tomasky, Paul Waldman, Sam Wang, William Julius Wilson, Matthew Yglesias, Julian Zelizer Publisher Amy Marshall Lambrecht Director of Business Operations Ed Connors Development Manager Justin Spees Publishing assistant Stephen Whiteside board of directors Michael Stern (Chair), Chuck Collins, Shanti Fry, Stanley B. Greenberg, Jacob s. Hacker, Stephen Heintz, Robert Kuttner, Ronald B. Mincy, Miles Rapoport, Janet Shenk, Adele Simmons, Ganesh Sitaraman, 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

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What Happened to America?

By Randi Weingarten, President AMERICAN FEDERATION OF TEACHERS ita Mehrjou, a nurse from New York, joined a group of AFT members this fall to provide relief after hurricanes Irma and Maria ravaged Puerto Rico. She expected to see bacterial disease, post-traumatic shock, and untreated wounds and illnesses—but not a suicide note. Mehrjou and a team of nurses visited the home of an 80-year-old woman who was nearly out of food and water. Alone and desperate, the woman had written what could have been her final words, saying she was contemplating ending her life. Fortunately, the relief team happened upon her in time, and a tragedy was averted.

But many tragedies are still unfolding in Puerto Rico and the U.S. Virgin Islands. Contrary to President Trump’s boast that he should get 10 out of 10 for the recovery efforts in Puerto Rico, federal assistance to the American citizens there has been and remains grossly inadequate. AFT members—who joined 300 union electricians, carpenters and other skilled workers to provide aid—told us that many hurricane victims said the same thing: “You are the first person who has come to help.” Devastation and suffering on this scale require more than volunteers and charity.

Bernie Sanders and others have introduced the Puerto Rico and Virgin Islands Equitable Rebuild Act, which calls for billions in urgent humanitarian assistance while also investing heavily in infrastructure, including public schools, and allowing for long-term debt relief. Congress should pass this legislation swiftly.

Failure to act is literally a matter of life or death.

Demographer Alexis Santos and epidemiologist Jeffrey Howard compared historical averages of deaths in Puerto Rico over the past seven years with the total number of deaths reported in September and October 2017. Their findings are stunning. In September 2017, the month that Maria hit, there were 518 more deaths than the recent historical average for September, and October 2017 saw 567 more deaths than the average for October. Yet the federal government’s “official” death toll remains at 55.

Public schools are playing a central role in recovery efforts. Schools in Puerto Rico that initially served as

shelters were turned into community centers and hubs for relief efforts. Members of our affiliate in Puerto Rico, the Asociación de Maestros de Puerto Rico, are working with officials to inspect school buildings so they can be repaired, sanitized and reopened. Yet, we know that school privatizers often prey on crisis, and there are warning signs that the commissioner of education in the Virgin Islands wants to abandon its public schools to the highest bidder.

The American Federation of Teachers will continue to raise funds for Operation Agua and other relief efforts to help our fellow citizens in Puerto Rico and the Virgin Islands. That’s the union movement: We care about people, and we fight for what’s right. We fight to help people have the freedom to secure a better life, and we work to alleviate human suffering—like Bita Mehrjou, who, when she saw the hurricane’s devastation, asked: “How can I help?” It is deeply shameful that President Trump is not asking the same question.

Federal assistance to U.S. citizens in hurricane-ravaged Puerto Rico has been grossly inadequate.

On two recent visits to Puerto Rico, I saw firsthand that, months after the hurricanes hit, many people still are without safe water, electricity or adequate housing. In order to bring immediate relief to our fellow citizens in Puerto Rico, the AFT and several partners launched Operation Agua, a crowdsourced campaign to bring safe drinking water to people in need.

A single $30 contribution to Operation Agua (www.OperationAgua.com) covers the cost of a water purifier that requires no electricity and provides more than 10 gallons of safe water per day for a family. And $5,000 delivers a disinfectant generator that can disinfect 150,000 gallons per day—enough safe water for thousands of people. Already we have delivered filters to 400 schools, reaching 125,000 students, and thousands more are being distributed to families across the island. At one school where we delivered filters, I met with a teacher who broke down in tears of joy. She had been buying water with her own money so her students wouldn’t have to go without in her sweltering classroom, or drink unsafe water. Our goal is to distribute 100,000 individual water filtration systems to classrooms and households so no one has to go without clean drinking water.

While we are a union that fights for and cares for people, and shows up, our work is not and cannot be a substitute for federal action, which continues to be woefully inadequate. President Trump and Congress are failing in their responsibility to our fellow citizens. Sen.

Photo courtesy of Brett Sherman

Weingarten, second from right, at the Asociación de Maestros de Puerto Rico relief distribution site in Yabucoa, Oct. 14.

Follow AFT President Randi Weingarten: www.twitter.com/RWeingarten

Prospects

The Democrats: Exorcizing Ghosts and Looking Forward

by Robert Kuttner

T

he Democrats’ stunning success in the November 7, 2017, Virginia state elections, and more recently, Democrat Doug Jones's election in Alabama, portends a great blue wave in 2018.

Or does it? The good news is that dozens of new groups mobilized thousands of volunteers and candidates, many of whom were new to politics. With a lackluster and centrist gubernatorial candidate in Ralph Northam, Virginia also produced a rare case of coattails in reverse. The down-ticket campaigns increased turnout, which improved the margin in the governor’s race.

Most of the new groups that contributed to the Virginia wins have been created only since Trump’s election in 2016. They range from groups devoted to candidate recruitment and training for state and local races, such as Run for Something, to full-service organizations like the Arena, to specialized outfits like Sister District, which direct volunteers from safely blue areas to races where they are needed. The new groups in turn connect with broad-gauge mass coalitions like Indivisible and established groups such as Emily’s List. Remarkably, they don’t seem to be tripping over one another, as they gear up for 2018.

In the now-legendary Virginia win, first-time candidates ran for seats that had been uncontested for decades, not only propelling Northam to an impressive 9-point win, but very nearly winning control of what had been the 2-to-1

4 WWW.Prospect.org winter 2018

Republican House of Delegates. The winners were disproportionately young, female, and diverse. But the races were not won on identity issues. Perhaps the poster child for the Virginia success was a transgender woman, Danica Roem, 33, whose main issue was the traffic jams on Route 28. Roem ousted a 73-year-old Republican who’d sponsored a bill restricting transgender use of public bathrooms.

Roem made headlines by making clear that the “trans” she wanted to discuss was transportation.

Amanda Litman, the 27-yearold former Hillary Clinton email director (and former Prospect intern) who launched Run For Something, points out the importance of contesting races that have long seemed unwinnable.

“As the first Democrats to run for these seats in decades, our candidates were talking to voters who had never talked to a Democratic candidate. Even if they didn’t win, those conversations are how we rebuild our party for the long term. A district becomes flippable by doing this over the long term.”

For the most part, lingering factionalism between Hillary and Bernie people did not undermine the good energy in Virginia. One unfortunate complication was that Sanders’s group, Our Revolution, which had endorsed the progressive former congressman Tom Perriello for governor, refused to back the party nominee and ultimate victor, Northam. Sanders himself spent election eve in New York City campaigning for Mayor Bill de Blasio, who had no serious

opposition. Our Revolution, in another expression of purism (and ultimately a display of its own weakness), endorsed only six legislative candidates.

Yet despite the official stance of Our Revolution, former Sanders supporters worked side by side with former Clinton supporters to produce this landslide. The election was about the future. infighting between the Obama/ Clinton and Sanders factions does continue at the Democratic National Committee. One problem, says a senior operative, is that divisions at the DNC have alienated donors. The DNC may seem mercifully irrelevant to the grassroots activism, but it does have a role to play. The DNC keeps the national voter list, and the technology for the use of that list has lagged compared with its Republican counterpart, and needs to be modernized.

Under effective DNC chairs, the national party has also helped fund and professionalize state parties.

Presidents and presidential candidates have a chronic habit of turning the DNC into a personal machine and vacuuming up money needed for long-term party building and for state, local, and congressional races. This dysfunction reached a peak under Obama and Hillary Clinton. Obama left the DNC with a debt upwards of $20 million and effectively handed the operation over to Hillary Clinton, well before Clinton was the official nominee, violating both rules and norms, and rightly incensing the Sanders campaign. Clinton in turn

cut a complex deal that came close to merging her own fundraising with the party’s. When Donna Brazile’s recent memoir confirmed in well-documented detail just what had occurred, old wounds were rubbed raw again.

DNC Chair Tom Perez and Vice Chair Keith Ellison, whom Perez narrowly beat for the top slot, present a public façade of unity.

But friction persists. At the DNC’s October meeting, Perez ousted four high-profile Sanders or Ellison supporters from leadership positions, while elevating Clinton allies and lobbyists, prompting complaints of a purge. Most Sanders supporters were in fact reappointed. A spokesman for Ellison, Karthik Ganapathy, downplaying reports of a purge, said in a statement, “Keith suggested names for DNC at-large membership and committees.

Some were selected and some were not. In the end, the selections are the prerogative of the chair.”

Perez himself faces a steep learning curve. “He has never done anything like this job,” says one longtime political director, who is a fan. Much of the job entails raising money, and the lack of money creates a vicious circle.

Without money, the DNC lacks the staff to modernize campaign technology and help state parties, which only makes it seem irrelevant and drives donors elsewhere.

Over the weekend of December 9, however, the party’s Unity Reform Commission agreed to far-reaching reforms that will limit the voting power of superdelegates to the party’s national

Prospects

conventions, open up the primary and caucus process to same-day registrants, and subject the party’s budget to much greater transparency and scrutiny. The reforms are intended both to heal the wounds of 2016, and to ensure that the party has a durable existence independent of presidential personalist campaign machines. The reforms still have to be approved by the full DNC, but both Perez and Ellison have pledged to support them intact, and not to relitigate details of a hard-won compromise. “This was the best thing to come out of 2016,” says Larry Cohen, vice chair and senior Sanders appointee on the reform commission. “I have never been more hopeful.”

Liuba Grechen Shirley lives in the village of Amityville, in Long Island’s Suffolk County. Her congressman is Republican Peter King, 73, who has held the seat since 1986, when Shirley was in kindergarten. The district, whose boundaries have shifted, now has a slight Democratic registration majority. Yet King has never faced a formidable challenger. This is exactly the sort of district Democrats need to flip, if they are to take back the House—conventionally a long shot, but winnable.

Shirley, a 36-year-old mother of two toddlers who has worked for nonprofits focused on women’s and family issues, got so incensed after Trump’s election that she decided to revive the dormant local Democratic Party. Working with a few friends, she used a Facebook group to created a grassroots organization called New York’s 2nd District Democrats. Within a few months, it had 2,500 members. The group began looking for someone to run against King. The only person interested was a relatively conservative local businessman named Tim Gomes, who has switched back and forth from Republican to Democrat, and recently lent his own candidacy $1 million from his personal fortune. So Shirley began considering whether to run herself.

About the same time, one of the

new pop-up candidate recruitment and training groups, called Square One, flagged New York’s Second District as one of the widely overlooked, potentially winnable seats, a district that went for Obama and then for Trump. “We began calling around out there, and the only name we kept hearing was Liuba Grechen Shirley,” one of Square One’s organizers told a recent fundraising event.

One not-so-secret weapon for candidates like Shirley is the Republican Congress. The Republican tax bill is a complex mess, but one provision is clear as a bell in relatively high-tax states like New York, New Jersey, California, Pennsylvania, and Illinois. That’s the provision to limit the state and local tax deductions to $10,000 or less. According to the Democratic Congressional Campaign Committee’s tally, there are at least 30 winnable seats currently held by Republicans in those states alone, more than the Democrats need to take back the House.

In New York’s Second, Peter King voted against the Republican tax bill, mainly to protest that provision. But Shirley plans to hang the bill around King’s neck anyway. If he is re-elected, he will caucus with the Republicans to re-elect Paul Ryan House speaker, which guarantees still more damage to King’s constituents, even if King himself casts the occasional impotent protest vote.

At a fundraising event in Cambridge, Massachusetts, on November 12, the weekend after the big Virginia win, Shirley was able to announce that the DCCC, normally a rather risk-averse operation widely criticized for working harder to protect incumbents than to invest in taking back competitive seats from Republicans, had agreed to add New York’s Second District to its list of contestable seats. That means that the Democratic nominee can potentially get financial support from the DCCC. First, Shirley needs to win her primary, and she has to demonstrate that she can raise money. But candidates like Shirley will be running for

all the House seats deemed flippable, many of them recruited and coached by the new organizations.

Speaking at the fundraiser, Brooke Scannell, chief of staff to Representative Katherine Clark, who chairs DCCC’s “Red to Blue” candidate recruitment committee, confirmed that the DCCC now reckoned that as many as 91 Republican-held seats fit the “flippable” description, and were worth investing in. That in itself is a remarkable transformation. Conventionally, most analysts have placed the number at no more than 40 to 50 seats. Clark told me that since the beginning of 2017, the committee has steadily increased the number of target districts from 54 to, now, 91, based on polling

the field and depresses energy.”

Democrats do have a habit of snatching defeat from the jaws of victory. Dukakis in 1988, Gore in 2000, Kerry in 2004, and of course Hillary Clinton in 2016 were all winnable elections lost by a combination of blunder, hubris, and bad luck. Yet the fine thing about the apparent blue wave in the making is that it has just about nothing to do with presidential politics. It is a genuinely up-fromthe-bottom grassroots resurgence that shows the ingenuity of American politics and its capacity to regenerate and to heal.

Best of all, this wave is led by the young, some of them now 30-something, veterans of the 2008 Obama campaign, by some

Best of all, this blue wave is a grassroots movement led by the young. data, the willingness of candidates to come forward, and the success of the new groups. “It’s less a case of ‘Come work with us’ and more ‘What can we learn from you?’”

The outrage following Trump’s

victory and the spontaneous activism that it kindled sets the table for a genuine wave election. The continuing acrimony between diehard Sanders and Obama veterans still fighting last year’s battles can harm the capacity of the institutional party to help this grassroots upsurge, but it can’t destroy it. The fact that new grassroots activists are bringing candidates to the party committees, rather than the party committees recruiting wealthy centrists who can selffund and generate little excitement within the base, is just how things should be. “Historically,” says Litman, “the party focused on rich old white dudes who could raise money and on districts they thought they could win. That mentality is understandable, but it narrows

of last year’s Sanders campaign, and by others even younger. But then, it is the young who have often brought the Democratic Party and our republic to be its best self, from the college students of the lunch counter sit-ins and the activists of the antiwar movement to the children’s crusade that enlisted Gene McCarthy to lead the Dump Johnson movement. To be sure, 2018 will be no cakewalk. Republicans got blindsided by their Virginia losses. They will fight back next year with massive funding and micro-targeted negative ads.

For a generation, until the Obama campaign of 2008, or the Sanders campaign last year, many of the young were often otherwise engaged, perhaps volunteering in do-good activities but skeptical about electoral politics. The election of Donald Trump got their attention. Elections may be messy, prone to corruption, too reliant on money, and just plain hard. But in a democracy, elections are ultimately all we have.

winter 2018 The American Prospect 5

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notebook was first established by Congress in 1990, TPS has been an uncontroversial program with bipartisan support.

But no more. The Trump administration has ordered a complete reversal, ending the designation for refugees from Haiti and Nicaragua and deferring a decision on Honduras for six months.

The possibility of El Salvador losing this special protection now seems increasingly like a certainty, too. For the approximately 200,000 Salvadoran TPS holders, including Karla and her family, the lives they’ve spent years building now teeter on the verge of collapse.

“I don’t know anything else besides the U.S.,” says Karla, now 29 years old. “It’s like they’re taking my entire life away.”

The Other Imperiled Immigrants For no good reason, other than spite and symbolism, Trump goes after Central American immigrants with Temporary Protected Status.

by Ma n u e l Madrid

c a r o ly n k a s t e r / a p i m a g e s

T

he past has come to claim Karla Alvarado and her family.

Departing from Central America’s infamous Northern Triangle of El Salvador, Guatemala, and Honduras, Karla and her younger brother Carlos made the harrowing journey to the United States border in 1997, crossing over with the help of a coyote and then waiting for nightfall to hike into Texas.

Their mother, Maria, had gone before them just months earlier, fleeing an abusive husband in El

Salvador and then arranging for her children to join her in Washington, D.C. At the time, Karla could count the number of words she knew in English on one hand and her own age on two hands; Carlos, too little to remember most of the trip, recalls vividly only a few scenes: Floating across the Rio Grande on plastic inner tubes, hiding in the basement of a hotel turned safe house in Mexico, and, throughout, the fear of being on the run, of being caught and kicked out—a

feeling that, after 20 years, the Alvarado siblings are still unable to fully escape.

Since 2001, the only thing standing between Karla’s family and deportation has been a littleknown immigration protection called Temporary Protected Status (TPS). Currently granted to more than 300,000 immigrants, the status has allowed foreign nationals who cannot return to their homes because of perilous conditions to legally reside and work in the United States. Since it

TPS was created by Congress as a humanitarian response to the refugee crisis following the civil war in El Salvador. The Immigration Reform and Control Act, signed into law by President Ronald Reagan in 1986, had granted legal status to hundreds of thousands of undocumented immigrants, but left out anyone who had entered the country without authorization in 1982 or later.

Before TPS, there had been no established criteria for granting temporary immigration protections, leaving decisions to the discretion of the president. The new bill allowed more oversight, charging the attorney general (and then later the secretary of homeland security) to decide, in consultation with the State Department, which countries deserved TPS status based on a dispassionate review of adverse conditions in the country in question, such as war, political upheaval, epidemic, natural disaster, or an inability to handle the return of its foreign citizens.

In line with Trump’s slogans of less immigration and more enforcement, the administration has contended that the deportation protection was intended to only

Winter 2018 The American Prospect 7

notebook

8 WWW.Prospect.org Winter 2018

holders will actually self-deport themselves: More than half of TPS holders from El Salvador and Honduras have resided in the United States for more than 20 years and have more than 245,000 U.S.-born children. A far more plausible scenario is one where tens of thousands of immigrants continue to live in the country after their status expires, no longer paying taxes and unable to find legal employment.

“The choice people are going to have to make is whether running from immigration officers is less dangerous than running from gang members back home,” says Pablo Alvarado (no relation), director of the National Day Laborer Organizing Network (NDLON). “For most, that’s going to mean staying and living in the shadows.”

But returning to the shadows may prove difficult for many protected by TPS. Much like recipients of the DACA program for young immigrants, a TPS holder is far more integrated into

Development analyzed the relationship among violence, economic stability, and migration, finding that homicide and unemployment strongly correlated with the number of migrants bound for the United States.

“Ending TPS puts even more strain on these countries and our relationships with them,” says Doris Meissner, who served in the Reagan and Clinton administrations as commissioner of the Immigration and Naturalization Service, the predecessor to current immigrant agencies. Although she admits that the Trump administration is well within its rights on its narrow interpretation of the statute, Meissner, who was involved with TPS renewal during her tenure in the Clinton administration, believes ignoring realities on the ground makes for bad policy on a purely pragmatic level. “ TPS has become very bound up with our overall interests in the region. ... It is a selfdefeating action, sending these people back before the country is ready.”

Nicaraguan nationals now have until January 2019 to change their immigration status or risk going undocumented. TPS holders from Haiti were given until July 2019. The matter of a narrow or broad interpretation of the statute is sure to come up again in the decision on El Salvador, which was granted TPS after a trio of deadly earthquakes in 2001. The Department of Homeland Security is scheduled to announce its decision sometime in December 2017.

The Alvarado siblings and their

mother are paralyzed by the idea of going back. “The gang violence, the lack of work—I wouldn’t survive in El Salvador,” says Carlos, now 25 years old. Carlos has received many a cautionary tale from his aunt, who he says will soon have to abandon her transportation business because of incessant extortion and death threats from local gangs. Salvadorans pay an estimated $390 million a year in extortion fees, while Hondurans pay around $200 million.

Homeland Security currently lacks the resources to deport thousands of individuals the moment they lose TPS protections. It also remains unlikely that the entire population of TPS

Suddenly In Limbo: Marianne and her son Amocachy Jeune are Haitian immigrants living in Boston through the Temporary Protected Status program.

Their special status is being revoked by the Trump administration.

American society than an undocumented immigrant—owning driver’s licenses, being admitted into school system records, and taking out mortgages—and, paradoxically, thus more easily tracked down. Many won’t want to chance deportation and will try to apply for asylum once their protected status runs out, a much more onerous case-by-case process with no guarantee of success.

“A lot of people who are concerned about TPS ending will contemplate applying for asylum as a way to remain in the country,” says Todd Pilcher, a Washington, D.C., immigration lawyer. “However, to win an

steven senne / ap images

be temporary and argued it has been abused over the years through constant extensions. Whereas past administrations concluded that some perilous conditions on the ground required extended protected status, the Trump administration has focused on the original reason for that status being granted. In the case of Haiti, which was given TPS after a catastrophic earthquake in 2010, Acting Secretary of Homeland Security Elaine Duke determined in November that the “extraordinary but temporary conditions” caused by the earthquake no longer existed. The decision did not seem to take into account the more recent devastation from Hurricane Matthew, which tore through the island in 2016, leading to a cholera outbreak and exacerbating severe food shortages.

“This is an administration that is hostile to immigrants overall and is using as many tools to remove immigrants as possible,” says Cecilia Muñoz, chief of domestic policy in the Obama administration and a former immigrant-rights advocate who worked to pass the original TPS legislation in 1990. “There is ample reason to be concerned that the decisions on TPS are being motivated by this posture.”

Congress approved in 2015 a $750 million investment to take on poverty and gang violence in El Salvador, Guatemala, and Honduras. A truce between rival gangs in El Salvador had unraveled and an aggressive crackdown by security forces ravaged the country. As a result, the country’s murder rate spiked—a 70 percent increase over 2014. Congress’s decision to send aid to the region was largely a response to the surge of women and unaccompanied minors fleeing to the U.S-Mexico border to escape the violence, with the expectation that improving conditions would eventually lead to fewer migrants.

Muñoz, who worked on the unaccompanied minors crisis during her time in the White House, believes the decision to end TPS status for these countries is inconsistent with the previous investment in the region.

The three countries in the Northern Triangle remain among the world’s most violent nations not at war. A July report from the Center for Global

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asylum case, you must prove that you will be persecuted in your country because of your religion, nationality, ethnicity, social group, or political beliefs. A generalized worry about the nation’s economy and violence, or not having access to medical treatment or education for your kids is not enough.”

Internal estimates from CARECEN, an immigrant-aid organization that provides low- or no-cost legal services, find that only 20 percent or less of those currently with TPS would qualify for some sort of individualized protection from deportation. The Alvarado siblings are relatively lucky: Both Karla and Carlos are married to U.S. citizens and plan on applying for a green card through their spouses, a process that Karla says would cost $4,000 to $5,000 at an organization like CARECEN, but would cost more at a private law firm.

But because Karla and Carlos entered the United States illegally, they will still have to leave the country before changing their status and could face a tenyear bar, minimum, before returning to the United States.

Although they’ll be shielded from deportation once the application process has begun, the siblings would still be unable to work once their permits expire. Karla works as a home healthcare nurse in a low-income neighborhood in Philadelphia, where she oversees care for 55 clients, from the disabled to the elderly; Carlos works in HVAC full-time and is a financial educator on the side. Both of them are the primary breadwinners in their homes and say they cannot afford to lose their jobs.

“This is clearly a working population,” says Cecilia Menjívar, codirector of the Center for Migration Research at the University of Kansas who has done research on TPS holders. According to a survey conducted

by Menjívar, more than 80 percent of Central American TPS holders are employed, well above the 63 percent labor force participation rate of the rest of the country—and more than 80 percent pay income taxes.

An April report by the Immigrant Legal Resource Center estimated that ending TPS designations for Honduras, Haiti, and El Salvador would lead to a $45.2 billion loss in GDP over the next decade in lost wages

This is an administration that is

hostile to

immigrants overall and is using as many tools to remove immigrants as possible.

alone. Another report by the Center for American Progress went one step further, factoring in potential impact on industries as well as lost earnings, and found that economic output could take a hit as large as $164 billion over that same period.

In October, the Essential Worker Immigration Coalition, representing more than 30 business and trade groups, called for a path to legal status for TPS recipients, citing economic concerns. Two weeks later, the U.S. Chamber of Commerce sent a letter to the Department of Homeland Security, warning that canceling the program would “adversely impact” industries such as construction, food processing, hospitality, and home health-care services.

The reality is that the TPS program has flown relatively under the radar compared with DACA , which has received national attention since its inception in 2012 and affects approximately 800,000 individuals.

As a group, “Dreamers” have shown far more political clout than their TPS counterparts. With a median age of 43 years, according to Menjívar’s survey, TPS holders are older than Dreamers, many of whom have been raised in the United States and have been politically active for years.

“People don’t understand my status when I explain it to them at work,” says Karla, who feels that TPS remains unknown to most Americans. “They ask me, ‘Why can’t you just become a citizen?’”

There are currently multiple pieces of legislation in Congress, mostly sponsored by Democrats but a few with bipartisan support, that would provide some form of relief to TPS holders. But the political prospects of such legislation are remote.

Any attempt to expand immigration has become anathema to conservative Republicans and their base.

Republican Representative Ileana Ros-Lehtinen of Miami is one of the few lawmakers in the GOP who have pushed for TPS renewal alongside a more permanent legislative solution.

Unsurprisingly, Ros-Lehtinen has little support from her Republican colleagues, of whom the majority “would

not know what TPS is” in the first place.

“There’s just no interest for immigration reform generally, and I don’t think there’s much appetite to help these ... people. It hurts to say it but it’s the political reality,” Ros-Lehtinen told The Miami Herald. “It’s taken us a long time to get where we are, to get a lot of people in favor of a legislative fix for Dreamers. That’s where the priority is.”

“From Rachel Maddow to Sean Hannity, there’s one message in the immigrant-rights movement that has transcended ideology and political affiliation, and that’s that these kids with DACA were brought here through no fault of their own,” says NDLON’s Pablo Alvarado. “What that does, however, is immediately stigmatize their parents and adult immigrants, many of them TPS holders.”

The March 2018 deadline for lawmakers to find a legislative solution for Dreamers is well ahead of the 2019 TPS elimination dates for Nicaragua and Haiti, as well as Honduras’s possible elimination in July 2018. Only El Salvador risks losing its status before the deadline for Dreamers, though observers believe it is unlikely that El Salvador will not receive a similar transition period to Nicaragua before its status is rescinded.

For now, no news is good news for Salvadoran TPS holders. Karla is hopeful that as more people hear the stories of TPS recipients, political momentum will begin to grow behind passing a legislative solution. Despite their situations, Karla and Carlos are more concerned about their family than anything else.

“Our grandmother survives off the money Carlos and I send back to El Salvador. What will happen to her if we lose our jobs?” Karla asks. “What about my mother? What about the people who have no legal option when they lose status?” At the moment, Maria would have no clear avenue for relief if her TPS status were to be revoked. The Alvarado siblings insist that they won’t allow her to be deported, that they’ll find a way.

“I hope this administration takes into consideration that they’re breaking up families,” Karla says. “All these people want is an opportunity to have a little piece of the American dream.”

Winter 2018 The American Prospect 9

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Donald Trump Is No Friend of a Better NAFTA We do need to repair or replace what’s wrong with the mother of bad trade deals. But don’t be fooled by Trump’s posturing.

By M a u d e B a r l o w

C

anada, the United States, and Mexico are deep into the renegotiation of the 1994 North American Free Trade Agreement. These talks were precipitated by President Trump, who promised as a candidate to tear up “the worst trade deal ever.”

Neither Canada nor Mexico sought to reopen NAFTA .

Progressives, particularly those of us who fought NAFTA 1.0 for being a tool for corporate interests, find ourselves somewhat caught. Labor, environmental, and social justice groups obviously do not side with the narrow and xenophobic nationalism of Donald Trump. But we welcome the opportunity for open debate on a disastrous trade deal as a way to either fix it or tear it up and start over.

NAFTA accelerated the creation of a precariat in North America, as well as a dramatic increase in wealth inequality, wage stagnation, the hollowing out of the middle class and the weakening of the social safety net.

Unionized rates have declined in all three countries and many full-time and secure manufacturing jobs have been replaced by insecure, temporary, and self-employed work.

In the United States, more than 930,000 jobs, mostly in manufacturing, were lost to NAFTA offshoring.

Between 2000 and 2011, the United States lost 35 percent of its manufacturing jobs, at least half due directly to trade. Canada lost more than 300,000 manufacturing jobs in the wake of the 1989 Canada-U.S. Free Trade Agreement (the precursor to NAFTA) and another 547,000 since 2000, many due to trade competition from Mexico and China.

While Trump says these numbers show that Mexico was the NAFTA winner, about two million Mexican farmers and agricultural workers lost their jobs due to subsidized food

10 WWW.Prospect.org Winter 2018

imports from the United States, creating unprecedented migration. It is true that many jobs and plants relocated to the maquiladoras, particularly in the auto sector, but Mexican workers, who earn one-eighth of the wages paid to American and Canadian autoworkers, were not winners by any definition.

The three governments signed a side agreement on labor that was supposed to protect workers and prevent labor abuses. But not one of the 36 labor complaints filed with the North American Commission for Labor Cooperation even got to the stage of arbitration, and the commission essentially disbanded.

The story is equally dismal on the environmental front. In all three countries, NAFTA led to an increase in large-scale, export-oriented farming that relies on fossil fuels, pesticides, and GMOs, increased the threat to groundwater, and led to more rapid deforestation. Canada dismantled its regulatory regime for its oil and gas industry and signed a “proportionality” clause, essentially obliging Canada to continue to supply the United States with its energy even in times of scarcity. This led to a dramatic increase in the production and export of tar sands bitumen, resulting in increased greenhouse gas emissions and the dumping of toxic waste into groundwater.

NAFTA inaugurated an era in which environmental laws in all three countries were ignored or dismantled in the name of competition. The postNAFTA rapid growth in Mexican factories and assembly plants (more than 3,000 now) saw a rapid increase in dumping of toxins on land and water with a concurrent spike in illnesses.

Environmental regulations were not enforced and spending on environmental protection drastically declined after 1994, as did factory inspections. The Conservative Canadian

government of Stephen Harper pulled Canada out of the Kyoto Protocol and gutted the country’s most important water protection laws, all in the name of global competitiveness. Trump has linked his deregulation policies to bringing back jobs lost to NAFTA .

The most egregious threat to the environment is Chapter 11, the Investor-State Dispute Settlement (ISDS) provision of NAFTA that allows foreign investors to challenge the laws and practices of governments.

Chapter 11 has been used 85 times. As documented by the Canadian Centre for Policy Alternatives, 40 of the challenges (the largest number) have been laid against Canada, two-thirds of which have to do with Canada’s environmental laws. Challenges include bans on pesticides, fracking, and the export of PCB waste. Canada has already paid more than $200 million in penalties and is currently facing another $2.6 billion in challenges from American corporations.

As with the labor side agreement, the NAFTA environmental side agreement, called the North American Agreement on Environmental Cooperation, has proven useless in holding governments accountable for their deregulation policies and preventing environmental infractions.

Given this record, why not just

walk away from the negotiations entirely? In part, the answer lies in the reality that, after almost a quartercentury, the economies of the three countries have become deeply intertwined and many are now employed in NAFTA-related jobs. The Mexico Institute at the Wilson Center estimates that trade with Mexico creates just under five million jobs in the United States. The Canadian government estimates that more than three million Canadian jobs are NAFTA-related and that Canadian exports to the United States are now roughly equal to 20 percent of the country’s economy.

While these jobs may not provide the same wages, benefits, and security as those lost over the last two decades, nevertheless, there are real ramifications for many workers and businesses from the details of the NAFTA talks.

The labor movement in Canada

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and the United States has urged that this renegotiation process dramatically improve NAFTA to the benefit of working people. The AFL-CIO calls for a “new approach” that “prioritizes benefits for working families, not simply benefits for multi-national or global enterprises.” It seeks a trade deal that promotes equitable economic development, a virtual cycle of wageled growth and high standards for the protection of working families and democracy. Jerry Dias, the president of Unifor, Canada’s biggest privatesector union, is actually sitting on the Canadian government’s negotiating team, openly working with Foreign Minister Chrystia Freeland, who heads Canada’s delegation.

These unions are hoping a new NAFTA will spell out clear rights for workers with accompanying enforcement provisions. The Canadian government is proposing a NAFTA chapter on labor standards that would include the core International Labour Organization rights and address both the low wages and poor treatment of workers in Mexico but also anti-worker “right to work” laws in the United States. Freeland is proposing similar chapters on environmental standards, gender rights, and indigenous rights.

The latter would include language referring to the U.N. Declaration on the Rights of Indigenous Peoples.

Disappointingly, Canada is refusing to consider canceling Chapter 11, which is fiercely opposed by labor, environmental, and justice groups in all three countries. Canada is also not open to revising the energy chapter or canceling the proportionality provision. In fact, Canada is pushing Mexico to sign on to a similar clause, something Mexico refused to do in NAFTA 1.0, and which would lock in the energy liberalization and privatization policies of the current government. Such an energy chapter in a new agreement would commit North America to a fossil fuel future, making it far more difficult to meet climate commitments for governments of all political stripes.

However, all of this may be for nothing if any party walks away from the talks, which increasingly appears likely. Privately, Canadian and Mexican negotiators say that because Trump

NAFTA side agreements on labor and the environment have proven useless in holding governments accountable for assaults on labor and environmental degradation.

is so inconsistent in his policies and directions, their American counterparts are to a great extent winging it.

The United States has asked for concessions that no other country could grant. It wants to eliminate Chapter 19, the state-to-state dispute settlement provision—a red line for the other countries that have been served well by it. It wants an end to agricultural subsidies such as Canada’s supply management system for dairy, and a “sunset clause” that would trigger a NAFTA renegotiation every five years.

U.S. negotiators want to break down all barriers to American exports and eliminate “unfair” Mexican and Canadian subsidies and restrictions. They want to open up previously exempted areas in services and are targeting telecommunications, financial services, and cross-border data flows.

However, the United States is not in any way willing to be reciprocal, so quid pro quo bargaining is simply not happening. The Trump negotiators are further demanding that half the content of all North American–built autos be produced in the U.S., and states its intention to expand “Buy American” policies and practices. It is proposing to cut access to its own markets so that the total value of contracts that Canadians and Mexicans could access together would not exceed the total value the U.S. firms could win in the other countries, thereby removing the procurement advantage NAFTA gave them. And the Trump administration is threatening to put up new tariffs on textiles and fruit.

For now, the NAFTA talks are at a

serious impasse. If they fail and Trump pulls the plug, our countries will revert to the rules of the WTO. Despite earlier warnings from the corporate sector that this would be an economic disaster, several studies show that while a NAFTA collapse would be disruptive, it would be manageable. The Canadian Centre for Policy Alternatives estimates that for 96 percent of total Canadian exports, the cost would amount to only 1.5 percent of the value of Canadian exports. A study by the IMF had similar results. Similarly, Alberto Arroyo, a professor at Metropolitan Autonomous University in Mexico, reports that the

manufacturing exporting sector in Mexico accounts for only 2.4 percent of total Mexican jobs.

Whatever the fate of NAFTA, it is crucial to articulate a progressive vision of a trade and development agenda for North America, and there are many existing excellent proposals by labor and environmental groups. We need a profoundly altered NAFTA. Adding clauses that introduce labor and environmental rights without removing the corporate power structure embedded in the current agreement is not enough.

As a group of Canadian labor unions stated, “A bad agreement with good labor rights is still a bad agreement.”

Chapter 11, giving corporations special rights to overturn regulations in the name of trade, must go.

Clear labor, environmental, gender, and indigenous rights must form the heart of a new deal, and they must be accompanied by binding dispute settlement mechanisms. Governments must retain the right to regulate in the public interest, including screening foreign investment, combating tax evasion, setting enforceable currency rules, and regulating the financial sector. They must be able to protect and create public services and domestic cultural policies. They must restore local and national sovereignty over food and farm policy and outlaw dumping. Any new trade agreement must be compatible with international climate commitments and not be allowed to challenge domestic measures to combat climate change.

Trump has clumsily attempted to appropriate the legitimate progressive critique of NAFTA , but without delivering something better. Around the world, people and their governments are reassessing the purposes and goals of trade agreements in light of the deep inequality they have helped engender. The backlash against ISDS is international and growing. It is imperative that progressive voices are heard. If any good can come from this impending fiasco, it is that it presents an opening for something new.

Maude Barlow is an author and activist, and chairs the boards of the Council of Canadians and Food and Water Watch.

Winter 2018 The American Prospect 11

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The Full Employment Solution Truly fixing the American economy requires full employment, as Franklin Roosevelt proposed 74 years ago.

And that can’t be done through the private sector alone.

By M a r k Pa u l , Wi l l i a m Da r it y J r . , a n d Da r r i c k H a mi lto n

T

wo years into U.S. involvement in World War II, President Franklin Roosevelt delivered his 1944 State of the Union address, calling for a Second Bill of Rights—by which he meant not just political rights, but economic rights. The wartime economy was firing on all cylinders, bringing the unemployment rate to historic lows, averaging just 1.7 percent from 1943 to 1945. But Roosevelt and his advisers were concerned about maintaining these employment levels and the economic expansion when the war came to a close.

“Necessitous men,” Roosevelt observed, “are not free men.” Those “who are hungry and out of a job are the stuff of which dictatorships are made.” Real freedom, he said, freedom to “pursue happiness,” required a “second Bill of Rights under which a new basis of security and prosperity can be established for all.” For Roosevelt, full citizenship demanded more than the political rights designated in the first ten amendments to the Constitution: It required economic rights as well.

Roosevelt outlined them in his speech: 1. The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

2. The right to earn enough to provide adequate food and clothing and recreation.

3. The right of every family to a decent home.

4. The right to adequate medical care and the opportunity to achieve and enjoy good health.

5. The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.

6. The right to a good education.

Roosevelt and his administration turned their attention first to

12 WWW.Prospect.org Winter 2018

delivering legislation that would achieve full employment, a condition where anyone who wanted a job could find employment. While Roosevelt’s Second Bill of Rights, also known as the Economic Bill of Rights, was ambiguous about the mechanisms for reaching and sustaining full employment, the administration forged ahead with the Full Employment Bill of 1945, hammering out the details in the process. The bill proclaimed that all Americans had the “right to work,” which entailed the right to access “useful, remunerative, regular, and full-time” employment.

Although the bill passed the Senate, it was defeated in the House by Republicans and Southern Democrats who feared the legislation would derail the continued domination of black workers.

A year after President Roosevelt’s death, a markedly weaker version of the bill, the Employment Act of 1946, passed Congress and was signed into law by President Truman. The bill lacked many of the key provisions in the original Full Employment Bill of 1945, stripping the provisions that guaranteed a full employment economy or a right to a job.

Roosevelt died before he could establish the economic rights he put forth as a constitutional commitment.

In later years, however, prominent politicians and civil rights leaders would build on Roosevelt’s vision for economic justice.

The pursuit of economic rights captivated the nation’s attention nearly two decades later during the civil rights movement. In 1965, the convener and organizer, respectively, of the great 1963 March on Washington—A. Philip Randolph and Bayard Rustin— and the former New Deal economist Leon Keyserling drafted “Freedom Budgets” that recognized that poverty and unemployment remained a great

Fearing unemployment would rise after World War II, FDR drew up an Economic Bill of Rights.

barrier to opportunity and expressed the need for strong federal action to bring economic equity to all Americans. Martin Luther King Jr. joined this campaign, and before he was assassinated, he planned a new march on Washington, the Poor People’s Campaign of 1968, to demand economic rights for all, linking the civil rights movement to a movement for economic rights.

Following King’s death, Coretta Scott King and other civil rights leaders continued to campaign for economic rights. Coretta Scott King’s actions were pivotal in developing what would become the 1978 Full Employment and Balanced Growth Act, better known as the Humphrey-Hawkins Act, after its Senate sponsor (Minnesota’s Hubert Humphrey) and its sponsor in the House (California’s Augustus Hawkins). The act, an amendment to the 1946 Employment Act, initially— and boldly—was conceived as a mandate to guarantee full employment through direct government hiring.

At the time, Humphrey remarked that the Employment Act of 1946 had “been conveniently ignored.” To correct this, early versions of the legislation proposed the creation of a federal Job Guarantee Office, which would be tasked with maintaining full employment through direct government hiring. The final version of the bill, however, included language calling for a goal, rather than a mandate, of a 3 percent unemployment rate within five years, and for full employment to be achieved as soon as possible thereafter. Forty years later, the government has failed to achieve the employment targets in any year since the legislation’s passage.

Today, despite the recovery from the Great Recession, the problem of inadequate employment continues to plague our society. Not only are there millions more Americans seeking jobs than there are available openings, but many Americans who are working remain in poverty because of woefully inadequate wages.

These conditions warrant the resurrection of a bold idea, an Economic Bill of Rights for all Americans, tailored to the conditions of the 21st century. Below, we turn our attention to

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the first article of a new Economic Bill of Rights—a federal job guarantee.

Why the need for such a guarantee? First, we invariably have major economic crises that drive people out of work; the most recent episode is the Great Recession. Second, even in “good” economic times, the United States has more people seeking employment than the private sector is willing to employ. And third, not only do we generally have an inadequate number of jobs, but we have a tier of jobs that feature low pay, uncertain hours, and few or no benefits.

What the nation needs is federal legislation that would guarantee employment to every American at non-poverty wages. Similar legislation to what we envision has already been introduced to Congress (H.R. 1000, the Jobs for All Act, which has 29 co-sponsors). In our proposal, we would first establish the National Investment Employment Corps (NIEC), a permanent agency to oversee direct employment of all Americans seeking a job. If individuals were unable to find adequate employment in the private sector, they could turn to the government for employment. In return, the government would provide employment at non-poverty wages.

The minimum yearly salary would be at least $24,600, with guaranteed benefits as well.

Provision of a reasonable floor for compensation in the labor market must be a critical feature of the program. If employers are unwilling to provide employment, or are offering terms inferior to those offered under the NIEC, individuals can simply take the public-sector job. However, to provide genuine economic security, workers will need more than a non-poverty wage—they need benefits. The program will include health insurance for full-time workers (35 to 40 hours per week) of the same quality that is received by civil servants and elected officials in the federal government.

Such a program, which will transform the labor market as we know it, will come with a price tag. We estimate that the federal job guarantee, inclusive of total compensation, training, and materials, will have an annual cost of about $575 billion, which is nearly

Full employment would give workers more

bargaining

power and shift income from capital to labor.

3 percent of GDP. But that will not be the net expense of the program. Since the program functions both as a full employment and as an anti-­poverty program, a portion of the expenditures the United States currently devotes to a variety of entitlement programs could be reduced significantly. This would include lower expenditures for unemployment insurance, food stamps, or other types of means-tested social programs.

It is not extraordinarily difficult for governments to fund large-scale programs. The fact that at the outset of the Great Recession, huge amounts of public funds were quickly turned over to the banking community suggests that there is a huge capacity to meet large, new expenses.

How would the program function?

The NIEC would be housed under the Department of Labor and administered by the secretary of labor. If individuals want a job, they simply could go to reconfigured unemployment offices. Under the job guarantee, those offices would become, literally, employment offices, where any applicant could get a job on demand.

The specific types of work undertaken in the program would be developed in conjunction with local and state governments. The needs of a rural community in West Virginia may be different from the community needs in the city of Milwaukee.

Local and state governments would work with the federal government to develop jobs that would serve the needs of specific communities while taking into consideration what would be appropriate for workers in need in the region. Ultimate administrative authority and funding would be provided at the federal level, and priority would be given to the most distressed communities and to infrastructure projects in areas with the most need.

We envision an array of jobs that would address both our nation’s physical and human infrastructure needs. Such a program could rebuild our crumbling roads and bridges, and could provide such services as elder care and child care. Imagine if the government mobilized resources to

provide universal, high-quality elder care. Its positive impact would not be limited to the direct recipients of the service, but it could also reduce dramatically the stress, time, and monetary expenses now borne by relatives who have to provide or pay for all of the care work themselves.

Beyond building roads, bridges, schools, and other public infrastructure, the program could also play a fundamental role in transforming areas of our economy, hastening, for instance, a transition to a “green,” decarbonized economy.

One of the major benefits of such a program is its transformative effect on the U.S. economy, away from lowwage work toward decent jobs for all. The program would reshape the power dynamics between labor and capital, enabling workers to have more bargaining power by removing the threat of unemployment. This would likely lead to a shift in income away from capital towards labor. Corporations and their shareholders do stand to incur a loss on that score.

On the other hand, the federal job guarantee will reduce business costs by extending and maintaining the nation’s human and physical infrastructure and creating greater demand for the products of America’s businesses. Both of these effects will benefit the private sector’s bottom line, providing at least a partial offset to the impact of the job guarantee on labor’s bargaining position.

The federal job guarantee not only will chart a direct route to full employment, but also to decent and dignified employment for all Americans. At long last, it will make the right to a job a reality.

Mark Paul is a postdoctoral associate at Duke University and a visiting fellow at the Roosevelt Institute. William Darity Jr. is the Samuel DuBois Cook Professor of Public Policy, and professor of African and African American studies and economics at Duke University. Darrick Hamilton is associate professor of economics and urban policy at the Milano School of International Affairs and professor of management and urban policy at the New School for Social Research.

Winter 2018 The American Prospect 13

Big Tech:The New Predatory Capitalism

The tech giants are menacing democracy, privacy, and competition. Can they be housebroken?

By Dav id Daye n

‘‘W

e’re making the world a better place.”

The phrase is thrown around so often in the tech world that it became a punch line on the HBO satire Silicon Valley. Executives controlling the largest tech titans—Google, Amazon, Facebook, Apple, and Microsoft—might even believe it. But in a searing presentation at Business Insider’s IGNITION conference in November, New York University professor Scott Galloway explained that technology and progress have stopped traveling together since the days of the Apollo Project, even as scientists and engineers developed the most sophisticated tools known to mankind.

“What has the greatest collection of humanity and IQ and financial capital been brought together to accomplish?” Galloway asked the crowd. “To save world hunger? To create greater comity of man? I don’t think so. … Their singular mission, simply put, it’s to sell another fucking Nissan.”

Today’s technologists work at for-profit businesses, doing what for-profit businesses do in America—maximizing shareholder profits by acquiring functional control of markets, as well as intimate details of our lives. Big Tech makes aspects of daily life more convenient (if more fraught), but that’s not the same as making the world a better place. Mainly, the goal has become making more money, via more monopoly. And their success over the

14 WWW.Prospect.org Winter 2018

past decade has been so unprecedented and damaging that Galloway—a self-described “full-throated capitalist”—sees no choice but to break these companies up.

The five largest global corporations by market value are the five tech firms named above. Google has near-total dominance of the search market. Facebook welcomes two billion monthly users and manages six of the top ten social media apps globally. Amazon controls nearly half of e-commerce and over two-thirds of the emerging voice-activated digital assistant market. Apple and Google share control of the operating systems for mobile phones and tablet gadgets; add Microsoft and Amazon and you’ve covered virtually all electronic computing devices. Facebook and Google dominate digital advertising. Amazon is increasingly the only player for cloud services. Heck, I’m writing this story on an Apple MacBook, finding links through Google, and resisting the temptation to use the Amazon Echo in the next room. And the imminent end of net neutrality will give AT&T and Verizon new power to determine winners and losers—and the Big Tech monopolists will be the winners.

The effects of tech monopolization have been detailed, at book length, over the past year (see companion book review essay by K. Sabeel Rahman, page 104). We already know these firms have crippled entrepreneurship, by either buying out competitors or copying their features and using overwhelming

market share to destroy them—tactics that would be familiar to the authors of the Sherman and Clayton antitrust acts. We already know they’ve concentrated economic gains in a few small enclaves, leaving large swathes of the country behind. We already know they religiously avoid taxes and cut special deals with intimidated public officials, burdening the rest of society. We already know their surveillance capabilities rival any in history, handing over a comprehensive profile of your every waking moment for advertisers and behaviorists to exploit. We already know the addictive qualities of their products have undermined social relationships, expanded divisiveness, and transformed what it means to be human.

We already know their drive for profits ignores how their platforms can be weaponized, scarring millions and undermining democracy.

After an unconscionable period of naïve neglect, in which the public was dazzled by tech wizardry, Americans of all stripes have recognized that allowing Silicon Valley to take this much control was dangerous. Polls show the public still likes tech platforms but doesn’t trust them. Conservatives think Big Tech stifles their voices; liberals think Big Tech hobbled our competitive economy; both think they’ve abused power, and both are right. Politics has grown interested in monopolies, and particularly tech monopolies, for the first time in decades.

The question is no longer whether we have a problem with Big Tech; it’s what we’ll do about

victor juha sz

it. And there, we have a distinct lack of consensus. “It shouldn’t be so hard, right?” muses Franklin Foer, author of World Without Mind: The Existential Threat of Big Tech. “We’re at the earliest stage. There’s no white paper.”

Let’s try to remedy that. Let’s survey the sundry theories for how to tame the Big Tech colossus—whether through laws, regulatory oversight, taxes, or antitrust enforcement.

Let’s test these ideas and see how they might fit together. Let’s try to construct a coherent strategy—one that will require the participation of experts, politicians, and the public to make it work.

The Beginning of a Backlash

“I think you do enormous good … but your power sometimes scares me,” said Republican Senator John Kennedy of Louisiana in October to the general counsels of Facebook, Google, and Twitter at the first major congressional hearing on Big Tech in years. The topic was Russian interference with the 2016 presidential election, but the testimony illuminated the platforms’ domination of large parts of American life, without any interest in managing that control. Malign actors could so easily penetrate platform defenses because there weren’t any.

Facebook has five million advertisers at any

one time; it couldn’t possibly vet them if it tried.

Furthermore, tech firms have no incentive to interfere with the source of so much revenue.

That’s why ProPublica could list discriminatory rental housing ads excluding races and ethnicities in 2016, and then again in 2017, after Facebook claimed to fix the problem. That’s why Google is purging videos and disabling comments on YouTube’s predatory, sexualized user content aimed at children, but not always removing the predators’ accounts. Allowing the narrowest possible targeting and the maximum possible targets has built the most lucrative ad mechanism in history, and it generates

Winter 2018 The American Prospect 15

big bucks, even if the bill is paid in rubles.

The hearings were important more for their explanatory power than for the technicalities of election integrity. “The end of the story is not Russia hacking the election, but that gross harm exists,” says Marshall Steinbaum, research director at the Roosevelt Institute. It filled out the picture on these platforms, whose operations we understand as much as the proverbial blind man feeling around an elephant.

“We need to make sure that the public fully understands the scope of the problem we face, and how it could be dramatically worse, given the speed at which these companies are growing,” says Lina Khan, legal policy director at the Open Markets Institute.

We don’t know how our data is handled.

We don’t know how algorithms nudge us into certain apps or products. We don’t even have

vertently leaked to The Wall Street Journal, but the FTC has rejected calls to release the full investigation.

Incentives have moved in the opposite direction. Silicon Valley’s congresswoman, Democrat Zoe Lofgren, has routinely defended the industry’s priorities. But now that she desires the Democratic ranking membership on the House Judiciary Committee, she’s requested a study on how Big Tech data collection affects competition. “Politicians are really recognizing it,” says Craig Aaron, president and CEO of Free Press, a consumer advocacy group. “You have Mark Warner, not a radical member of Congress, thinking, ‘Wow, when I talk Google and Facebook, my social media goes crazy.’”

Three senators have introduced bipartisan legislation to institute disclosure in online election ads. Another pending bill would

Social media users should be able to re-route all

same Big Data revolution that led to today’s state of play has also ushered in tools that provide more sophisticated crystal balls into what’s happening in the market,” says Luther Lowe, vice president of public policy at Yelp, a persistent Google critic. His company paid for a study by researchers at Harvard and Columbia that used Amazon’s Mechanical Turk, a crowdsourcing app where individuals perform menial computer tasks, to emulate Google searches with tens of thousands of responses.

The results suggested that Google alters search to prioritize its own content (Google has contested that conclusion).

“The takeaway is any Joe off the street, any law enforcer or whoever, can walk up to a consumer-facing internet product and understand what happens,” Lowe says. The platforms enable their critics to scrape and analyze information, just like they do. And the bigger the data bundle, the more proof available on Big Tech’s distorting power.

messages onto any platform, the way phone calls

Hail, Hail Europa

connect everywhere regardless of the provider. a confirmed figure of Amazon Prime memberships (recent estimates range between 52 million and 85 million households). There are nearly 270 million fake and duplicate accounts on Facebook, a number they quietly updated only in November.

Platforms like Google have invested heavily in the academic research establishment.

The search giant has funded around 100 public research papers since 2009, with up to $400,000 in seed money for each, according to data from The Wall Street Journal. Most of the research papers failed to disclose Google’s funding; Google even gives notes on the studies before they get published. This academic payola tilts the debate about how these businesses work, and in whose interest.

Government can solve this information chasm, but millions in lobbying dollars help shield Big Tech from scrutiny. The Obama administration was captured by Google; his Federal Trade Commission famously declined to sue them in 2013 over favoring properties in search and mobile apps, defying staff recommendations. Part of the staff report got inad-

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allow victims of sex trafficking to sue websites that facilitate it. Such laws won’t put a dent in Facebook or Google’s business model.

But they would remove the illusion that tech companies are powerless to police user-generated content, or be held responsible for it—and signal a power shift. “I don’t think shoring up issue ads at the FEC is the answer, but the goal is to make them sweat, to force them into the spotlight,” says Aaron.

A bigger pushback exists outside Washington. In Connecticut, Democratic Attorney General George Jepsen is investigating Google’s pervasive tracking of Android phone users without their knowledge, following similar privacy investigations into Apple Watch.

And Missouri Republican Attorney General Josh Hawley has initiated a wide-ranging investigation into Google’s data collection and bias in search results. “We should not just accept the word of these corporate giants that they have our best interests at heart,” Hawley said in his announcement.

Investigators, ironically enough, employ the very innovation that powers Big Tech. “The

Europe has propelled past the United States when it comes to constraining the abuses of Big Tech. In June, the European Union fined Google $2.7 billion for steering web users to its shopping site, and investigations remain active over similar treatment on Android phones. European regulators fined Facebook for lying about whether it could match user profiles with phone numbers on its messaging acquisition WhatsApp. They demanded Apple repay $15.3 billion in back taxes in Ireland.

And they forced Amazon to change its e-book contracts, which they claimed inappropriately squeezed publishers.

Unfortunately, these actions were treated mainly as the cost of doing business. The Facebook fine totaled not even 1 percent of the $22 billion purchase price for WhatsApp, and it allowed the two companies to remain partnered. Government policy, in effect, has “told these companies that the smart thing to do is to lie to us and break the law,” said Scott Galloway in his presentation. Google’s remedy in the shopping case still forces rivals to bid for placement at the top of the page, with Google Shopping spun off as a stand-alone competitor.

This does weaken Google’s power and solves the “equal treatment” problem, but it doesn’t

v i r g i n i a m ayo / a p i m a g e s

Europe Does It Better: European Union Commissioner for Competition Margrethe Vestager speaking at a media conference in June. The EU’s competition watchdog fined Google over its online shopping service.

protect consumers, who will ultimately pay for those costly bids. “The EU got a $2.7 billion fine to hold a party and bail out Greek banks,” said Gary Reback, an antitrust lawyer and critic of the EU’s actions. “No amount of money will make a difference.”

However, one thing might: Europe’s increasing move toward data privacy. The General Data Protection Regulation (GDPR), scheduled for implementation in May 2018, empowers European web users to affirmatively opt out of having their data collected, with high penalties for non-compliance. Consumers will be able to obtain their personal data and learn how it is used. They can request that their data be erased completely (known as the “right to be forgotten”) as well as prohibited from sale to third parties. Platforms could not condition use of their products on data collection. A separate, not-yet-finalized regulation called ePrivacy would forbid platforms from tracking users across separate apps, websites, and devices.

Data is the mother’s milk of Big Tech. Nearly all revenue is derived from it, mostly from delivering valuable targeting information to advertisers. Platforms obtain not only basic data like location, age, and gender, but more intimate details embedded in social media posts, emails, files from data brokers, even

third-party sites that happen to feature a Facebook, Amazon, or Google button. The platforms know how much money you make, what you spend it on, what you watch and listen to, whom you owe money to, and what you’re feeling, on a moment-by-moment basis.

There is legitimate fear that GDPR will threaten the data-profiling gravy train. It’s a direct assault on the surveillance economy, enforced by government regulators and an army of class-action lawyers. “It will require such a rethinking of the way Facebook and Google work, I don’t know what they will do,” says Jonathan Taplin, author of Move Fast and Break Things, a book that’s critical of the platform economy. Companies could still serve ads, but they would not be able to use data to target someone’s specific preferences without their consent. “I saw a study that talked about the difference in value of an ad if platforms track information versus do not track,” says Reback.

“If you just honor that, it would cut the value Google could charge for an ad by 80 percent.”

Europe appears to view data privacy as a more fundamental right than America does.

(Mark Zuckerberg famously said in 2011 that privacy is no longer a social norm.) Just recently, Congress nullified a Federal Communications Commission rule that internet

service providers refrain from selling personal data to advertisers without consumer permission. But conservative Representative Marsha Blackburn of Tennessee has introduced legislation that would not only restore these rules for ISPs, but expand them to tech platforms, under supervision by the Federal Trade Commission. Requiring consent to sell data is weaker than a ban on data collection or a user opt-out. But any move away from the current model of selling any and all personal data would be positive.

A potentially bigger shift involves making data portable. Guy Rolnik and Luigi Zingales of the University of Chicago proposed in a recent New York Times op-ed that social media users should be able to re-route all their messages onto any platform, the way phone calls are re-routed regardless of whether AT&T or Verizon is the provider. Data portability is also part of GDPR in Europe. A variant would give users the option to set search algorithms to favor preferred sites, rather than having Google peddling its in-house products.

Portability would break one of the most powerful dynamics cementing Big Tech dominance: the network effect. People want to use the social media site their friends use, forcing startups to swim against a huge tide. Competition is not a click away, as Google’s Larry Page once said; the costs of switching are too high.

But if you could use a competing social media site with the confidence that you’ll reach all your friends, suddenly the Facebook lock gets jimmied open. This offers the opportunity for competition on the quality and usability of the service rather than the presence of friends.

Interoperability wouldn’t be a novel requirement. In the 2001 AOL -Time Warner merger, the FCC forced AOL’s market-leading Instant Messenger (AIM) to be compatible with chats from rivals. This opened up AOL’s walled garden to other systems, taking as its premise that people own their relationship networks, not private companies. The companies just provide the lines on which those relationships traveled.

Email also works this way.

You could argue that without that interoperability, Facebook wouldn’t exist; it wouldn’t have been able to pull market share from an entrenched social messaging program like AIM, with hundreds of millions of users. The same

Winter 2018 The American Prospect 17

concept could weaken Facebook’s stranglehold on the market. Maybe something better, something more dedicated to a superior user experience, would emerge. And maybe Facebook would have to work harder to avoid the fate of AIM, which shut down December 15.

Net Neutrality and Market Power

Net neutrality has been a core doctrine of fair use of the internet as an essential public service. FCC Chair Ajit Pai’s pending repeal of net neutrality rules technically only affects telecoms like Comcast or Verizon, but you’ll see its impact in which websites thrive. If only giant platforms can afford faster download speeds, even more barriers to competition rise. Indeed, Netflix already pays for faster speeds. Net neutrality repeal should accelerate the demise of the entrepreneurial web.

Big Tech has historically opposed net neutrality repeal. But in practice, when Trump’s FCC proposed repeal, the big platform companies took a far softer line than in previous years.

They understand how tollbooths on the web could create barriers to entry for smaller rivals.

In July’s internet “day of action” protesting repeal, Google merely placed a note endorsing net neutrality on its less-prominent public policy blog; Mark Zuckerberg posted a brief Facebook message; Amazon’s show of support could barely be found on its homepage. Facebook and Google only expressed “disappointment” when the FCC ’s order was released. Serious lobbying muscle was not brought to bear.

There’s a compelling argument that neutrality ought to be imposed on platforms as well as internet providers. As gatekeepers with the power to highlight or suppress content, Facebook, Google, or Amazon should not have the power to pick and choose what gets attention and what doesn’t. Any lawful information or commerce should be able to reach those who want a look.

What does platform neutrality mean in practice? Harold Feld, senior vice president at Public Knowledge, distinguishes between common carriage regulation, which demands certain businesses treat all customers equally, and public utility regulation, which designates a service so critical that government must guarantee affordable access. Where you think the platforms sit depends on whether you

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consider them essential services, like electricity or transportation, or merely companies that should adhere to a nondiscrimination standard, like cable providers.

Tech platforms have made themselves essential—and they defy existing categories of public-interest regulation. Amazon is becoming indispensable to navigate the modern economy; even though e-commerce represents a small portion of overall consumer sales, it has become necessary infrastructure for thousands of sellers requiring access to Amazon’s platform to survive. The web doesn’t work well without Google search. Facebook has become a communications tool with greater reach than the phone. There is certainly a basis to apply the strictest regulatory scrutiny, though the idea of subsidizing access to Google or Facebook, a clear goal of universal access to public utilities, wouldn’t necessarily apply.

“The fundamental issue is neutrality,” says Marshall Steinbaum. “These are not neutral platforms. They have no way to function in the public interest.” That could mean restricting what Amazon charges vendors for access to its marketplace, or forbidding Google and Facebook from deliberately favoring in-house products over rivals. Information services like the platforms could be regulated like news providers, as Britain has suggested, forced to take responsibility for the content published. These approaches allow some level of market power, but limit the harms that inevitably follow.

Unfortunately, regulation often starts vigorous but fades. “It might work for a time when high-energy people come in, but then they go on and industry packs the regulatory commission,” said Gary Reback. Some think the judiciary represents a better venue. Hal Singer, an economist with George Washington University’s Institute for Public Policy, believes nondiscrimination could be enforced through an administrative law tribunal ruling on complaints on a case-by-case basis.

Section 616 of the Cable Act of 1992 established tribunals for cable networks claiming discrimination by distributors; decisions normally take a couple of years, rather than interminably long antitrust cases. Singer believes a Big Tech tribunal would fill gaps in enforcement, getting out from under “competition is only a click away” assumptions. Precedents would emerge

and create certainty on where to draw the line.

“The tribunal gives the keys to the complainant, it doesn’t rely on a bureaucrat being moved to act,” says Singer. “And it has no requirements of antitrust cases, like showing market power.”

Lina Khan doesn’t believe we need a new tribunal, just new law enforcers. “I think that is the FTC ’s role. They have expansive power in their pocket to reach business practices that are anti-competitive,” she says. Indeed, Section 5 of the Federal Trade Commission Act grants open-ended authority to act. But in 2015, the commission restrained its own power in a “statement of principles,” saying it would interpret Section 5 narrowly, the same way the courts interpret the Sherman Act. Sandeep Vaheesan, a regulatory counsel for the Consumer Financial Protection Bureau, explained in a University of Pennsylvania Journal of Business Law paper that Section 5 could give the agency far more power. “The FTC could say any firm with more than 40 percent of the market is presumptively anti-competitive,” Vaheesan said. “So instead of having to do careful market examination, there would just be a simple rule. You have dominance, you have to change.”

There’s also a role for the taxing power, offers Free Press’s Craig Aaron. For example, Google revenue between 2004 and 2016 has increased from $3.2 billion to $89.5 billion, while print newspaper advertising fell over the same period from $44.4 billion to $12.9 billion. (See companion piece by Kuttner and Zenger, page 22.) Maybe Google and Facebook, which benefit from hosting news links (three of every four inbound links to news outlets come from these two sites), could redress some of that market collapse, by paying small taxes on data or targeted advertising, which in turn could subsidize news media. “If they control the ad market, what transaction costs should there be to support public goods?” asks Aaron.

“I’d put journalism on that list.”

But policymakers need to address the challenges of regulatory enforcement. Neutrality depends on seeing and understanding an algorithm that’s often invisible, and it can be difficult to establish a causal connection of bias.

Plus, “discrimination is practically inevitable in search,” says Vaheesan. “Ultimately Google has to decide which ten links appear on the

first page. So long as Google is allowed to own its own content, there’s a real risk that strong net neutrality principles will be violated. So you need some structural separation.”

Break Them Up

It’s assumed that tech giants rose to prominence by offering the most compelling content or superior technology. Less remarked-upon is how they resemble old-school conglomeration and monopoly. Google didn’t have its revenue model straight until purchasing online admaker DoubleClick, and it routinely obtains technology through acquisitions like Waze, YouTube, and Android. In 2011, Chairman Eric Schmidt boasted of Google buying a company a week.

Microsoft has adapted to the modern internet by buying Skype and LinkedIn. Amazon deals include Quidsi, the online retailer that owned Diapers.com, Soap.com, and other flagships; Amazon shut down these competitors in March.

Facebook best exemplifies the growth-bymerger model of Big Tech. The company uses an internal database to monitor mobile app rivals; ironically, the software tool came from the acquisition of a startup named Onavo.

Once it identifies early growth in a competitor, it offers them a simple directive: Join or Die. Instagram joined, for $1 billion. So did WhatsApp, for $22 billion. Most recently, Facebook acquired anonymous messaging app TBH, which was only live for two months before the new boss came calling. Snapchat rebuffed Facebook’s entreaties, so Facebook employed Plan B: they copied Snapchat’s innovation of short, disposable messages, through a feature called Stories that it copied onto four of its most popular products. Instagram VP of Product Kevin Weil explained, “This is the way the tech industry works,” and he’s not wrong. But in the hands of a platform monopoly, copying rivals can strangle them. Snapchat has struggled since Facebook declared war.

Facebook uses its market share or its wallet to bury competitors. Google has a similar strategy, transforming its search by providing answers instead of links. They’ve hobbled entire websites by scraping content and posting it as their own, thereby keeping users inside the Google ecosystem. That the platforms can carry this out with impunity saps the hope from any would-be startup. Seed funding in

Silicon Valley has slowed down by 40 percent since 2015, because what’s the point?

Amazon similarly intimidates everyone in its path to world domination, including local governments, who’ve competed against each other to bribe the company into siting its new headquarters in their cities. NYU’s Galloway explains that consumer stocks now move for only three reasons: the performance of the company, the macroeconomic environment, and whether Amazon is moving into their sector. Amazon buys Whole Foods and supermarket stocks tank. Amazon files a trademark on a meal-delivery kit and every rival in that space nosedives. Amazon hints at selling prescription drugs and pharmacy CVS goes out and buys health insurer Aetna, an example of concentration creep, where monopolists in one industry beget monopolists in another.

Google Shopping case. Similarly, Facebook has kept the Instagram and WhatsApp brands going; it wouldn’t be hard to disintegrate them, under a similar competition rationale.

Rather than policing neutrality, a difficult task for even aggressive regulators, you could force structural separation, forbidding Amazon to operate business against companies it allows to sell on its platform, or prohibiting Google to own both search and advertising, using data from one to profit on the other. The government is currently challenging a vertical deal between AT&T and Time Warner, fearing that ownership of content and distribution in the same hands creates anti-competitive opportunities. But Apple, Google, Facebook, and Amazon have just as widespread content and distribution tie-ups. “Vertical is so important in high-tech, because the challenger to

Facebook and Google use their market share or their wallets to bury competitors. Amazon intimidates everyone in its path to total domination.

A first step to counteracting this market failure would place a moratorium on all acquisitions for tech platforms that already have too much power. “If it’s clear that Facebook and Google can’t manage what they already control, why let those corporations own more?” asked Matt Stoller and Barry Lynn of the Open Markets Institute in a Guardian op-ed. A merger ban could prevent these companies from de facto dominance of next-wave technologies like virtual reality and artificial intelligence, if some enterprising entrepreneur solves the problem first.

But that only maintains an inadequate status quo. And observers are warming to the idea of more drastic action. “In my book, I walk up to the line of calling for the breakup of these companies and kind of balked,” says Franklin Foer. “I have come along in my own thinking even since publication.”

Google has helpfully split itself into business lines under the parent company Alphabet; you could just cleave these off, or force Alphabet to do so by establishing regulatory mandates promoting competition, like the EU did in the

today’s monopolies sits on top of them,” says Gary Reback. “Netscape couldn’t get to market without Microsoft. Shopping sites can’t get to market without Google.”

Skeptics of an antitrust approach to Big Tech use two main arguments. First, they worry about the length of cases. “It would be a multimillion-dollar venture that could take ten years,” says Hal Singer. “It’s like redirecting a cruise liner.” By the time you’ve reached a resolution, Singer adds, innovators who could benefit from it would all be out of business. He doesn’t oppose bringing a case, but sees it as an aspirational goal.

What this misses is Gary Reback’s famous construction that “the trial is the remedy.”

Reback’s legal work led to the U.S. antitrust case against Microsoft bundling its computers with its web browser and software. “It was a highprofile trial covered by the press, which does a better job of explaining than lawyers do,” says Reback. “People loved tech, but then they saw what Microsoft was doing, they saw the emails.”

Even though the ultimate resolution was weakened by the Bush administration, public

Winter 2018 The American Prospect 19

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Trust-Busted: In 2002, Microsoft Chairman Bill Gates had to testify at federal court in his company’s antitrust case.

The public trial led Microsoft to soften its aggressive strategy against rivals.

says Lina Khan, pointing to research showing that prices rise after mergers. “The tech sector shows that failure with particular elegance.

Companies can monopolize the economy without breaking anti-monopoly laws.” She believes that set standards to promote competition and give rivals the right to access the market, sometimes called per se rules, would solve the platform problem better than the open-ended inquiries of today. “We should move away from consumer welfare to a broader appreciation of corporate power and simpler legal standards,” says Sandeep Vaheesan.

The Justice Department and the FTC could make these guideline shifts without going through Congress. They could refashion antitrust to better take into account the impact of tech monopolies on consumers, suppliers, workers, and the broader economy.

Competition through compulsory licensing

A final alternative again takes history as its guide. In 1956, the Justice Department offered AT&T a deal: They could retain their monopoly over telephone communications, but they would have to give up their prodigious market advantage from Bell Labs. This subsidiary of the AT&T empire, born in 1925, conducted

multi-faceted scientific research, developing such technological building blocks as the transistor, the microchip, the solar cell, the laser, and the cellular network. Practically no research facility in history has been as productive or as recognized: Eight Nobel Prize winners came out of Bell Labs.

Under the 1956 consent decree, all current and future Bell Labs patents had to be made available to any applicant who wanted them.

Previous patents, 7,820 in all, would be licensed without royalties, while future patents could be had for a nominal fee. And something incredible happened, as four economists explained in a recent paper from Yale University.

Not only did business participants benefit from existing patents; compulsory licensing actually permanently increased innovation in dozens of unrelated industries that built on Bell Labs’ work, mostly from young and small companies. The 1956 decree “remains one of the most unheralded contributions to economic development” in American history, wrote Peter Grindley and David Teece, “possibly far exceeding the Marshall plan in terms of wealth generation.” Even as Bell Labs’ research dropped off, the public still benefited in aggregate from the innovation the licensing unleashed, and the industry it fostered.

rick bowmer / ap images

sentiment (and some additional European fines) led Microsoft to soften its aggressive strategy against rivals. “Microsoft ran Netscape out of business, so the only way to get to Google (at the time) was the Microsoft browser,” says Reback.

“They could have killed Google in the cradle, but they didn’t, and the reason why, according to Microsoft people, was they had this public trial.” Microsoft’s later move into search with Bing happened too late. Franklin Foer calls the Microsoft case “one of the most important developments in American political economy over the last 20 years. It created space for the platforms.”

You could re-run the Microsoft case against Google now, over the bundling it does in Android phones or its bias in search. “Elements of the Google business model seem written into the DNA of the Microsoft settlement,” says Marshall Steinbaum. But this speaks to the second half of the skepticism on antitrust: Will a court rule favorably?

For the past 40 years, antitrust jurisprudence has followed the convictions of Robert Bork and the University of Chicago, which dictates that mergers are beneficial unless they harm consumer welfare. It also generally blesses vertical combination for its economic efficiency and benefits to consumers. Even since the Microsoft trial, this straitjacket has gotten tighter, with stricter evidentiary standards and endless interpretations among economists on what constitutes anti-competitive behavior. Bork himself wrote a Google-funded study arguing that effective search benefits consumers, who can switch to any competing search engine “at zero cost.”

This myopic and self-serving perversion of antitrust frustrates efforts to break up the tech giants. Regulators would need to show concrete harms to consumers from sites like Facebook and Google that are nominally free. Even questions of bias against rivals aren’t clear-cut.

“Google doesn’t tell Yelp you can’t get to the customer, it just puts them on page 2 [of search],” says Hal Singer. And the impact of lost innovation from startups that choose not to compete because they know Facebook or Amazon will bury them is impossible to quantify.

Reformers respond to this by arguing that the consumer-welfare standard cannot encompass the harms presented by these firms.

“There’s growing evidence that [the] consumer welfare [test] has failed on its own terms,”

“This is what started Silicon Valley,” says Taplin, who wrote about the Bell Labs consent decree in Move Fast and Break Things. Indeed, companies like Intel, Hewlett-Packard, and Motorola can trace their beginnings back to that consent decree. A similar lawsuit against IBM for bundling its mainframe with software led to the computer giant passing off software to other companies, creating another giant industry. “The idea was that the companies could stay a monopoly, but have to stop using intellectual property as a cudgel against peers,” Taplin says.

If Google were put into a compulsory licensing regime, it would have to give up patents for its search algorithms, self-driving cars, mapping software, virtual reality, and Android operating system, to name a few. As the Bell Labs example shows, this type of antitrust enforcement enhances public welfare by benefiting both competition and innovation. And again, it’s not a novel idea: Under existing law, many patents are required to be licensed under “fair, reasonable, and non-discriminatory” (FRAND) terms.

Obviously, all the complications around applying antitrust in its hobbled modern context apply. In addition, the Yale study showed that innovation did not jump in the telecommunications industry after the licensing decree; AT&T had maintained its network effect, foreclosing competition. To really enjoy long-term technological change, you have to bust the industry giants that sit on innovation, says Gary Reback. “Setting up the industry so it once again runs on competition as opposed to oligopoly, that’s the key.”

Connecting the Dots

From this broad canvas, you can piece together the outlines of a strategy, with interlocking approaches designed to restore competition. You start with hearings and investigations to identify how platforms operate. Then you incorporate tools—data protection, neutrality standards, compulsory licensing, marginal taxes, antitrust cases—to combat the negative trends. A neutrality regime may lead platforms to shed businesses without a government-mandated breakup, or structural separation relieves the regulatory burden to police bias. Remove the value of ad targeting, and the problem might solve itself; give innovators free use of the tools, and competition could burst forth. “We need a suite of

solutions, not just one,” says Vaheesan. “The current cacophony of ideas is not a bad thing.”

Luther Lowe’s idea of crowdsourcing investigations and leveraging Big Data could render moot the debate over the consumer-welfare standard. “If you look under the hood at the analytics of these companies, it puts a stake in the heart of Borkian economics,” Lowe says.

“In The Antitrust Paradox, Bork has a line about how we’ll never have enough information to plot an actual demand curve. But we have more information now than we’ve ever had. We can overcome these objections.”

If you set up structural or regulatory barriers to prevent competition, you might even get the platforms to turn on each other. Right now, Big Tech operates almost like a cartel, each with its own fiefdom (Google paid Apple $3 billion in August to remain the default search

dling. He just signed a defense policy bill that could turn over much of the federal government’s commercial procurement to Amazon.

But the aftermath of the financial crisis taught the lesson that those seeking reform need a shelf full of ideas when the opportunity to implement them arrives. And instead of technocrats dominating competition policy, the focus on recognized consumer brands with supreme importance has opened up the debate.

“It’s healthy that there should be public input into a realm of policy that profoundly affects public welfare,” says Marshall Steinbaum. “The idea that we should do antitrust behind closed doors is what got us where we are today.”

Franklin Foer adds that the Democrats’ search for an economic identity after the Trump election also creates positive momentum for anti-monopoly solutions. “I’ve talked

Compulsory licensing of technology to rivals helped cure the old telephone monopoly. Its extension to today’s tech cartel would promote competition. on the iPhone, the way a competing Mafia organization would pay tribute for access to the street). The areas of overlap are rare, though new technologies like voice-enabled digital assistants bring it out (Amazon seems to have beaten Google and Apple to the punch). Losing monopolies in specific arenas could lead the platforms to search elsewhere to cleave market share. Starting turf wars among the giants might benefit consumers and weaken the giants so outsiders could enter markets and thrive.

Obviously none of this will be implemented tomorrow. Big Tech is still learning how to navigate Washington, but even while under siege they control massive resources to get their way.

And while Donald Trump blusters about Big Tech on occasion, his policies have offered them tremendous benefits. The Republican tax plan’s lifeline for money earned overseas that can be repatriated at a skinny tax rate mostly benefits the tech industry, which has several hundred billion dollars stashed. Trump’s NAFTA rewrite proposal would limit Facebook and Google’s liability for content on its site, even as Congress tries to hold them accountable for Russian med-

to [Senate Minority Leader Chuck] Schumer about antitrust,” Foer says. “I think he understands that there’s free-floating anger that the Democrats need to be able to capture and steer toward prudent solutions.”

Indeed, Democrats have put antitrust enforcement at the center of their “Better Deal” framework, putting them on record that their return to the majority will have to accompany a strategy to end the Big Tech monopoly.

And the bipartisan concern over the platforms could leave them with fewer friends when the political moment strikes. Most of the tools to enforce already exist and just have to be correctly targeted. The laws are on the books.

All that’s required is political will. “Antitrust is really driven by an appointee,” says Taplin.

“You can have a president who says, ‘I’m going to get a hard-ass in there,’ and no laws have to be passed to change everything.”

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.

Winter 2018 The American Prospect 21

Saving the Free Press from Private Equity

Navigating the digital transition is a huge challenge for newspapers.

Absentee ownership by private equity predators makes it all but impossible.

By Robert Ku t t ne r and Hildy Z e ng e r

T

here is a standard story about the death of newspapers. After decades of enjoying easy profits from print ad income, publishers were blindsided by the internet revolution. Free information on the web cut into their core audience, especially among the young. The expenses of paper, printing, and delivery—“trucks and trees”—made them increasingly uncompetitive in a digital age. Publishers were slow to adjust. By the time owners figured out how to monetize web content, Google and Facebook had gotten there first, and were taking an estimated 80 percent of digital ad revenues. The crash of 2008 only hastened the decline.

A few national newspapers with unique franchises—The New York Times, The Wall Street Journal, and The Washington Post—have begun to figure out the digital transition, using paywalls, new digital content, and complementary business strategies to realize income from other sources. They will survive, even thrive.

But the real tragedy for the civic commons is occurring at the level of regional papers. Local dailies and weeklies are in a slow death spiral.

They missed the digital rendezvous. Operating losses cause owners to lay off staff and shrink content, further depressing readership and ad income, leaving little to reinvest in digital.

Local web-only media are feisty in a few places, but no substitute for a robust newspaper, whether print, web, or a blend.

This story is all too true as far as it goes. But

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it leaves out one major player: the private equity industry. Private equity has been gobbling up newspapers across the country and systematically squeezing the life out of them to produce windfall profits, while the papers last. The cost to democracy is incalculable. Robust civic life depends on good local newspapers. Without the informed dialogue that a newspaper enables, the public business is the private province of the local commercial elite, voters are uninformed, and elected officials are unaccountable.

Companies with names like Alden Capital, Digital First Media, Citadel, Fortress, GateHouse, and many others that you’ve never heard of have purchased more than 1,500 small-city dailies and weeklies. The malign genius of the private equity business model, of which more in a moment, is that it allows the absentee owner to drive a paper into the ground, but extract exorbitant profits along the way from management fees, dividends, and tax breaks. By the time the paper is a hollow shell, the private equity company can exit and move on, having more than made back its investment. Whether private equity is contained and driven from ownership of newspapers could well determine whether local newspapers as priceless civic resources survive to make it across the digital divide.

The Bastrop Daily Enterprise, in the northeast corner of Louisiana, was founded in 1904, part of a small family-owned chain. The news-

paper did a thriving business, with 30 employees and $1.5 million in annual revenues. “We served our communities, won awards for our reporting, and made good money for the owner,” says a former staffer who asked that we not use her name. Then the Enterprise was bought by GateHouse Media, the newsroom was gutted, and all operations were centralized by the new corporate owners.

“Now they’ve got maybe eight people,” says this former employee. “They’re lucky if they’re doing $600,000 gross. I remember what these papers used to be. It’s unrecognizable.” Few citizens of Bastrop, however, know the reasons behind the wasting of the Enterprise because no one has reported on it.

In North Carolina, The Fayetteville Observer, founded in 1816, had been owned by the McMurray family since the 1920s and is the oldest North Carolina paper continually publishing. Fayetteville is hard by Fort Bragg. The paper has a daily circulation of about 62,000 across ten counties, and had been profitable and well managed. But family members, getting older, decided it was time to sell. Charles Broadwell, whose grandmother had been board chair, was the last family member running the paper. He engaged newspaper brokers to find a buyer. GateHouse, the biggest of the private equity players, took over the paper in 2016, making deep cuts in the newsroom and the business office, and moving the copy desk to their regional center. They raised the

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subscription price for a shabbier product. “It was like walking around at my own funeral,” Broadwell says.

However, against this bleak trend, being repeated at hundreds of papers nationwide, there is actually some good news. In some cities, private equity owners are selling newspapers back to local owners who are not looking for windfall gains but are committed to reinvesting in the newsroom and figuring out digital publishing. In other places, like Minneapolis, Philadelphia, and Boston, a category of new local owners whom we might call benign billionaires are devising new business

models to allow papers to at least break even, while they give talented editors the freedom and resources to rebuild the newsroom and advance digital. While newspapers will never be the money machines that they were in the glory days, they may yet endure as core institutions of American democracy.

This article is an unusual collaboration.

One of us is the co-editor of this magazine. Over the years, Robert Kuttner has written numerous articles on the business of media. The other, writing under a pseudonym, Hildy Zenger (first name in honor of The Front Page, and last name

for the pioneer of press freedom in America), works at a small-city paper owned by GateHouse. Zenger observes the carnage close up.

Zenger’s newspaper, with a circulation of under 10,000, has been pillaged in classic private equity fashion. Its pre-GateHouse staff has been cut by 70 percent, and those who remain have not had a raise in almost ten years.

The paper had its own in-house production and printing operation, and had won design awards, but GateHouse shut down and sold the press and fired the entire production staff. The paper is now laid out hundreds of miles away in Austin, Texas, along with most of GateHouse’s 770 papers. The printing is done in another city, at a GateHouse-owned shop, by harried press workers who are under constant pressure to cut costs by reducing quality.

Editors must send all the content, page by page, to the GateHouse design center via a cumbersome, laughably outmoded software interface and then wait, often for hours, to see what the pages look like on their computer screens. They are not allowed to speak to the designers, who can be contacted only by email.

The designers follow strict rules that make creative layout solutions virtually impossible.

GateHouse wages are so low and working conditions so high-pressured and unpleasant that turnover among layout staff is constant—so mistakes are rampant.

Although GateHouse management claims to be aggressively pursuing a “hyperlocal” digital ad strategy, its newspapers’ websites—all with close to identical design—are stunningly ugly, hard to use, and filled with dated, soft feature stories of zero local interest. Its subscriber services—all outsourced—are even worse. At Zenger’s office, the editors get calls from readers who are having trouble with their subscriptions and can’t reach anyone for help.

“Sorry,” the editors have to say. “There’s nothing we can do.”

Cost-cutting measures at GateHouse are absurdly draconian, ranging from the fact that editorial staffers don’t even get complimentary subscriptions to having to buy their own coffee for the office machine. “Next it will be the toilet paper,” says one staff member, only half-joking.

The newspaper where Zenger works, sold to GateHouse a decade ago, has lost 40 percent

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n o r d q u i s t s i g n c o m pa n y

of its circulation over that time, and nearly it—a total waste of time. ‘I’ve got your back,’ he according to a tabulation collected by journalhalf its advertisers. At the Columbia Daily said. ‘I hope you’ve got mine. I’m crazy about ists who worked for DFM papers.

Tribune in Missouri, massive layoffs began all of you.’ I wanted to throw up.”

As quality drops at these papers, so does one month after GateHouse took over. “You circulation. And though ad revenue is down, are expected to do the work that three people Is private equity any worse than tradi- many local businesses continue to advertise used to do, and you are not rewarded for it,” tional chains? In 2004, the two largest media because they actually value the print newssays one former employee. Across the company, companies were publicly traded legacy chains, paper and want to be seen in it. “Print is not employees complain of few resources and little Gannett and Knight Ridder. By 2014, the close to being dead,” says Mark Jurkowitz, who tech support. A senior sales rep at a GateHouse top two were private equity firms, Fortress/ wrote about the media for The Boston Globe for paper in Massachusetts had his computer hard GateHouse and Digital First Media (DFM). ten years, then became associate director of the drive crash and couldn’t get a new one from The big chains like Gannett, McClatchy, and Journalism Project at the Pew Research Center the company for nine days. When he finally Cowles got overextended and made some bad in Washington, D.C. “The reason is not just did get one, it wouldn’t accept his password. business decisions in the decade before the that publishers are attached to the idea, but The ruthless miserliness of Gateyou’re still generating most of your House management has two effects: revenue from the dead-tree product.”

It destroys the newspaper’s capacSo, despite having cut costs to ity to do its fundamental job of covthe bone, the private equity parent ering the news, and it makes for is, for now at least, able to take out miserable employees. “Everybody I profits in the range of 15 percent to know in the leadership of the cor25 percent of revenue. Papers that poration were financial people or ad don’t hit this mark can be sold for directors,” says the editor of a Gatescrap or closed. Imagine what these House-owned paper. “They were papers might be if this money were never journalists—never covered reinvested in the newsroom and in a story in their life. This corporate an enlightened digital strategy. stuff is killing local newspapers. I’m GateHouse owns more newspasweating bullets hoping some bean pers, currently in 36 states, than any counter doesn’t say we’ve got to get other media conglomerate: a mix another 17 percent profit out of this. of dailies, paid weeklies, and free How much more can these people “shoppers,” mostly in small cities, but cut? It becomes harder to do the also a few bigger city papers like The Providence Journal, the Worcester right thing—to cover the city council meetings and find out what really did Back In Benign Hands: The Minneapolis Star Trib took a round-trip to local ownership. Telegram & Gazette, and The Columhappen—when you had five people in bus Dispatch. the newsroom and now you’re down to two.”

The model is simple. Buy a newspaper on the collapse, resulting in severe downsizing. But Zenger’s paper is in a community with a some of these owners retained a commitment cheap, often from a legacy chain like Gannett dense civic life that has supported serious jour- to newspapers as a public calling. “The tradi- or from a family owner whose siblings and nalism for over a century, but the tiny staff now tional chains had to downsize, but they still cousins want to cash out. In the glory days has little time to cover important aspects of thought like newspaper people—what sus- before the internet and the financial collapse, city government, much less do serious investi- tains the product and the community,” says newspapers were earning profit margins of 20 gative work. It’s worth noting that GateHouse Bernie Lunzer, president of the NewsGuild- percent to 30 percent, and they cost at least 13 and other corporate predators are managing to CWA . “With private equity, it’s about squeez- times earnings to purchase. This was the era in destroy a once-robust tradition of independent ing out the 20 percent and anything goes. which buyers grossly overpaid for newspaper journalism without having to tell editors and Use it up, sell it, or just kill it. The profit is properties, the epic case being The New York Times purchasing The Boston Globe in 1993 reporters what to write or not write. Starva- the product.”

The private equity formula of hollowing out from the local Taylor family for $1.1 billion, tion, it turns out, is at least as effective a way to keep nosy reporters at bay as killing their local papers the better to extract windfalls only to sell it two decades later to Red Sox is cynical and deliberate. Between 2012 and owner John Henry for about $70 million. stories before they see the light.

In the first wave of purchases, some private “Eight hundred of us [from local papers] 2016, according to the Bureau of Labor Statistics, all newspapers lost 24 percent of their equity companies overpaid and went bankwere on a call yesterday with [GateHouse CEO] rupt, but the management group often was Kirk Davis,” one GateHouse advertising man- workforces. But at a sample of 12 papers owned ager said recently. “We gained nothing from by DFM, the layoff rate was more than half, able to use legal maneuvers in bankruptcy

court to keep control. Since 2012, a second wave of private equity purchasers has swept in to buy newspapers for prices at just three or four times earnings. That means the new owner can make back its money fast, and even faster if it strips staffing and siphons off cash flow. GateHouse is continuing its acquisition binge. Just last August, it purchased another 11 dailies and 30 weeklies from the Morris Publishing Group based in Augusta, Georgia. Its most recent move is to buy the Boston Herald, for just $4.5 million in cash, announced on the same day the 171-year-old daily filed for federal bankruptcy protection. GateHouse’s bid was conditioned on voiding all of the paper’s union contracts and discarding all legacy pension, health, and other obligations to Herald workers. Major layoffs in the newspaper’s 120-person newsroom are a certainty.

But the other top private equity player, DFM, got overextended, and has sold some of its papers. Its owner, Alden Capital, targets a profit margin of 25 percent. DFM has pursued some of the most aggressive cash-extraction tactics in the business—for instance, cutting the newsroom staff of the St. Paul Pioneer Press from a peak of 225 journalists two decades ago to just 25 today, with similar-scale cutbacks at flagship papers like the San Jose Mercury News and The Denver Post.

According to newspaper financial analyst Ken Doctor, DFM advised brokers who specialize in the purchase and sale of newspapers that it would entertain individual sales if it could realize prices of around 4.5 times annual earnings. As many as 50 DFM papers were reportedly on the block. Recent sales have included The Salt Lake Tribune and the New Haven Register. In October, DFM chief executive Steve Rossi abruptly stepped down, after serving just two and a half years.

This pullback and selloff has cre-

ated opportunities for restored local ownership. Consider the venerable Berkshire Eagle, now back in local hands. The Pulitzer Prize–­ winning Eagle, based in Pittsfield, Massachusetts, has a great tradition of public-minded journalism with roots that go back to 1789.

The legendary press critic Ben Bagdikian said there are only three great papers: The New York Times, Le Monde, and The Berkshire Eagle.

The paper, with a current circulation of about 24,000, has existed in its present form since 1891, when it was bought by Kelton Bedell Miller, later Pittsfield’s mayor. The Miller family owned the Eagle and four other small New England papers until 1995, when the company, overextended and in debt, was sold to an aspiring private media press baron, Dean Singleton.

By 2006, Singleton’s private equity company, MediaNews, based in Denver, owned 55 dailies, including The Denver Post, The Detroit News, the Los Angeles Daily News, the San Jose Mercury News, the St. Paul Pioneer Press, plus more than 100 weeklies, becoming the nation’s fourth-biggest newspaper company. After the 2008 crash, MediaNews used the bankruptcy laws to shed debt, and was reborn as Digital First Media, partly owned

ronment, that approach really is revolutionary.

“We had to re-populate functions that had been outsourced,” Rutberg adds. “Composition of the paper, design staff, the call center, classified ads, finances—all brought back to Pittsfield. When you walked around here, the newsroom was half-empty.” The Eagle, amazingly, has been hiring. At the three papers, about 50 new positions in all departments have been filled, and newsroom staffing has been built back from a total of 34 to around 50.

“We even increased the size of the paper and we printed it on heavier stock, to signal that the Eagle is back,” says Editor Kevin Moran.

“I think there are maybe three or four really lucky newspaper editors in the country. One works at the Post, one works at the Times, and maybe the third works at the Berkshire Eagle.

We have worked so long and hard just to keep

Billionaire owner Glen Taylor will leave the Minneapolis Star Tribune to a nonprofit foundation, so that the paper will always stay in local hands. by yet another private company, Alden Capital.

Under DFM, the Eagle and its sister papers in the New England Newspaper Group, the Brattleboro Reformer, The Bennington Banner, and the weekly Manchester Journal in Vermont, were relentlessly cut, though Alden managed to extract cash flow to meet a target return of 15 percent to 20 percent.

But in May 2015, DFM, financially stressed, went through yet another restructuring and put several papers up for sale, including the New England Newspaper Group. At that point, a group of Pittsfield business and civic leaders resolved to take back the Eagle, which had been in absentee ownership for two decades. In early 2016, former Berkshire County Judge Fredric Rutberg was named publisher. Other investors included former Visa Inc. President John C. “Hans” Morris, banker Robert G. Wilmers, and Stanford Lipsey, former publisher of The Buffalo News.

“We announced a revolutionary business plan,” Rutberg says, tongue only partly in cheek.

“Improve content, attract more readers and advertisers.” But in today’s private equity envi-

the paper alive, and now we can build it back.”

In some small towns as well, citizens are finding ways to take their newspapers back.

The independent local weekly in the central Massachusetts town of Harvard, with 6,500 residents, was first sold to the Community Newspaper chain, which was then bought

by GateHouse. The corporation did its usual hatchet job on the formerly beloved Harvard Post. But a group of civic-minded citizens got together and started a competing weekly, the Harvard Press, modeled on the old Post, with extensive coverage of town boards, schools, and community life—and a notably quirky and detailed police blotter. Within six years, they put the GateHouse paper out of business.

In Southern Pines, North Carolina, The Pilot has been a family-owned paper for nearly a century, and has been owned for 21 years by its current publisher, David Woronoff and family members. Editor John Nagy wrote a signed article for the paper last January bemoaning the fact that one North Carolina paper in three is absentee-owned, and that others had folded. “Folks in those communi-

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ties regularly call us, asking us about buying their local paper. … They’re tired of a 12-page paper with no news, and they look at our 40-page, all-local product with envy.”

Woronoff got a call offering to sell a group of five other local papers that had been stripped down as they repeatedly changed hands over a decade. Woronoff took a good look at one, the Richmond County Daily Journal. “It’s maybe eight pages a day, six days a week,” he says.

“They sold the building, sold the press; they might have two people in the newsroom. There is no kind of innovation that can come from that environment. There is nothing left. If he just handed me the keys, I’m not sure I’d take it.”

Woronoff has strengthened The Pilot by developing other lines of business that are logical outgrowths of the newspaper. He now publishes four glossy monthly city magazines

almost coming full-circle, back to the 18th century,” says analyst Ken Doctor. “The first newspapers were published by local printers, who were job shops. They knew their communities, and had multiple lines of business.”

The other model of keeping great journalism alive relies on arguably benign billionaires. These include Jeff Bezos at The Washington Post, Red Sox owner John Henry and colleagues at The Boston Globe, and an intriguing hybrid in Philadelphia, where the Inquirer and Daily News, after several private equity misadventures, were purchased by a group led by H.R. “Gerry” Lenfest, a longtime media executive and philanthropist, who turned the holding company into a nonprofit.

The Philadelphia story reads almost like a parody of recent events in the media business.

At the bankrupt Boston Herald, the new private equity owner GateHouse Media will void union contracts, pensions, health benefits, and order major newsroom layoffs. in nearby communities, and operates a digital agency for the newspaper’s customers.

He also publishes telephone directories, and even operates a local bookstore. These profitable enterprises provide a revenue stream that strengthens the newspaper, which now accounts for only 35 percent of total revenue.

According to Penelope Muse Abernathy, the Knight Chair in Journalism and Digital Media Economics at UNC Chapel Hill, the key to this sort of model is local ownership playing to local strengths. Almost by definition, private equity owners can’t and don’t pursue these strategies, because they have no stake in the community.

Among larger papers, The Washington Post and The Dallas Morning News have successfully branched out into profitable services for both clients and other newspapers. In Santa Rosa, California, Abernathy reports, then-publisher Bruce Kyse created an in-house ad agency at The Press Democrat that offers search optimization, web development, and social media assistance for clients who pay $1,000 a month.

Her 2017 book, Saving Community Journalism, gives dozens of other examples. “We’re

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The Inquirer went through seven different owners in eleven years, beginning in 2006 when McClatchy bought the Knight Ridder chain, which included the Philadelphia papers.

McClatchy promptly sold the papers for $562 million to a local investor, Brian Terney, who went bankrupt in 2009. The papers then ended up with yet another group, Angelo, Gordon & Co., which bought the property for just $135 million in 2010. During this entire period, sickening newsroom downsizings ensued. At length, following litigation among the owners over who was in control, a judge ordered an auction. The winning bidder was the group led by Lenfest.

The three media properties, the Inquirer, the Daily News, and Philly.com, became the Philadelphia Media Network—debt-free. Lenfest turned the company over to a new nonprofit, the Lenfest Institute, which also serves as a grant-giving foundation to help the Philadelphia papers and others like them reinvent themselves. In a radical attempt to accelerate a digital transition, all newsroom staff, the number now stable at about 250 across the three

publications, were requested to apply for their jobs—which were drastically redefined to be more like a digital newsroom. That’s down from more than 600 at the Inquirer alone less than two decades ago, but no further cutting is anticipated, and the company operates in the black.

“Gerry established that the papers should have a public mission, rather than one of profit maximization,” says Jim Friedlich, a Wall Street Journal alum who heads the Lenfest Institute. Lenfest and Friedlich see these newspapers as comparable to civic and arts organizations like museums or symphonies.

This roughly follows the model of the Poynter Institute, the nonprofit journalism school and research center that also owns the Tampa Bay Times, whose owner, Nelson Poynter, willed ownership of the paper (then the St. Petersburg Times) to the newly created institute in 1977.

Among the most hopeful of these benign billionaire sagas is that of the Minneapolis Star Tribune. The Star Tribune, once one of America’s great regional dailies, went through a fairly typical family-ownership/private-equity tailspin. The Cowles family of Iowa, publishers of The Des Moines Register, purchased the afternoon Minneapolis Daily Star in 1935 and eventually merged it into the morning Tribune in 1982. In 1998, at the peak of the newspaper boom, McClatchy bought the paper from Cowles for $1.4 billion, only to lose money and sell to a hedge fund, Avista Capital Partners, for just $530 million. But the purchase was heavily “leveraged”—financed with borrowed money—and the Star Tribune went into bankruptcy in 2009 after the financial collapse.

The paper’s debtors assumed control and created a new board of directors. Yet another private equity company, Wayzata Investment Partners, temporarily became the majority owners. The new board hired a Wall Street Journal veteran, Michael Klingensmith, as publisher. In 2014, the board was able to enlist Glen Taylor, 76, as a local “white knight” purchaser.

Taylor, whose reported net worth is about $2 billion, leads the Taylor Company, an electronics conglomerate headquartered in nearby North Mankato, with some 15,000 employees. Taylor, very much a Twin Cities booster, also owns the Timberwolves NBA basketball team.

In drastic contrast to private equity owners, according to Klingensmith, when Taylor

s a b i n a lo u i s e p i e r c e / t h e l e n f e s t i n s t i t u t e

purchased the Star Tribune he got favorable Company private in 2007 on the eve of the Graham, was married to billionaire David financing terms based on his own ample net crash, in a deal valued at $8.2 billion, mostly Rubenstein, who co-founded one of the largest worth, but did not load any of the debt onto using borrowed money. The Tribune Compa- private equity companies, the Carlyle Group. the paper. As a result, the paper’s cash flow ny, which included the Los Angeles Times and Rogoff in 2009 had bought a struggling digital can go to rebuilding the newsroom, invest- other media properties, filed for bankruptcy startup, Alaska Dispatch News, but it couldn’t ing in the digital transition, meeting pension in 2008. The company went through a succes- compete with the Daily News. When she solved fund obligations, and devising other sources of sion of owners, layoffs, name changes, and bit- that problem by purchasing the Daily News as income to replace print ad revenues that are ter newsroom conflicts. Its current publishing well, many felt that she had overpaid. The deal dwindling at the rate of about 9 percent a year. incarnation is called Tronc. Local civic-minded for the Daily News, with a paid circulation of For instance, the Star Tribune has the contract philanthropists, including Eli Broad, sought to only about 42,000, cost $34 million, far above to print USA Today in the Minnesota region. restore the Los Angeles Times to local control, the going rate for comparable media properties.

Taylor was able to purchase the paper for but were rebuffed by Tronc’s owners, who insistIn August 2017, the paper filed for banka sum reported to be around $100 million, ed that they would only sell the entire company. ruptcy. Unlike many private owners who or about four times projected annuextracted lots of money before al earnings, less than one-seventh selling off the paper, Rogoff took of the $530 million that Avista heavy losses. The new owners are paid, and one-twentieth of what Alaskans, led by the Binkley family, McClatchy had paid in 1998. In a who operate local tourism compasense, two rounds of private equity nies. The new publishers put out a owners and a bankruptcy did the brave statement, declaring, “Alaska deserves and needs a robust and dirty work of ruthlessly cutting costs, healthy paper of record as much as laying off employees, and re-negoit needs any other public utility or tiating union contracts, allowing a infrastructure, particularly in these benign local owner to acquire the uncertain times,” and projected no paper at a sustainable price. layoffs. A month later, about a third The company now turns a small of the newsroom was let go. profit, estimated in the low tens of millions, which is all that Taylor expects. He is not looking to maxiDespite the relatively benign mize returns. Taylor has given Klinexperiences of the billionaires who gensmith free rein to run the paper, own the Post, the Globe, the Star Tribune, and the variation on the consistent with a sound bottom line. Philadelphia Story: Jim Friedlich and H.F. “Gerry” Lenfest of the Lenfest Institute, a theme in Philadelphia, this is obvi“We’ve continued to invest aggres- nonprofit that supports the public mission of newspapers ously not a reliable recipe. And yet sively in print,” says Klingensmith, there is some hope that the private equity “maintaining the newsroom, and introducing In Alaska, there is a wonderfully ironic model may fall of its own weight. twist.

The longtime owners of the Fairbanks new sections. We’ve not cut back our news well.

Fortress Investment Group, which controls News-Miner were Charles and Helen SnedThat has helped us maintain readership while GateHouse, is the rare case of a private equity we increase digital income.” den, a local business and philanthropic family.

The newsroom is now back to about 250 After the death of Charles in 1989, the paper firm that is also a publicly traded company. employees, and circulation has stabilized at was eventually sold to Dean Singleton, the Fortress was the first private equity compaa respectable 288,000. The Sunday paper same private equity operator whose holdings ny to list its shares on the New York Stock has the nation’s fifth-largest circulation, at became DFM. After Helen’s death in 2012, two Exchange, beginning in 2007—on the eve of 581,000. The Star Tribune has erected a pay- charitable foundations were created—and last the financial collapse. Its media subsidiary wall—readers can get seven items a month year the Helen E. Snedden Foundation bought promptly went broke. Fortress transferred free—and now has about 50,000 paid digital back the News-Miner from Singleton, and pur- its media properties to a new subsidiary, and assumed more than a billion dollars in debt. subscribers. Best of all, Taylor has made pro- chased the Kodiac Daily Mirror to boot. vision for the paper to be left to a nonprofit In another charming wrinkle, in 2014, After emerging from a strategic bankruptcy foundation, so that the Star Tribune will stay Alice Rogoff, a would-be media mogul with in 2013 though a complex ownership web, and in local hands and not stripped of the cash flow a fondness for Alaska, purchased the state’s rebranding the company New Media/Gatelargest paper, the Anchorage Daily News, from House, the private equity managers continue that it needs, private equity–style.

Not all rescues have happy endings. Billion- McClatchy. Rogoff, who was once an assistant their acquisition binge, spending $735 million aire Sam Zell took the publicly traded Tribune to former Washington Post publisher Donald to buy up newspapers in the past four years.

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r e x f e at u r e s v i a a p i m a g e s

As a rare hybrid of private equity opera- journalists. The CWA , of course, can’t carry this into bankruptcy. Though private equity owntors controlling a publicly traded company, fight alone. Ironically, the shareholder revolt ers are hailed in some quarters as turnaround Fortress has to make financial disclosures to against Fortress/GateHouse, though stimu- artists, for the most part the model is inconsisthe Securities and Exchange Commission and lated by the Guild, now has allies among other tent with reinvesting in the long-term health the public, and shareholders get to vote on shareholders—including hedge funds and other of the enterprise. directors and bylaws. Public filings with the institutional investors—who could well chalFortress, for instance, has holdings in a vast array of sectors, ranging from railroads and lenge the entire business model of bleeding the SEC revealed, for instance, that Fortress, as managers of GateHouse, had taken out $19.4 enterprise for the narrow benefit of managers. casinos to nursing homes, fast food, mortgage companies, and media properties. The top million in management fees and “incentive compensation” in 2016, and $39.7 million in The press is not the only victim of pri- managers know little if anything about actu2015. As newspaper financial analyst Ken Doc- vate equity, one of the most predatory and ally running these businesses—their main contor observes, these payouts are not far from the poorly understood parts of contemporary cern is the balance sheet—and unlike an earlier $27 million in operating expenses that Gate- American capitalism. The idea that managers wave of conglomerates, there is no supposed House expects to extract from its “synergy.” This is about extracting wealth, pure and simple. papers during 2017. The money from Private equity exists thanks to the cuts goes straight to the private three loopholes in the law. Much of equity absentee owner and its execuNew Deal financial regulation was tives. The New York Times reported based on public disclosures, which Fortress CEO Wes Edens’s total 2016 had to be filed with the SEC. But the pay as $54.4 million, including an $11.6 million bonus. law granted a small exemption (to This public information gives the 1940 Investment Company Act) some leverage to another player, the for narrowly held investment comNewsGuild (formerly the Newspapanies, many of them built around families. As a result, private equity per Guild), the union that represents companies did not have to make the employees at 17 GateHouse propsame disclosures to the SEC as other erties. The Guild, after extensive research, concluded that the tightly mutual funds or ordinary corporaknit controlling group headed by tions. But the private investment Fortress CEO Edens was profiting at firms of that era were tiny compared with today’s. the expense of ordinary shareholdBeginning in the 1980s, muchers, and that the strategy of bleeding Gatekeeper: Wes Edens is the CEO of Fortress Investment Group, a private equity firm larger firms took advantage of this newspapers dry was unsustainable which controls GateHouse Media and extracts generous management fees from it. loophole. Private equity funds began over time. Some stock analysts who cover media properties had expressed similar can make a fortune by bleeding an enterprise doing large-scale leveraged buyouts and selling concerns. At a meeting in May 2017, sharehold- dry seems to defy gravity, but that is increas- shares to “limited partners,” but these were ers overwhelmingly rebuked management in ingly the pattern, not just in media but in other deemed not to be sales to the general public, so a resolution offered by the NewsGuild (which sectors where private equity has made major no disclosure requirements were triggered and had purchased shares), requiring an annual inroads, including retailing, fast food, airlines, private equity could continue to operate in the election of directors—the resolution carried hospitals and nursing homes, private prisons, dark. This is still the case. Private equity firms by an astonishing 83 to 17. private universities, and a great deal more. are the latest incarnation of what used to be The NewsGuild is now in collective-bargain- Today, private equity firms control some $4.3 called holding companies. New Deal regulaing talks with GateHouse management. With trillion of operating companies that employ at tion required far greater transparency of these deliberately opaque pyramid structures—but management on the defensive, the union may least 11 million workers.

The basic model is the same whatever the be able to extract raises and better working conthe private equity loophole allows today’s holdditions for employees at unionized GateHouse sector. Borrow heavily against the assets of ing companies to operate without financial dispapers who have not had raises in a decade. the operating company, extract income in the closures. Critics can get a look at the innards At the same time, the NewsGuild, part of the form of excessive dividends and management of Fortress only because its shares are publicly Communications Workers of America, has big- fees, sell off real estate and other assets, cut traded—which suggests the greater accountger fish to fry, since the entire private equity wages, pensions, and other operating costs. ability that might be possible if the disclosure model is inherently destructive to both a free And then, as an exit strategy, either find a loophole were repealed. and robust press and to decent conditions for buyer for part or all of the business, or take it The second loophole exploited by private

equity is the unlimited tax deductibility of borrowed money. That allows private equity managers to borrow massively against the companies that they buy and sell, and use some of the debt to pay themselves. This seems like a conflict of interest, but as owners, the managers are free to do whatever they like. Many critics have argued that unlimited tax deductibility for borrowed money is bad policy—it promotes over-leveraging and hidden liabilities of the sort that crashed the economy in 2008—and the abuse of debt by private equity managers is an extreme case. An aggressive SEC could crack down on these practices, especially when private equity managers prosper at the expense of their own investors or limited partners.

The third loophole is private equity’s abuse of the bankruptcy process. Bankruptcy was invented by Queen Anne’s ministers in 1706— see Kuttner’s book, Debtors’ Prison—to give failed merchants a fresh start so that they would not languish in prison indefinitely, unable to ever repay their creditors. The idea was for a magistrate to tally the debtor’s assets and debts, settle debts at so many pence on the pound, and allow the merchant to move on. Debts incurred in bad faith were expressly excluded from this process, and fraudulent debtors were to stay in prison. This was the germ of modern Chapter 11.

The current use of debt to deliberately overburden an operating business, with “prepackaged” bankruptcies as part of an exit plan, is the opposite of what bankruptcy law intended—namely forgiving merchants who got in over their heads because of miscalculations or wider economic circumstances beyond their control. Private equity manipulation of bankruptcy is nothing if not bad faith, and it should be banned and punished accordingly.

The post-Thanksgiving stories on the

coming demise of retailing, with icons like Macy’s and Sears near bankruptcy, invariably cited online shopping and the fact that many of the retail chains had taken on too much debt. But hardly any bothered to mention that it was absentee private equity owners who were responsible for the excess debt. It’s bad enough that the private equity industry is accelerating the abuse and collapse of good companies in retail, nursing homes, and air-

lines. But newspapers are in a special category.

With the exception of a tiny handful of nonprofits, newspapers are commercial enterprises—but they are not only commercial enterprises. What’s being lost in the private equity takeover of community journalism is not just local jobs and local control of an important information source, but something profoundly more important: an entire profession based on a commitment to fundamental principles of truthfulness, courage, and civic responsibility. In that sense, the gradual destruction of smaller newspapers mirrors the existential crisis faced by all of modern journalism in the era of Trump and “fake news”— yet at the same time may offer a way to counter those troubling trends at the grassroots level.

“People have lost sight of the public-trust aspect of newspapers,” says Jane Seagrave, pub-

After eight years chronicling the decline of newspapers at the Pew Journalism Project, Mark Jurkowitz left in 2014 to buy the weekly Outer Banks Sentinel in Nags Head, North Carolina. “We make money,” he reports, “but it is financially challenging. The headwinds are rough in this industry at whatever level. But weeklies can be successful. They haven’t been devastated the way major dailies have. If you’re doing your job well and you know your mission, you can make a modest success.”

“The most important thing we do is hold local government accountable,” says Cecile Wehrman, publisher of the Journal, which comes out weekly in Crosby, North Dakota.

“The Crosby city government has to be one of the most examined city governments in the entire country. I’m sure they don’t always appreciate it. If we weren’t here to report what

In isolated corners of the United States, community publishers and journalists are succeeding at keeping independent papers alive, decently staffed, even profitable. lisher of the Vineyard Gazette, an enduring Massachusetts weekly in Martha’s Vineyard.

“Small newspapers used to be family-owned by local people. That community connection equals accountability, and that does create public trust. The problem with corporate ownership is the loss of context—of deep knowledge of the community. And the loss of local jobs from the outsourcing of management, advertising, and production destroys the fabric of the community.” Ironically, the Gazette, with a full-time staff of 30, remains independent and strong because it was purchased in 2010 by billionaires Nancy and Jerome Kohlberg, longtime Vineyard residents and fans of the local paper.

Jerome is none other than one of the original architects of the leveraged buyout, Kohlberg Kravis Roberts & Co. As buyer of the Gazette, he was mercifully in philanthropist mode.

In isolated corners of the United States, community journalists are succeeding at keeping independent papers alive. An informal survey of independent weekly publishers found them reporting profit margins ranging from 2 percent to 15 percent—but all of them were profitable.

they’re doing, it would be very easy for it to degenerate into a good old boys’ club.” The people who live in Divide County sure do appreciate it, though. The Journal’s circulation is 2,500, in a county with a total population of 2,400. The paper has existed since 1902, and “it has deep roots—a very strong tradition,” says Wehrman. “Twenty-five or 30 percent of our subscribers don’t even live here anymore.

But they keep up their subscriptions to stay in touch with home.”

Her operation is “minimally” profitable, she says, but it’s “definitely sustainable. It’s done it for 115 years.” She recently had to make some cuts for the first time since she bought the paper in 2012, because the grocery stopped taking a full-page ad every week. “We’ll have to figure out how to operate a little leaner,” says Wehrman. “With my background being in journalism, the advertising is a means to an end—how to make enough money to keep doing the news. I’m not going to cut news. That would be cutting off my nose to spite my face.

This is the way I plan to spend the rest of my life. And happily so.”

Winter 2018 The American Prospect 29

The New Reformer DAs

As cities grow more progressive, a new breed of prosecutors are winning office and upending the era of lock-’em-up justice. They may hold the key to resisting Trump’s mania for mass incarceration.

By J u s t in M ille r

L

arry Krasner twists and turns the touchscreen map on the dashboard of his red Tesla, reorienting the city’s streets as he navigates through unusually heavy traffic on a rainy afternoon in Philadelphia—all the while discussing the finer points of cash bail, civil asset forfeiture, juvenile justice, and the root causes of mass incarceration.

It’s November 7, 2017—Election Day. We’re driving from the far reaches of northwest Philadelphia to his campaign headquarters in downtown Center City. The Democratic candidate for Philadelphia District Attorney had been at a luncheon at Relish, a Southern soul food restaurant that has become a go-to spot for the city’s political class on election days. Democratic leaders like Pennsylvania Governor Tom Wolf and up-and-comer candidates like Krasner gripped and grinned while the diners plowed through the fried chicken, greens, and mac and cheese.

WURD, the only black-owned and -operated talk radio station in the state, was broadcasting live from a corner of the restaurant.

“Obviously when you become the most incarcerated country in the world and you live in a city where the rate of incarceration is about four times—four times!—[more] than you’ve got in New York, only 90 miles away … when that’s where you are, then something has gone haywire,” Krasner told the hosts. “We have to go in a much more balanced and fair direction.”

Krasner was never supposed to be here.

While he may look like your typical district attorney candidate—he’s a white, 56-yearold man with silver hair, decked out in blackframed glasses with transition lenses and a

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fitted suit—he’s anything but. Krasner has zero experience as a prosecutor. Rather, he’s made a name for himself as a prominent civil rights rabble-rouser who’s defended activists from groups like Black Lives Matter, Occupy Philadelphia, and ACT UP. He has sued the police department 75 times. His candidacy for Philadelphia district attorney was “hilarious,” according to the head of the city’s powerful police union, the Fraternal Order of Police.

Krasner himself joked he was completely unelectable. And yet, Krasner soundly defeated the six other Democratic primary candidates— most of them former prosecutors—back in May. “The idea that we hit authentically what we believed—hard and unrelenting, without any kind of repentance for it—that turned the whole field to [the] left,” a campaign adviser for Krasner told me. “It’s like when you become the DJ, everybody else has gotta dance to your tune. And they were all kind of crappy dancers when it came to our tune.”

From the get-go, Krasner was the outsider, the insurgent hammering away at the city’s drivers of mass incarceration: trumped-up charges, long sentences, and a “failed culture” inside the DA’s office that places the conviction rate over the demands of justice. He opposed the death penalty, promising not to seek capital charges in any case. He called for ending cash bail for nonviolent offenders and for overhauling the police department’s asset-forfeiture program. He pledged to strengthen investigations into officer-involved shootings. And he vowed to end the war on drugs by expanding drug courts and diversion programs. Finally, he promised to radically overhaul the office’s

approach to sentence recommendations, which are a big factor in determining a judge’s ruling.

“The most important thing is we not repeat this absurd level of sentencing, which has made corrections in Pennsylvania one of the two largest expenditures in the budget and has siphoned incredible amounts of money away from education and things that actually prevent crime,” Krasner told me. His ambitious message not only solidified his support within the African American community, but also mobilized progressive millennials to engage in district attorney politics in an off-year election.

The race was only the second opening for the city’s DA office since 1989. The office has long had a reputation for being heavy-handed in its exercise of prosecutorial power. Voters elected Lynne Abraham, who served from 1991 to 2009, four times in a row. Dubbed “the Deadliest DA,” she obtained 108 death sentences in her 19 years on the job. The most recent DA, Seth Williams, became the city’s first African American chief prosecutor when he was elected in 2009, promising sweeping reforms. His tenure, though, proved a disappointment to reformers when he backtracked on promises, and when, seven years later, he received a fiveyear federal prison sentence for bribery.

Despite concerns that Krasner was too radical for even a staunchly Democratic city like Philadelphia, and the predictable backlash from leading law enforcement officials, he handily defeated his Republican opponent in November and will take office in January.

The relatively quick swing from a death penalty devotee to a crusading reformer at the helm of a major American city’s DA office is

Defense attorney Larry Krasner, who’s sued Philadelphia’s police 75 times, is now the city’s new DA.

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both a distillation of a long-brewing shift in the politics of crime—away from the standard tough-on-crime bromides and toward a smarter approach to justice—and emblematic of a new recognition from progressives that electing allies into DA offices could be one of the most effective ways to reform the system from the inside. It couldn’t come at a more urgent time, as President Donald Trump’s Attorney General Jeff Sessions seeks to double down on the lock-’em-up ethos that has long characterized American law enforcement.

District attorneys “are in many ways the most important figures in the system,” says David Alan Sklansky, a Stanford law professor who studies DAs. “They are crucial gatekeepers between the police and the courts. They get to decide who gets charged and what they get charged with. They are the ones who recommend sentencing and negotiate plea agreements. And since the vast majority of criminal convictions in this country are the result of plea agreements, they are the ones who are negotiating sentences.”

While the war on drugs, mandatory minimums, and discriminatory policing practices have all earned a great deal of scrutiny for

creating the levels of mass incarceration we see today, more and more reformers are recognizing the pernicious role that prosecutors— who have a tremendous amount of power and discretion within the system—have played.

John Pfaff, a Fordham law professor and author of the provocative book Locked In, argues that the role low-level drug charges have played in the rise in mass incarceration is overblown.

The main drivers, he contends, are the prosecutors in the country’s DA offices. By examining state court data, Pfaff finds that almost all prison population growth since 1994 derives from overzealous prosecutors, who have doubled the rate of felony charges brought against arrestees.

For decades, district attorney politics (almost all counties elect their chief prosecutors) have been relatively conservative affairs, animated by white suburban voters who want assurances of law and order—not by the people of color living in the city and on the receiving end of tough-on-crime policies. Of the more than 2,400 elected prosecutors in the United States, 95 percent are white, according to the Reflective Democracy Campaign. In 14 states, all elected prosecutors are white. Just 1 percent of prosecutors are women of color.

Once in office, the power of incumbency is particularly strong. Eighty-five percent of all district attorneys who seek re-election never even face a challenger. That fact was brought into stark relief when it was reported that longtime Manhattan District Attorney Cyrus Vance Jr. had declined to bring sexual abuse charges against the now-disgraced movie producer Harvey Weinstein for groping a model in 2015; nor did he charge President Trump’s children Donald Jr. and Ivanka for misleading potential buyers about their struggling Manhattan real-estate project. Vance reportedly took campaign contributions from defense attorneys in both cases after he dropped the charges. The news broke just weeks before the DA’s election, which New Yorkers belatedly realized was a one-sided affair. Facing only a last-minute write-in campaign, Vance won with more than 90 percent of the vote.

Krasner is not the first candidate to win on a progressive justice reform platform. 2016 was a banner year for the movement, as several reformer candidates surprisingly swept into office—from Florida, Louisiana, Mississippi, and Texas to New Mexico, Colorado, and Illinois—on promises to turn back the tide of tough-

Winter 2018 The American Prospect 31

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john r aoux / ap images

on-crime politics and shrink the carceral state. endorsing, and why they should vote for their American Civil Liberties Union a $50 million In Chicago, Kim Foxx, who grew up in the endorsees. Through 2016, the group says, it grant to launch its Smart Justice campaign, city’s infamous Cabrini-Green housing proj- conducted more than one million conversa- which includes a goal of ten victories in key ects, ousted Democratic incumbent District tions with voters—and in 2017, it replicated DA races. The California ACLU has rolled out Attorney Anita Alvarez on the heels of her that strategy in the Philadelphia DA’s race. a flashy voter education campaign called “Meet “We are trying to build a movement around Your DA,” that, with the help of the singer John bungled handling of the police killing of black teenager Laquan McDonald and a renewed this effort that is both local and national and that Legend, works to introduce Californians to focus on corruption and misconduct within attracts the right set of candidates,” says Rashad their local district attorney and educate them the Chicago Police Department.

Robinson, spokesperson for Color of Change’s about what a prosecutor does and can do.

Houston’s Harris County is known through- PAC, “and then really tapping into the intel from “We have very powerful local officials able out the state as the “execution belt” for putting the advocates in the community who live and to exercise discretion with virtually no overmore than 120 people to death since 1976, dou- work and do this engagement everyday, to help sight, accountability, or transparency,” says Ana Zamora, the criminal justice policy ble the number of any other Texas coundirector for the ACLU of Northern Cality. It was there that Kim Ogg became the fornia. “So the first step is getting voters county’s first Democratic DA in nearly 40 to pay attention.” years on a platform that pledged to create Despite California’s reputation as a a more stringent review process for levystronghold of progressive politicians, ing capital charges, decriminalize posZamora says that isn’t the case in many session of small amounts of marijuana, of the state’s 58 DA offices. “By and commence pre-trial diversion programs, large, the elected prosecutors in Caliand overhaul the cash bail system. Two fornia have taken a more conservative, hundred miles south, Mark Gonzalez, tough-on-crime view of the criminal a defense attorney with the words “Not justice system,” Zamora says. “They’ve Guilty” tattooed across his chest, won the fought against progressive reforms and DA race in Nueces County, home to Corfor regressive measures.” pus Christi. His office no longer pursues In partnership with the Fair Punishmisdemeanor marijuana charges and is ment Project, the state ACLU zeroed in emphasizing pretrial diversion.

“We seemed to be in a spiral of everon nine California district attorneys increasing harshness, which was dispirwho are particularly out of step with iting to observe,” says Sklansky. But more Aramis Ayala, who unseated the incumbent state’s attorney in Orlando, Florida their electorates on criminal justice reform. They released a report that recently, “There have been a lot of signs that compared how counties voted on a handful us get a sense of who’s for real and who’s not.” the politics of criminal justice are changing, that of recent reform ballot measures with their The financial force behind this progressive there’s this greater opening for people to suggest DA’s positions on those particular issues—be surge in district attorney elections is, not surthat ‘more’ and ‘harsher’ is not always better.” prisingly, George Soros, who has committed it reforming the three-strike sentencing laws, increasing access to parole and the juvenile Seeing promise and opportunity for trans- a tidy sum of money to electing progressive forming prosecutorial practices across the reformers and diversifying the ranks of Ameri- justice system, or legalizing marijuana. Some nation, criminal justice reform advocates are can prosecutors. In 2016, Soros spent more of the out-of-sync district attorneys (at least on thinking about how to both scale up campaigns than $11 million on 12 candidates through some of the reforms) are in major counties— heading into 2018 and ensure that recently various super PACs; ten of them won. He spent including Los Angeles, San Diego, Alameda elected reformers are being held accountable. $1.4 million in support of Ayala, who ran suc- (Oakland), Sacramento, and Orange.

While the ACLU doesn’t recruit or endorse Color of Change’s political action commit- cessfully against the incumbent state’s attortee dived head first into a handful of district ney for the district covering metro Orlando. He candidates, Zamora says the group has been attorney races in 2016, backing candidates like also set up PACs in the Harris County election reaching out to the legal community in CaliAramis Ayala and Andrew Warren for state’s and for Foxx in Chicago. In 2015, he pumped fornia, trying to convince reform-minded proattorney positions in Florida, as well as Ogg more than $900,000 into a rather obscure gressives to consider running for prosecutor in Harris County and Foxx in Chicago. The DA’s race in Caddo Parish, Louisiana, help- positions. Zamora predicts there will be a host PAC also mobilized its members to engage in ing elect challenger James Stewart. He also of new candidates running reform campaigns “textathons” with registered black voters in spent nearly $1.5 million on Krasner’s candi- against incumbents all over the state. Geneviéve targeted areas, educating them about what dacy in Philadelphia’s Democratic primary. Jones-Wright, a deputy public defender in San Soros’s Open Society Foundations gave the Diego County, has already launched a campaign the district attorney does, who the group was

challenging the Republican district attorney.

“For far too long, we San Diegans have been at the whim of prosecutors who care more about headlines and political points than seeking justice—this ends now, San Diego,” Jones-Wright declared when she launched her campaign.

Getting reformers elected to DA offices is a big step—but it’s just the first. They then have to work to change the entire culture of the office. A typical big-county office consists of hundreds of line prosecutors charged with carrying out individual cases. Office cultures can be more conservative and change-averse than a progressive district attorney might wish.

“Many of the problems that afflict prosecutors’ offices around the country have to do with the workplace culture inside these offices, which very often prizes conviction and obtaining a long sentence more than making sure that justice is done,” says Sklansky. “That’s what gets valued, that’s what gets rewarded, and that’s what gets celebrated.”

Sometimes the only way to ensure reform can take root is to clean house. Just over a month after her election, for instance, Harris County’s Ogg fired 37 prosecutors and filled out her ranks with a slew of defense lawyers.

With the rhetoric of criminal justice reform now proving to be an increasingly effective political message, reformers are also wary of faux-progressive politicians who might coopt the movement’s rhetoric. “‘I’m a criminal justice reformer’ are now some of the cheapest words in the English language,” says Rob Smith, executive director of the Fair Punishment Project. He points to former DAs like Anita Alvarez in Chicago, Seth Williams in Philadelphia, and Tim McGinty in Cleveland, who all claimed the mantle of reform during elections only to revert to protecting police malpractice once in office.

It’s become increasingly common for district attorneys to use books like The New Jim Crow, which details the rise of mass incarceration via the war on drugs, as props to prove their progressive bona fides. Hillar Moore III, the district attorney for East Baton Rouge Parish in Louisiana, was the subject of a glowing newspaper profile in 2013 in which he boasted about the piles of books and scholarly articles he’d read on criminal justice reform ideas. He has sat on panels about reform held by progres-

sive organizations, and was even invited to the Obama White House to discuss innovations in prosecution. Meanwhile, Smith points out, Moore has prosecuted juveniles, supported the death penalty, and lobbied against state reforms. In 2015, Moore pitched the idea to open “misdemeanor jails” for as many as 100,000 people with unpaid misdemeanor warrants as a way to encourage them to show up for their court dates. Baton Rouge leaders quickly batted down the idea.

“You need people who not only know what to say on campaign trail, have a clear policy vision and the stomach and skill set to be able to implement that vision,” Smith says. They must be able “to withstand any retrograde naysayers within their office or other positions in local government,” he continues. “It’s one thing to do that on campaign trail, and a whole other thing to implement that in an office.”

Miriam Krinsky is trying to help bridge that

wave of justice-system thinking, and we know that so much in criminal justice happens at a local level,” says Krinsky. “This new group [of prosecutors] is still a drop in the bucket. But if we can amplify them, enable them to succeed, and encourage the next generations of leaders who are like-minded, then the impact is going to be that much greater [and may help] bring in the next wave and the wave after that.”

In 2018, there will be more than 1,000 elections for local district attorneys—and there will be an unprecedented amount of resources and energy directed at putting more progressives into those offices. At a recent Democracy Alliance retreat that brought together some of the biggest liberal donors with various progressive organizations, one panel event was titled “Prosecutor Races—Winning Big in 2018?” and promised to highlight “more than 30 hot races, many overlaying other key 2018 battlegrounds.”

Becky Bond, a senior adviser to Bernie Sand-

There will be more than 1,000 elections for district attorney in 2018, and an unprecedented commitment of resources to electing progressive prosecutors. gap between rhetoric and the more complicated realities a district attorney faces. She’s launched Fair and Just Prosecution, a network of more than 15 DAs around the country who “share the view that we need a justice system based on smart approaches, equity, and compassion,” she tells me. “For too long, our justice system has tried to criminalize things that are better dealt with outside the criminal justice system—poverty, mental illness, addiction.”

The network emerged about a year ago from a smaller project focused on assisting Chicago’s Kim Foxx, and is meant to connect newly elected district attorneys with more experienced DAs who can help them navigate common challenges. FJP has brought a group of DAs to Seattle to see how that city’s Law Enforcement Assisted Diversion (LEAD) programs are helping to keep vulnerable people out of the system, and to Philadelphia to talk with exonerees, emphasizing the importance of having strong conviction integrity review practices.

“This has been the beginning of the new

ers’s presidential campaign, has also started a group called the Real Justice PAC, which aims to bring the strategies of Sanders’s campaign— small donor fundraising, digital media, and aggressive field organizing—to county prosecutor races. Krasner’s campaign was a successful test case for Bond.

Rashad Robinson says the Color of Change PAC is already gearing up for 2018, looking at upwards of 20 different DA elections, particularly in big counties where the black vote could be particularly consequential. Among its prospective targets are Dallas, Las Vegas, and Alameda County.

“Because so few DAs have had to run in competitive races, these elections are winnable and provide a real pathway for progressives to be able not just to have a rhetorical conversation in the era of Trump, but to actually point to ways in which they’re making people’s lives better,” Robinson says. “But this work takes money as well. It’s not going to happen out of thin air. It requires resources.”

Winter 2018 The American Prospect 33

The Two Sides of Immigration Policy We need to legalize the undocumented already here, but open borders will mean lower wages for American workers.

By J o hn B. J u dis

D

uring his campaign, Donald Trump used the issue of illegal immigration as a nativist dog whistle.

According to Trump, Mexico was sending criminals over the border.

He called for deporting the 12 million undocumented immigrants in the United States.

Trump’s strident appeals definitely contributed to his success in the Republican primaries, and probably were of net benefit to him in the general election, especially in swing states like Pennsylvania, Ohio, and Iowa.

After the election, Trump accused undocumented immigrants of surreptitiously voting for Hillary Clinton in the general election.

He and his attorney general have stepped up deportations, even for traffic offenses. And he has refused to extend the Obama administration’s Deferred Action for Childhood Arrivals (DACA) program, which allows the children of undocumented immigrants, who came to the United States through no choice of their own, to avoid deportation. After agreeing to work with Democratic congressional leaders on a bill extending DACA , he reneged by attaching conditions, including funding for a border wall, that he knew Democrats would reject.

In fact, Trump has not come close to deporting the 12 million. According to reports last September, he has deported fewer undocumented immigrants than the Obama administration did in a comparable period. But his rhetoric, and his rejection of DACA , have sown fear among immigrants. A friend reports that in parts of Texas, where there is little public transportation, undocumented immigrants who cannot obtain driver’s licenses are trapped in their homes, fear-

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ful that if they are apprehended while driving, they will be deported. Trump’s policies are cruel and inhumane; and they help reinforce the existence of a fearful, docile underclass that can be exploited by political demagogues and avaricious business managers and owners.

Democrats and liberals have rightly rejected Trump’s words and deeds. And they have reasserted the need to find an eventual path to citizenship for the 12 million. But in responding to Trump’s xenophobia, many have gone to the opposite extreme and denied, in effect, that a problem really exists. They have consistently downplayed or denied that there is any urgent need to stanch the flow of unauthorized immigration. The party’s 2016 platform plank on immigration gave short shrift to the problem of illegal immigration, merely calling for law enforcement that is “humane and consistent with our values.”

They have also denied that the massive inf lux of unskilled labor over the last five decades has held down wages, increased social costs, or undermined unionization in some sectors, including construction, agriculture, and meatpacking. A major Democratic think tank, the Center for American Progress, put out a position paper asserting that “immigrants complement native-born workers and increase the standard of living for all Americans” (my italics). Democrats and liberals have joined business conservatives in insisting that unskilled immigrants are simply taking jobs that American-­born workers won’t take, ignoring, for instance, the displacement of African Americans in the hotel industry.

The Democrats’ penchant to reject with-

out consideration any stance associated with Trump—even if it merits discussion—is borne out by their reaction to the immigration reform proposal (the Reforming American Immigration for Strong Employment, or RAISE , Act) put forward by Republican Senators Tom Cotton and David Perdue. Cotton and Perdue had originally introduced their plan in February to little fanfare, but in August Trump endorsed the plan, making it his own.

To anyone familiar with the history of immigration debate, Cotton and Perdue’s proposals strikingly resembled those put forward in 1997 by the U.S. Commission on Immigration Reform, chaired by former Democratic Representative Barbara Jordan, a leading liberal of her day. In line with Jordan’s recommendations, Cotton and Perdue propose giving priority to skilled immigrants, narrowing the criteria for family reunification, and reducing the annual number of immigrants.

At the time, Bill Clinton reacted favorably to the Jordan Commission’s recommendations, but when Cotton and Perdue made similar recommendations, and when Trump endorsed them, the two leading Democratic senators rejected them out of hand. Illinois’s Dick Durbin, the Democratic whip, accused the plan of “gutting legal immigration” and of being “nothing more than a partisan ploy appealing to the racist and xenophobic instincts Trump encouraged during [the] campaign.” Minority Leader Chuck Schumer dismissed it as a “nonstarter.” That reflects, of course, the even more polarized politics of the Trump era, but also the Democrats’ out-of-hand dismissal of proposals that once seemed sensible.

In August, Trump announced his support for the RAISE Act, a proposal from Senators Tom Cotton and David Perdue that bore a striking resemblance to immigration policy recommendations put forward by Democrats in 1997.

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Democrats believe, of course, that in downplaying illegal immigration and insisting that immigration benefits everyone, they are standing up for their own constituents. They think that working-class Americans who backed Trump on this issue failed to understand their own interests. But Democrats are wrong in this case. While many American businesses and the well-to-do have clearly benefited from the massive influx of unskilled immigrants, many middle- and working-class Americans, including such key Democratic constituents as African Americans, have not.

America’s current immigration policy dates from 1965, when Congress passed a bill eliminating the quotas on national origin that had been adopted in 1924 to limit immigration from eastern and southern Europe. The 1965 act was adopted on civil rights and humanitarian grounds. It was not expected to increase immigration dramatically. Lyndon Johnson’s Attorney General Nicholas Katzenbach told a Senate hearing: “This bill is not designed to increase or accelerate the numbers of newcomers permitted to come to America. Indeed, this measure provides for an increase of only a small fraction in permissible immigration.”

But the bill created a large and growing increase, particularly from Latin America, because of a provision that allowed for fam-

ily reunification. In 1990, Congress passed another bill—this time enthusiastically backed by business—that increased still further the total quotas on immigrants. The immigrant population exploded. In 1970, the foreign-born accounted for 4.72 percent of the U.S. population; by 2014, it was 13.3 percent.

During the same period, illegal immigration across the border also grew, the result in part of the repeal in 1964 of the bracero guest-worker program, but also of a huge increase in Latin American population that was not matched by growing prosperity. (NAFTA played a role by decimating small-scale agriculture in Mexico.) There are now an estimated 11.5 million undocumented immigrants in the United States, although some labor economists would put the number higher.

In 1986, Congress and the Reagan administration tried to stem illegal immigration by making it illegal for employers to knowingly hire workers without citizenship papers, but employers did not have to check whether the papers were authentic. Attempts to create a more rigorous computerized system of checking have been resisted by business lobbies.

Employer fines were few in the Clinton years— 417 in 1999—but virtually ceased under George W. Bush, who levied three fines in 2004. That has put the emphasis on border control, even though half or less of undocumented immi-

grants actually come across the border. Most just overstay tourist or other visas.

About one-third to one-half of the immigrants coming legally into the United States are unskilled or lower-skilled. According to a Brookings Institution study, almost one in three don’t even have a high school diploma.

About half lack proficiency in the English language. Those percentages are considerably higher among undocumented immigrants.

About 70 percent lack proficiency in English.

As a result, the greatest percentages of immigrants find unskilled work in agriculture, construction, health care (as aides), maids and housekeeping, and food service.

Many of the studies of the effects of immigration are financed by business groups and lobbying organizations that have a stake in the outcome. I put them in the same category as the “studies” of business-financed think tanks that predicted that NAFTA and China’s entry into the World Trade Organization would reduce the American trade deficit.

But there are a number of studies that show that while immigration has resulted in a rise in overall wealth, it has been a significant, though not the only, factor in the decline of wages among the low-skilled workers who had to compete with the influx of new immigrants.

In 1997, the same year the Jordan Commission issued its findings, the National Academy of Sciences published a report on immigration.

While lauding the overall effects of immigration, the report acknowledged that “almost one-half of the decline in real wages for native-born high school dropouts from 1980 to 1994 could be attributed to the adverse impact of unskilled foreign workers.” Last year, the National Academy of Sciences published a new extensive study of immigration. It found again that “to the extent that negative wage effects are found, prior immigrants—who are often the closest substitutes for new immigrants—are most likely to experience them, followed by native-born high school dropouts, who share job qualifications similar to the large share of low-skilled workers among immigrants to the United States.”

These findings would accord with the simple law of supply and demand. A rapid increase in supply either holds down increases in wages or results in reduced wages. Harvard economist George Borjas, who participated in the NAS

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At an International Workers Day rally in May, New York Mayor Bill de Blasio affirms his support for immigrant communities—­ a Democratic tradition dating back at least to the origins of Tammany Hall.

A good example is the transformation of the meatpacking industry. In 2001, The New York Times described what had happened to the industry over the preceding 20 years: Until 15 or 20 years ago, meatpacking plants in the United States were staffed by highly paid, unionized employees who earned about $18 an hour, adjusted for inflation. Today, the processing and packing plants are largely staffed by low-paid non-union workers from places like Mexico and Guatemala. Many of them start at $6 an hour.

This didn’t happen because the people who worked in meatpacking plants decided they wanted to become computer programmers.

The companies brought in immigrants, including undocumented immigrants, to undermine the unions and depress wages. Something similar has happened in construction and low-skilled services, where documented and undocumented immigrants were brought in to undermine unionization. Some unions, such as the Service Employees International Union (SEIU) and UNITE HERE , have succeeded in organizing immigrants in hotels, restaurants, and janitorial services, but they are basically fighting an uphill battle.

The labor movement lobbied for the restric-

tions on immigration that Congress adopted in 1921 and 1924. The leaders of organized labor believed at the time that the huge inflow of immigrants was making it impossible to organize workers to better their conditions. During the prior decades, employers had used immigrants as strike-breakers. The legislation itself was tainted with nativism and anti-Semitism and contributed to the tragic denial of asylum in the 1930s to Jews fleeing Central Europe, but the restrictions imposed on the numbers of low-skilled immigrants were a factor in union successes from the 1930s through the 1960s and in wage increases during that period.

The temporary cessation of mass immigration also, as Borjas argues in his new book We Wanted Workers, facilitated the assimilation of the millions of immigrants who had entered the United States before 1920. They were able to work their way up through the new industrial economy that employed them and that, thanks to the growth of unionism, paid middle-class wages in the decades following World War II. But many of the low-skilled and unskilled immigrants who have come into the United States since 1965 and are employed in the lower rungs of a service economy may not find it as easy to attain middle-class incomes and living standards.

Well through the 1990s, Democrats and the labor movement worried that this massive

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study, estimates that within a particular skill group, a 10 percent increase in supply results in at least a 3 percent reduction in wages.

As the NAS study notes, the two groups in the labor force most immediately affected are prior immigrants and high school dropouts. Many of the first-generation immigrants are Hispanic, and many of the high school dropouts, or those with only a high school degree, are African American. And there are studies showing that workers from these two groups have been hit hard by competition from immigrants.

In a 2014 survey, sociologist Stephen Steinberg concluded that legal and illegal immigration had damaged opportunities for African Americans “in construction, light manufacturing, building maintenance, the hotel and leisure industry, the health care industry, and even public-sector jobs where one-third of blacks are employed.”

In 2010, the U.S. Civil Rights Commission issued a report on “The Impact of Illegal Immigration on the Wages and Employment Opportunities of Black Workers.” It concluded that “illegal immigration to the United States in recent decades has tended to depress both wages and employment rates for low-skilled American citizens, a disproportionate number of whom are black men.” As Steinberg notes, one of the great ironies of our recent history is that immigration policy, which was partly inspired by the civil rights movement, has probably had a negative effect on African Americans at a time when African Americans might have been able to take advantage of the passage of civil rights acts outlawing employment discrimination.

Some pundits and political scientists insist that unskilled immigrants don’t take jobs from native-born Americans. On building crews, for instance, immigrants and non-immigrants work side by side; most construction laborers are native-born. In other sectors, however, as businesses use legal and illegal immigrant labor to drive out unions and drive down wages and working conditions, native-born workers do begin to shun certain jobs. They become too “dirty” for Americans to take, and are then cited by business lobbies as grounds for increasing the number of unskilled immigrants—including so-called guest and temporary workers.

immigration was undermining unionization and holding down wages. That was reflected in the findings of the Jordan Commission in 1997 and in union support for the enforcement of the law prohibiting employers from hiring undocumented immigrants. But that understanding has disappeared. In the face of the government’s failure to stem illegal immigration, unions had no choice but to attempt to organize immigrants and push for a path to citizenship for them. But for Democrats, uncritical backing for immigration was also the result of a political calculation that may turn out to be wrong.

be a factor in immigration decisions. In other words, Hispanic voters were favorably inclined toward a proposal that aimed to change the priorities in our immigration policy.

Hispanic preferences were roughly the same as those of all registered voters. One of the few groups in the poll that was evenly divided on whether there are too many or just the right number of low-skilled immigrants were people who make more than $100,000. A plurality of the other income groups thought there are too many low-skilled immigrants coming into the country. In sum, the Democratic stance on these issues is not only unpopular with most voters, but with many Hispanics as well.

Many Democratic leaders assume that

in opposing measures to stem illegal immigration or to change the priorities of our current law, they are winning the support of Hispanic voters. And there is, or has been, some truth in that. When Republicans have accompanied arguments against illegal immigration with naked xenophobic appeals, as California Republicans did in promoting Proposition 187 in 1994, they have alienated Hispanic voters.

That dynamic is still with us. In a current Gallup poll, 78 percent of Hispanics oppose or strongly oppose Trump’s plan to deport all illegal immigrants—compared with 62 percent of non-Hispanic whites.

But at the same time, pluralities or majorities of Hispanics are leery of illegal immigration, and want it restricted. They look with disfavor on the massive immigration of unskilled workers. In a 2013 Gallup poll, 74 percent of Hispanics favor and only 24 percent oppose “tightening security at U.S. borders,” and 65 percent favor and only 34 percent oppose “requiring business owners to check the immigration status of workers they hire.”

Politico/Morning Consult ran an extensive poll last August to gauge the public’s reaction to the Cotton-Perdue bill. The poll found significant support among Hispanics for some of its provisions. For instance, 42 percent of Hispanics thought the United States allowed too many “low-skilled workers” to immigrate, and only 21 percent thought the number was “about right.” Hispanics thought job skills should be a higher priority than family reunification by 49 percent to 33 percent, and by 50 percent to 37 percent thought that English proficiency should

In polling, Hispanics have preferred an immigration policy that favors skilled workers and English speakers. They are leery of illegal immigration, and want it restricted.

Except as a response to Trump’s xenophobia, the Democrats’ response makes no political sense, and is not benefiting their own workingclass constituents.

There is one more political dimension to the argument about immigration that is voiced by leading Democrats and Republicans. It is that continuing large-scale immigration of unskilled workers will help the Democrats politically and hurt the Republicans. That calculation lies at the bottom of Democratic hopes and Republican fears of immigration. It encourages Democrats to ignore the downside of mass and illegal immigration and Republicans to seek to cut immigration and to do whatever they can do to discourage immigrants already here from voting.

The parties’ complementary calculations may prove correct. Democrats, after all, have historically been the party of immigrants. But I’d contend that on several counts, it could

prove short-sighted. If one assumes that Hispanics will, like previous immigration groups, eventually move up the economic ladders and assimilate—becoming “white” in the perverse language of American racial categorization—then Hispanics may not prove to be a dependable Democratic constituency. Outside California, there are indications that may be the case. Republican candidates for governor in Texas and the Senate in North Carolina have almost broken even among Hispanic voters.

And Trump, perhaps because he appeared to promise jobs, actually did better with Hispanic voters than 2012 candidate Mitt Romney.

Secondly, the continual surge of low-skilled immigrants into the United States will contribute to an impoverished underclass that holds down wages and creates welfare costs for small towns and states. The existence of that underclass has helped fuel bitter culturaleconomic conflicts that have riven America over the last 30 years. It undercuts any promise of an American social democracy or extension of New Deal liberalism, which must be based on a common sense of community. It is already threatening the social solidarity that sustained European social democracy. So in the long run, even if some Democrats benefit at the ballot box, an uncritical stance toward immigration is bad news for the country.

What, then, can the Democratic Party do?

On the one hand, it is reasonable to push for a path to citizenship, and especially to prevent the cruel deportation of immigrants who were brought here illegally as children and often literally have no home country to return to.

It’s also important to defend the labor rights of all residents of the United States, even those without papers, and to resist wholesale raids.

But Democrats make both a policy mistake and a political one when they become cheerleaders for illegal immigration and for expanded immigration in general, while denying the plain fact that in many cases immigrants do indeed lower the wages of local workers. Building a wall is bad policy, but so is ignoring the plain realities.

John B. Judis is the author of The Populist Explosion: How the Great Recession Transformed American and European Politics, and is currently working on a book about nationalism.

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A FABULOUS Clinton’s 1990s and the Origins of Our Times

By Nels o n L ic h te n s te in

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Failur

H

illary Clinton’s loss of the industrial Midwest to Donald Trump sealed her fate on Election Day 2016. This defeat, both narrow and catastrophic, had many architects, but one of the most consequential occupied the White House nearly 25 years before, when her husband faced an America whose stagnant economy, rampant deindustrialization, and giant trade deficit cried out for structural reforms to decisively break with Reaganstyle laissez-faire and renew the allegiance of hard-pressed voters with the party of Roosevelt, Truman, and Johnson. But this was precisely what Bill Clinton failed to do.

Many recall the 1990s as a moment of economic triumph with increasingly low unemployment, 4 percent annual economic growth, a booming stock market, even a balanced federal budget by the end of the millennium.

Economists Alan Blinder and Janet Yellen called those years the “Fabulous Decade” in 2001, while a 2015 opinion piece in The New York Times bore the title “The Best Decade Ever? The 1990s, Obviously.” Although the Republicans had seized control of Congress in 1994, it is worth remembering that Ronald Reagan’s vice president, George H.W. Bush, took only 37 percent of the vote in 1992 while that stalwart Republican, Robert Dole, won just 40 percent in 1996. Politics were clearly in flux. The Clintons therefore had the historical moment to recast not just trade, investment, and health-care policies, but the regulations, norms, and expectations that would govern a post–Cold War version of U.S. capitalism.

Their failure to take advantage of these fortuitous circumstances doomed any effort to build a more equitable economy or a political order powerful enough to sustain a dominant liberalism, a failure Donald Trump would one day seize. As he told an audience at a steel mill in Monesson, Pennsylvania, on June 28, 2016: “Globalization has made the financial elite who donate to politicians

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But a revival and modernization of New Deal– style liberalism was stillborn at the dawn of the Clinton era. Just as Republican Dwight Eisenhower legitimized the New Deal by accepting many of its accomplishments, Bill Clinton ratified much neoliberal policy long before Newt Gingrich led the GOP to victory in the 1994 congressional rout or Clinton sought to triangulate with his opponents in 1995 and after.

Key economic advisers put in place during the transition, notably Robert Rubin, Larry Summers, Lloyd Bentsen, Leon Panetta, and Alice Rivlin, advanced a far more orthodox set of economic priorities than those on Clinton’s “industrial policy” left. They would soon dominate. Despite his own initial opposition, President-elect Clinton was persuaded to give up a major economic stimulus package, including targeted investments, in exchange for the low interest rates his advisers thought the bond market would sustain if only the deficit were tamed by a combination of constrained social spending and higher taxes.

It was a tradition of Democratic presidents to appoint Wall Street–friendly Treasury secretaries, to reassure the financial markets. But under Roosevelt, Truman, and Johnson, these appointees lacked the power (or in the case of FDR’s Treasury secretary, Henry Morgenthau,

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Although conventional historical and journalistic thinking places Ronald Reagan at the center of the conservative turn in American trade and fiscal policy, we know that ratification of such a policy turn takes place only when the ostensibly hostile opposition party accommodates and then advances this transformation. And that is what the administration of Bill Clinton did—normalize key aspects of the Reagan economic worldview. As Clinton famously put it in his 1996 State of the Union address, “The era of big government is over.”

That declaration came after the Democratic rout in the 1994 congressional elections, but much of that policy shift toward the right came earlier, even before the GOP achieved legislative veto power.

This Clinton capitulation was not inevitable.

The campaign’s manifesto, “Putting People First,” had been largely based on recent work

by Robert Reich, Ira Magaziner, and other “Friends of Bill” who tilted left. Many of Clinton’s advisers admired the economic statecraft

The Clintonites Confront the Bond Market—and Retreat

the desire) to undercut the rest of the progressive program. Rubin, unlike the others, had begun his career in Democratic politics as a donor and fundraiser.

Clinton came face to face with the ideological power surrounding deficit reduction at a January 7, 1993, meeting at the governor’s mansion in Little Rock. There, Rubin, just selected to head Clinton’s National Economic Council (NEC), and Panetta, the new chief of the Office of Management and Budget, put forward the case for deficit reduction, sidelining proposals for the large, innovative stimulus that Clinton had advocated during the campaign. The deficit the Bush administration bequeathed to Clinton was roughly 40 percent higher than the estimate just a couple of months before. More important, stubbornly high long-term interest rates had convinced Wall Streeters, including Rubin, that a huge reservoir of investment money lay frozen and untapped. Interest rates on long-term bonds were now at above 7 percent. Lower interest rates would arguably free up investment and spending far beyond Robert Reich’s proposed $50 billion stimulus program.

But cutting the budget meant eliminating much of the social investment raison d’être promised during the campaign. Clinton campaign strategists like James Carville, Paul Begala, Stan Greenberg, and Mandy Grunwald, as well as Hillary Clinton and Ira Magaziner, were incredulous. There were no guarantees that shelving campaign promises would generate a positive response from the bond market, even if Federal Reserve Chair Alan Greenspan delivered easier monetary policy in exchange for deficit reduction. An appalled Clinton, confronted with reality according to Rubin, told his economic team, “You mean to tell me that the success of the program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?” Carville would later remark that were he to be born again, he wanted to be reincarnated as the most powerful thing in the world, the bond market.

But it was Clinton himself who had appointed deficit hawks like Rubin and Bentsen, the new secretary of the Treasury, who in turn chose the orthodox Summers as a top assistant, later to succeed Bentsen as secretary. Not everyone in the Clinton White House accepted this logic.

3 8 –3 9 :

Bill Clinton and His Moment

practiced in Germany, Scandinavia, northern Italy, Japan, and the East Asian “Tigers.” For example, economist Laura D’Andrea Tyson had studied Yugoslav economic planning at MIT and had just published Who’s Bashing Whom?

Trade Conflict in High-Technology Industries, a book that argued for a tough trade policy if the United States were to prevent Japanese evisceration of those industries where the U.S. had been an innovative pioneer but lagged in low-cost manufacturing technique.

All of Clinton’s advisers agreed with James Carville’s campaign catchphrase, “It’s the economy, stupid.” Henceforth, the government would offer a forceful set of interventions both to boost aggregate demand, as in traditional Keynesianism, and also use structural policies to increase the productivity of capital and labor, protect core industry sectors, and enhance the equality of American life. Or so it seemed.

pa g e s

very wealthy. But it has left millions of our workers with nothing but poverty and heartache. America became the world’s dominant economy by becoming the world’s dominant producer … creating the biggest middle class the world has ever known. But then America changed its policy. … We allowed foreign countries to subsidize their goods, devalue their currencies, violate their agreements, and cheat in every way imaginable.”

Trump’s rhetoric can never be taken at face value, but during the 2016 campaign he had an uncanny ability to capture the angst and id of those citizens and workers, many once solid Democratic partisans, now victimized and marginalized by the seemingly uncontrollable financial and economic transformations of the last few decades. With some justification, he called the Clinton era’s North American Free Trade Agreement the “worst trade deal” in history, and has opposed China’s entrance into the World Trade Organization. Indeed, Trump was the first actual presidential candidate of one of the two major parties—Ross Perot ran on a third-party ticket—to assert that trade policy was both cause and symbol of blue-collar malaise.

m a r c y n i g h s wa n d e r / a p i m a g e s

Writing to Rubin and Clinton in early February, both Council of Economic Advisers Chair Laura Tyson and council member Alan Blinder argued that “deficit reduction at the expense of public investment is self-defeating.” Blinder and Tyson wanted a gradual, multi-year program to lower the deficit, combined with “a shift in government spending toward public investment programs.” Importantly, Tyson and Blinder argued that “any plan to bring down the deficit by large amounts—and hold it there—in the late 1990s and into the next century will require changes in our health care system.” Magaziner hoped that spending caps on health care and the introduction of a system of managed competition would indeed have a long-range impact on federal spending, possibly by 1996, mooting the need for other spending cuts.

But the Clinton left was outgunned. Rivlin at the Office of Management and Budget, as well as Bentsen and Roger Altman at Treasury, worried that an insufficiently tough deficit reduction plan would send the wrong political and fiscal signal to Wall Street. The OMB argued that “a more vigorous deficit reduction plan” than the one put forward by the CEA “is necessary” because of its belief “that the Fed and the bond markets will respond very favorably if we are aggressive enough in our deficit reduction plan.”

All this was a sophisticated wager that relied heavily on the mentality of a few thousand traders in New York, Tokyo, Frankfurt, and London. To this, Joseph Stiglitz, a member of the Clinton CEA , retorted in his 2003 memoir of the 1990s: “I have become convinced that the confidence argument is the last refuge of those who cannot find better arguments.” Financial markets, of course, are often mistaken, as the collapse of 2000 would prove. But at the very dawn of his administration, Clinton opted to trust markets more than activist government.

This course would set the tone for later decisions defining Clinton as a neoliberal rather than the heir to FDR and LBJ. Whatever their source, low interest rates by themselves could not actually encourage or direct investment in the most productive fashion. From the late 1990s onward, a failure to find profitable and productive investment opportunities has distorted the political economy. The trillion-dollar rise of corporate stock repurchases, along with the offshore stash of

Going Right And Left: President Clinton with Treasury Secretary Lloyd Bentsen and Labor Secretary Robert Reich

an equally large amount of corporate profits, constitutes an admission that productive domestic investment opportunities are simply not present or pressing in a deregulated, freetrade environment.

In their absence, capital flowed either offshore or toward a variety of speculative bubbles, encouraged by the repeal of the Glass-Steagall Act in 1999 and the financialization of an increasingly large share of the economy. And indeed, much of the boom of the late 1990s turned out to be a bubble. Hence the dot-com bust of 2001, the housing bubble of the first decade of the 21st century, and the subsequent financial collapse and Great Recession of 2008 to 2009. A tripling of the stock market since that collapse suggests that such speculation has not been eliminated. But the real cost—economic and political—of such an investment deficit has not been found on Wall Street, but rather throughout the nation, and not just in the old Rust Belt, but in municipal governance, higher education, health provision, and infrastructure.

Trade Policy and Politics

Trade policy constitutes a version of industrial policy. The North American Free Trade Agreement had far less to do with trade than with

investment policy, ensuring that in Mexico, U.S. companies and banks could repatriate profits, extend U.S. patent and copyright protections, and once and for all end any Mexican government temptation to expropriate their property.

Initially, Clinton had tried to straddle the fence on a trade pact viewed skeptically by organized labor and most congressional Democrats. NAFTA had been negotiated during the Bush administration but required a legislative vote to go into effect. The Clinton campaign endorsed NAFTA in October 1992 but sought to make it palatable by including labor and environmental protections. These proved exceedingly weak, which turned the AFL-CIO and much of the Democratic Party base against the agreement. Aside from any long-term employment consequences—the “giant sucking sound” made famous by Ross Perot—Clinton made a disastrous political miscalculation when his administration chose to undermine labor-liberal unity and scramble the partisan landscape by pushing NAFTA through Congress with more Republican votes than Democratic.

This was the kind of mistake Reagan had never made. Although free trade was official Reagan ideology, his administration actually

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Liberal Democratic Party (i.e., conservative) rule there. It failed. But Mexico was another story.

Unlike Japan, which was then the second-largest industrial economy in the world, Mexico’s GDP was but 4 percent that of the United States. The U.S. had more of a free hand there, and ratification of the trade pact late in 1993 generated a template for U.S. approaches to globalization and the incorporation of many developing nations in that new order.

The Democrats were profoundly divided about NA F TA . Many in the administration, even liberals like Reich, thought globalization inevitable and that the best defense of American living standards would come through domestic investment in a high-skilled workforce, a hyper-productive set of industries, and the social The Great Piñata: Clinton promotes NAFTA, to the chagrin of most Democrats. and supportive physical infrastructure. Reich believed labor-inten- ed States,” asked the widely quoted indussive textile and apparel manufacturing would trial relations expert Harley Shaiken in 1993, inevitably leave the United States. In their “when a high-skill, low-wage strategy is availplace would arise high-productivity, high- able in Mexico?” wage manufacturing and service industries, House Majority Leader Richard Gephardt because “the fundamental fault line running shared that outlook. He came out of a still through today’s workforce is based on educa- industrial, still highly unionized St. Louis, and tion and skills.” The problem with this per- Gephardt harbored presidential ambitions— spective was that while productivity, as well one reason why in the last years of the George as education, was indeed low throughout most H.W. Bush administration, he reluctantly of Mexican—and Asian—manufacturing, key and cautiously backed “fast track” authority, export-oriented firms in the developing world hoping that a new, more liberal administrahad demonstrated the capacity to produce tion might include labor and environmental high-quality goods with low-wage and poorly side deals with real teeth. Bill Clinton kept educated workers. Because of a devaluation of such hopes alive when on October 4, 1992, he the peso in the early 1980s, Mexican wages endorsed NAFTA , but insisted that the trade in real purchasing power terms had actually deal had to be part of a “larger economic stratdeclined some 30 percent by the end of the egy” designed to raise the incomes of American decade. “Why should companies invest in a workers and protect their jobs and environhigh-skill, high-wage strategy in the Unit- ment. During the next year, Gephardt worked

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orchestrated an ad hoc industrial policy that appeased key political and economic constituencies. Many complaints came from older industries like textiles, steel, auto, and motorcycles, long bastions of GOP or Dixiecrat support. They were being inundated by East Asian and especially Japanese imports. Reagan’s Commerce Secretary Malcolm Baldrige and his deputy, Clyde Prestowitz, therefore challenged the free-trade orthodoxy still favored by the State Department, which was willing to sacrifice U.S. industries in order to sustain Cold War allies in Asia.

The Reagan administration slapped a quota on Japanese motorcycles during the first term that did much to save HarleyDavidson, after which Treasury Secretary James Baker negotiated a dollar devaluation in 1985, the so-called Plaza Accord, that made all manufacturing exports more competitive.

Reagan’s trade negotiators also pioneered a way forward in one of the world’s most strategic industry sectors. Americans had invented the semiconductor, but a strategy of continuous innovation did not lead to manufacturing competitiveness. American chip makers were stand-alone enterprises, while in Japan, large, capital-rich companies invested in computer chips as but one part of a larger high-technology endeavor. By the early 1980s, they had penetrated the U.S. market to devastating result. Intel’s Robert Noyce estimated that between 1984 and 1986, chip manufacturers lost $2 billion and laid off 27,000 workers.

In response, the Defense Department ponied up half a billion to fund a new research consortium, Sematech, in effect a governmentsponsored cartel that dampened domestic competition and stressed manufacturing prowess. Meanwhile, Prestowitz and other trade negotiators adopted a tough bargaining posture that stopped Japanese dumping of its chips on the U.S. market and mandated that Japanese companies must purchase 20 percent of all their chips from foreign producers, most in the United States.

Clinton proved unwilling to build upon this Reagan-era precedent. Although his administration tried to open Japan to American products, agricultural ones in particular, this effort encountered fierce resistance from those rural agricultural interests that bulwarked

closely with the AFL-CIO to make NAFTA’s labor clause something more than an assertion that each nation should enforce its own, often inadequate, labor laws. “ NAFTA , with the addition of the supplemental accord, is a groundbreaking agreement,” U.S. Trade Representative Mickey Kantor said in announcing the completion of a NAFTA deal on August 13, 1993. “For the first time a free trade agreement covers workers’ rights and the environment.” The devil was in the details. The United States extracted a nonbinding commitment by the Mexican government to tie its minimum-wage structure to increases in productivity and growth in the Mexican economy. Fines for violation of labor rights were possible at the end of a long process of consultation, but the tribunal set up by NAFTA would have no power to compel a government to pay or penalize a particular employer. Within hours of the Kantor announcement, a coalition of labor union leaders, consumer advocates, and environmental groups had denounced the accord.

Gephardt too called the side agreements “not supportable,” and in a speech to the National Press Club on September 21, 1993, he announced that he would vote against the pact.

Gephardt argued that genuinely fair trade was a contradiction in terms when applied to nations whose social structures and economic policies were incompatible; the wage differential across the Rio Grande was 8 to 1. In the absence of significant outlays for retraining and job creation, Gephardt warned of “downward pressure on wage agreements, holding down our standard of living. And they face that argument not only from Mexico, but from China and other places around the world.”

Labor-liberal opposition to NAFTA would therefore be staunch in Congress, backstopped by polls showing that a majority of Americans opposed the agreement. More importantly, the Clinton administration was at the very least divided on timing, with Hillary Clinton, among others, pushing for a postponement of the NAFTA fight until after the congressional health-care battle. But Bill Clinton pushed ahead. The White House set up a war room, headed by William Daley, a banker and youngest son of Chicago’s legendary mayor.

The administration soon pulled out all the

stops, making side deals to get the votes of representatives with citrus, flat glass, wine, and other interests that might be harmed by competition from Mexico. And when the flamboyant and erratic Ross Perot became the face of NAFTA opposition, the White House was not displeased.

The House passed NAFTA by a vote of 234 to 200 on November 17 and the Senate followed three days later with 61 in favor and 38 against. In both chambers, more Republicans voted for the trade agreement than Democrats, an ominous fissure in liberal ranks. Edward Kennedy backed Clinton, declaring, “All of the problems that working families face … will be even worse if NAFTA is defeated.” But other

Clinton considered NAFTA to be a marvelous bipartisan victory, but Rust Belt voters and their elected representatives spurned the trade compact. liberals like Senator Don Riegle of Michigan voted no, concluding, “This is a jobs program for Mexico, and my Lord, we need a jobs program for America.” Clinton thought he had secured a marvelous bipartisan victory, but Rust Belt voters and their elected representatives spurned the trade compact. Clinton “seriously split the electoral base of the Democratic Party and has alienated swing voters,” concluded Lawrence Mishel and Ruy Teixeira of the progressive Economic Policy Institute.

More than two decades later, NAFTA was still a resonant and unpopular symbol for Trump to use against the Clintons.

Dozens of Rust Belt Democrats were defeated in the 1994 elections, dragging down others, including Tom Foley, the House Speaker, who had sided with the White House on NAFTA .

Capturing the House for the first time in 40 years, GOP conservatives stepped into the pol-

icy vacuum engendered by liberal disarray.

Newt Gingrich and a new cohort of freshmen Congress members moved the GOP decisively to the right, Perot ran for president once again, and on the extreme right pundit Pat Buchanan offered a foretaste of Donald Trump when he deployed culture war rhetoric to denounce a Bush-Clinton “New World Order” that stood for globalization, multiculturalism, and a devaluation of American nationality.

Misjudging Capital: Failure of Health Insurance and Labor Law Reform

Although the Clinton left had been defeated when it came to a Keynesian stimulation of the economy or construction of a managed trade regime with Mexico and other nations, they believed reform of the immense health system as well as the increasingly calcified labor relations regime was still possible. In both instances, policy entrepreneurs like Ira Magaziner, Robert Reich, and Hillary Clinton thought American capitalism had been handicapped by declining productivity and embedded inefficiencies that required state action to redress. Both initiatives constituted an updated version of New Deal corporatism.

Both failed in part because the Clinton administration misjudged the power and perspective of key sectors of American industry, especially the booming retail, fast-food, finance, and high-tech sectors, all of which were hostile to unionism and state regulation.

Its architects considered the Clinton health-care plan an ingenious hybrid of market competition and regulation. Regional “health alliances” would have overall (“global”) spending caps on insurance and hospital costs, approaching some of the efficiencies of a single-payer system but preserving competition among private insurance companies. All large employers would have to provide health insurance, either directly or via the health alliances. Other workers and citizens would get subsidized insurance through alliances, from well-regulated insurers.

The sponsors made two serious miscalculations. First, they did not involve key legislative players in the early design of the complex hybrid bill, which proved too government-led for some and too far from single-payer for others. Second, they underestimated the ideologi-

Winter 2018 The American Prospect 43

cal opposition of organized business to a major expansion of the federal role, even if corporations stood to save some money.

The Clintons counted on support from business sectors that already provided health insurance: The new employer mandate would reduce their outlays by spreading insurance costs among all employers. American auto companies paid more for health insurance than for steel, but Walmart, Marriott, and thousands of other low-wage, service-sector firms shifted the health-care costs of their employees to the state, to charity, or to other firms’ payrolls. Walmart, with nearly a million workers at the end of the 20th century, provided a health insurance package that was so burdensome and inadequate that less than 50 percent of its employees subscribed. “Right now, big companies pay all of the health costs of small companies that are not providing insurance,” argued one pro-reform businessman. “It’s another form of tax.”

But American capitalism had transformed itself dramatically since the last era of healthcare reform in the 1960s, and low-wage, lowbenefit companies in the swollen service sector, especially restaurants and retailers, bitterly resisted employer mandates. A service-sector revolt generated something close to a coup within the U.S. Chamber of Commerce, which had initially favored Clinton’s reform at the behest of many big, old-line manufacturing companies like Chrysler and Bethlehem Steel.

Likewise, a set of smaller insurance companies, who made money by “cherry-picking” the most healthy and profitable clients, feared that the system of “managed competition” championed by the Clintons would put them at a disadvantage in a fight over market share with the big five insurance firms of that era, which were willing to turn themselves into something close to a utility in return for millions of new government-mandated customers. Organized into the Health Insurance Association of America, these smaller firms sponsored the infamous but highly influential set of “Harry and Louise” TV ads of 1993 and 1994, which equated employer mandates and cost controls with a cumbersome and intrusive federal government.

The ideological stakes in this fight were graphically highlighted in late 1993 when journalist and sometime Republican adviser

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Bill Kristol wrote a memo to GOP legislators and activists that remains perhaps the single most important document laying out the rationale for wall-to-wall conservative opposition to health-care reform, both in the early 1990s and in the years since 2009. Kristol argued that any Republican compromise with Clinton would not only “make permanent an unprecedented federal intrusion into and disruption of the American economy” but also advance Democratic electoral prospects because a successful Clinton plan “will revive the reputation of the party that spends and regulates, the Democrats, as the generous protector of middle-class interests.” Republicans had to therefore “adopt an aggressive and uncompromising counter-

Clinton presided over a generational changing of the governmental guard, but not the emergence of a new social movement or the revitalization of an old one. strategy” to “delegitimize” the Clinton plan and bring about its “unqualified political defeat.”

By the late summer of 1994, when the Clinton health plan expired in Congress, that failure proved an ideological victory for the likes of Bill Kristol and laid the basis for Republican capture of the House of Representatives for the first time since 1946. A long era of hyperpartisanship was upon us.

An effort to secure worker rights, not by reinforcing the right to unionize guaranteed in the oft-violated Wagner Act but by promoting greater labor-management collaboration, became the heart of the administration’s policy on labor. A commission on the future of worker-management relations, chaired by John Dunlop, was the signature early initiative. Greater collaboration would presumably generate productivity gains and improved earnings to match, not just in the unionized

sector but in the workforce as a whole. But by 1993, Dunlop-style social bargaining was already a relic of an earlier time. Most corporations did not want dialogue with labor, much less with labor unions. They wanted control.

The key deal Dunlop and others, including some in the labor movement itself, hoped to pull off was an exchange: Companies would get the right to create workplace productivity and engagement organizations, softening the Wagner Act’s ban on company unions, while real unions would get some labor-law reforms that might have made organizing easier. But this deal was doomed from the start. It won no traction from any wing of the employer community, neither old-line manufacturing, then being battered by imports, nor Silicon Valley, nor even unionized high technology companies like Xerox, whose otherwise liberal CEO, Paul Allaire, served as a Dunlop Commission member. And of course, the same labor-intensive, service-sector employers who sabotaged the Clinton health-care reform were even more adamantly hostile to any labor law deal that hinted at more employee voice. In the service sector, higher employee productivity was on the way, not via a new era of labor-management cooperation, but as new and more intrusive versions of electronic Taylorism made their way to the checkout counters, hospitals, eateries, and logistic hubs that were then leading the U.S. employment surge.

Once the health-care initiative collapsed and the Republicans won a decisive congressional victory in 1994, employers knew they held the upper hand. Jeff McGuiness, president of the management-side Labor Policy Association, which was actually one of the more moderate employer groups to engage with the commission, told the press, “All deals are off, all swaps, whatever deals there might have been are now off.”

Financial Deregulation

While the reform of health provision remained stymied during the 1990s, a radical restructuring of American finance proceeded with little opposition. By the mid-1990s, nearly all of Clinton’s advisers (notable exceptions being Joseph Stiglitz and Brooksley Born) repeatedly reassured him that the decision to let Wall Street dismantle regulatory pro-

tections erected during the Great Depression simply represented inevitable modernization.

As John Podesta, who would soon become Clinton’s chief of staff, put it in a 1995 memo, “The argument for reform is that the separation between banking and other financial services mandated by Glass-Steagall is out of date in a world where banks, securities firms and insurance companies offer similar products and where firms outside the U.S. do not face such restrictions.”

The remarkable influence of Robert Rubin, in both the White House and on Wall Street, symbolized and encapsulated this perspective, to which the term “neoliberalism” was now firmly attached. Unlike Greenspan, a disciple of Ayn Rand, Rubin was an attractive and seductive personage—a Democrat whose charm, social liberalism, and persuasive intellect shielded him from criticism and enlarged his influence, not just in terms of one policy or another, but as ideological leader of a species of neoliberalism, dubbed “Rubinomics.” He mentored a generation of Clinton-era policymakers, later with echoes in Obama appointees, creating a Democratic policy establishment that no longer took its cues from unions and consumer advocates, but saw an outlook congruent with Wall Street as synonymous with the general welfare. And the long boom of the 1990s, whatever its actual origins, seemed to ratify the wisdom of such an outlook and the statecraft that gave it legislative substance.

Although the Glass-Steagall Act was not formally repealed until 1999, the separation of commercial and investment banking had already been severely weakened by Federal Reserve rulings that increased bank size and allowed commercial banks, through subsidiaries, to underwrite many types of securities.

In 1994, with the Democrats still in control of Congress, Clinton signed the Riegle-Neal Interstate Banking and Branching Efficiency Act that eliminated restrictions on branch banking and thereby increased the sway of the big banks. Then in 1996, the Fed allowed bank subsidiaries to earn 25 percent of their revenue from securities operations, up from 10 percent. And that same year, the Fed overhauled its regulations to make it easier for banks to gain approval to expand into new activities. The Clinton administration did

nothing to hamper this decay of bank regulations; instead, Rubin’s Treasury pushed the White House to formalize the new banking investment regime by backing GOP deregulatory efforts in the Congress.

Repeal of Glass-Steagall late in 1999 spurred a wave of megabank mergers and enabled them to plunge headlong into the business of buying, securitizing, selling, and trading mortgages and mortgage-backed securities. Indeed, one such merger had already been carried out well before passage of the legislation, the $72 billon deal which brought together Citibank, the biggest New York bank, and Travelers Group Inc., the huge insurance, brokerage, and financialservices company. The merger was in clear violation of Glass-Steagall, but such was the Wall Street confidence that Congress would repeal the old law that Travelers boss Sanford Weill and Citibank CEO John Reed had no hesitation in concluding negotiations. Repeal of GlassSteagall in November 1999 was termed the “Citigroup Authorization Act” in some circles.

Rubin, who had stepped down as Treasury secretary in July of the same year, had become chair of Citi’s executive committee in October.

The only Clinton regulatory official who stood in the way was Brooksley Born, chair of the Commodity Futures Trading Commission. Her defeat and demise are telling. Born warned that the explosion of derivatives that took place in the 1990s created a gigantic moral hazard that was difficult for either government regulators or the banks themselves to measure. Unlike stocks, bonds, and options, no clearinghouse for derivative instrument trades actually existed; without a transparent record, such trades could become a source of dispute, uncertainty, conflicts of interest, and fraud. It was a “black” market. But Born’s Cassandralike warning was vociferously opposed by the Fed’s Greenspan, by Rubin, and by Deputy Treasury Secretary Larry Summers. When word got out that Born proposed to issue a “concept paper” urging regulation of derivatives trading, Summers placed a furious call: “I have 13 bankers in my office, and they say if you go forward with this you will cause the worst financial crisis since World War II.” Four months later, in September 1998, the collapse of Long-Term Capital Management, which held a trillion dollars in derivatives,

would seem to have confirmed Born’s apprehensions, but she nevertheless remained a near pariah on the Hill, at the Fed, and in the West Wing. At the behest of Rubin and Greenspan, Congress passed a moratorium prohibiting her agency from regulating most derivatives and in the waning days of his administration, Clinton signed the Commodity Futures Modernization Act, which exempted the most financially consequential derivatives from federal regulation.

The fuse had been lit for the implosion that would engulf Wall Street and the world just a decade later.

The tragedy of the Clinton administration

is that none of this was inevitable. Bill Clinton and most “Friends of Bill” were not neoliberals, yet they ended up presiding over a political economy that advanced that ideological and financial project. Their first instincts called for a novel form of managed capitalism, not markets, to revitalize the domestic economy, reform health care and labor relations, and ameliorate the social disruptions engendered by globalized commerce. But they caved before those, within the administration and without, who had a firmer set of ideological prescriptions. This was most notable in the emphasis on deficit reduction, in the seemingly gratuitous decision to drive NAFTA down the throat of a resistant Democratic majority in Congress, and the radical deregulation of financial markets.

The Clintons presided over a generational changing of the governmental guard, but not the emergence of a new social movement or the revitalization of an old one. They thought the solution to U.S. social and economic problems could be a corporatist “win-win,” when in fact the answer was closer to “zero-sum.”

The prosperity that would come in the latter half of the decade was therefore built on a set of fortuitous circumstances without the institutional foundation necessary to make that half-decade of rising living standards capable of withstanding the external shocks and political reverberations that were sure to come in the new century.

Nelson Lichtenstein is a professor of history at the University of California, Santa Barbara, where he directs the Center for the Study of Work, Labor, and Democracy.

Winter 2018 The American Prospect 45

The Forgotten Origins of the Constitution on Campus Foes of hateful speech should remember how free expression was protected on campus in the first place—through the civil rights movement.

By Randall Ke nne dy

R

ecent conflicts on campus have featured as antagonists proponents of racial justice versus proponents of civil liberties. Many in both camps identify as liberals. A dose of recollection might help dissipate this avoidable and politically destructive strife.

We should recall that in order to more militantly battle Jim Crow segregation, black high school and college student activists in the Deep South brought the federal Constitution to campus. They initiated the lawsuits that prompted judges to recognize that students at public schools are entitled to federal constitutional rights to due process and free speech. In the history of anti-racism, their demands were not atypical. Ardent champions of racial justice have typically been ardent champions of civil liberties. The Second Reconstruction of the 1960s, for example, prompted not only the emergence of law aimed at undoing racial hierarchy; it also prompted the growth of expansive constitutional doctrines on free expression.

To protect members of the National Association for the Advancement of Colored People (NAACP) from damaging exposure by segregationists, activists moved courts to recognize organizational privacy. To shield civil rights attorneys from rules that would have crippled their ability to further their cause through law-

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suits, advocates nudged the courts to acknowledge litigation as a form of political expression warranting protection under the First Amendment. To insulate news organizations from local officials who loathed publicity that put Jim Crow customs in a bad light, lawyers convinced the Supreme Court to transform the law of libel. To protect civil rights protesters against hostile authorities, advocates persuaded courts to craft rules that inhibit the squelching of massed dissent.

Student activists contributed mightily to this dual campaign for racial justice and enhanced liberties. A seminal confrontation stemmed from events on February 25, 1960, when 35 students enrolled at the all-black Alabama State College participated in a sit-in.

Their target was a racially segregated grill located in the county courthouse in Montgomery. Their protest occasioned neither violence nor arrests. Still, when the governor of the state, John Patterson, heard about the demonstration, he “advised” the African American president of Alabama State, H. Councill Trenholm, to consider expelling the participants. As governor, Patterson was the ex officio chair of the state Board of Education. His advice therefore mattered greatly to Trenholm.

On March 4, after additional demonstrations and after having personally warned dis-

sidents to desist, Trenholm sent letters to nine students informing them that they had been expelled “For Conduct Prejudicial to the School and for Conduct Unbecoming a Student or Future Teacher in Schools in Alabama, for Insubordination and Insurrection, or for Inciting Other Pupils to Like Conduct.” Six of the students challenged the legality of the expulsions in St. John Dixon, et al. v. Alabama State Board of Education. Their attorneys (a distinguished array that eventually included Fred Gray, Thurgood Marshall, Jack Greenberg, and Derrick Bell) argued that the punishment violated the federal Constitution. They mainly focused on the absence of any notice or hearing at which the students could contest the authorities’ allegations.

The federal trial judge presiding over the case was Frank Johnson, a white Alabamian who later became renowned for safeguarding the rights of anti-racist protesters. On this occasion, however, he ruled against them.

First, he maintained that “[t]he right to attend a public college or university is not in and of itself a constitutional right.” Second, he posited that “[t]he right to attend … is conditioned upon an individual student’s compliance with the rules and regulations of the institution.”

A regulation imposed by the Alabama State Board of Education declared that “[j]ust as a

student may choose to withdraw from a particular college at any time for any personallydetermined reason, the college may also at any time decline to continue to accept responsibility for the supervision and service to any student with whom the relationship becomes unpleasant and difficult.” A related provision stipulated that “[a]cts of insubordination, defiance of authority, and conduct prejudicial to discipline and the welfare of the school will constitute grounds for suspension or expulsion.” Judge Johnson saw these terms as having “the effect of reserving to the college the right to dismiss students at any time for any reason without divulging its reason other than its being for the general benefit of the institution.”

A splintered panel of the Fifth Circuit Court of Appeals reversed Johnson. Constituting the majority were Judge John Minor Wisdom, the most staunchly liberal of the judges on that court, and Judge Richard Taylor Rives, another strong liberal, who wrote the opinion.

Judge Ben F. Cameron, a fervent segregationist, dissented.

The question for decision, Rives declared, was “whether the students had a right to any notice or hearing whatever before being expelled.” He and Wisdom concluded that they did. Rives gave short shrift to the right/privilege distinction invoked by Johnson, declaring that even if a person has no constitutional right to pursue a given activity, he does have a right to be free of governmental interference unless it is constrained by due process. The court of appeals similarly dismissed the argument that the plaintiffs had waived their rights by matriculating at Alabama State upon terms to which they had agreed. The state, Rives declared, “cannot condition the granting of even a privilege upon the renunciation of the constitutional right to procedural due process.”

Cameron groused in dissent that the court’s decision would undercut school authority, subvert student discipline, and make “federal functionaries”—judges?—into a “Gargantuan aggregation of wet nurses or baby sitters.” Wisdom and Rives insisted, however, that under the federal Constitution, the student protesters were entitled to due process and that under the circumstances, due process required notice and some opportunity for a hearing prior to expulsion for misconduct.

The Dixon decision broke with a deeply

ingrained judicial tradition of deference to school authorities. Rives sought to obscure the novelty of what he and Wisdom had done.

Their innovativeness, however, is highlighted by a ruling announced by another federal court of appeals five months prior to the protests that triggered the Dixon expulsions. Steier v. New York State Education Commissioner involved a student, Arthur Steier, who wrote letters to

admitted “not as a matter of right but as a matter of grace having agreed to conform [to the school’s] rules and regulations.”

Steier was no outlier. When it was decided, federal case law permitted students to be disciplined, even expelled, on virtually whatever terms school officials determined. It is against that backdrop that the Dixon case is rightly seen as a pioneering ruling.

Although the dissidents in Dixon confront-

Risking Expulsion: Four Alabama State College students who participated in the sit-in at a segregated restaurant in Montgomery

the president of Brooklyn College complaining that the school’s administration was wrongly dominating student organizations. Steier was suspended for six months under a rule requiring students to “conform to the requirements of good manners and good morals.” After being readmitted and agreeing to “have a change of spirit,” he helped publicize the news of his suspension and probation in the college newspaper. For this, he was expelled. Responding to Steier’s assertion of a federal constitutional grievance, federal courts concluded that he had no valid claim. One judge quipped that while the plaintiff was indeed constitutionally free to say what he pleased, he was not entitled to say it as a student at Brooklyn College. After all, the judge reasoned, the student had been

ed a white power structure, they simultaneously challenged a black one as well, particularly the presidency of their college. Black college presidents enjoyed powers that were rare for any African American to exercise in Jim Crow America, especially in the South. They oversaw workforces, dictated the fates of professors and students, associated with some of the nation’s most affluent people, and knew, sometimes quite familiarly, major regional and national politicians. At the same time, the all-white boards of education and boards of trustees that selected and supervised black college presidents typically communicated the expectation that these educators would toe the segregationist line on racial politics and certainly suppress rebellion on campus.

Winter 2018 The American Prospect 47

Trapped by dependency on whites for financing and other essential resources, black college presidents were victimized by many of the same aggravating racial humiliations visited routinely upon “ordinary” Negroes. Although H. Councill Trenholm was, to students and peers in the world of the black college, a formidable figure, to the governor and other white officials he was but another “boy” from whom they could and did demand obedience.

When Patterson got fed up with the desegregationist dissent of Lawrence D. Reddick, the chair of the history department at Alabama State College, the governor denounced the professor as a Communist sympathizer and racial agitator, and the state board of education ordered Trenholm to dismiss him “before sundown.” Trenholm dismissed Reddick just as he expelled the dissident students.

a key aide to Martin Luther King Jr. Lee’s petition reflects the idealism, poise, and boldness that suffused the sit-in movement of the early 1960s: To the Honorable Governor John Patterson.

We have taken cognizance of your mandate to President H. Council Trenholm of Alabama State College to dismiss from the School those students who participated in the sit-down strike at the County Court House snack-bar, Thursday, February 25, 1960.

We, a united group of students of said college, humbly request that you reconsider your order to President Trenholm.

This decision is out of tune with the spirit of Americanism. The snack-bar at the

Thanks to these early struggles of black students in the South, all students at universities now enjoy rights of free speech.

Many observers faulted Trenholm for failing to do more to resist the segregationists. “It is indeed unfortunate,” wrote a correspondent from Chicago, as recounted by Adam Fairclough in Teaching Equality: Black Schools in the Age of Jim Crow, “that you have become the hatchet man for the governor of Alabama and expelled those kids.” Someone from Philadelphia complained: “The Uncle Toms are supposed to be dead. … Does economic security mean so much? How will you face tomorrow?” An observer from Huntsville, Alabama, declared, “We must not jump every time the white man speaks.” Writing from Dayton, Ohio, Trenholm’s own cousin remarked, “You should have resigned yourself.”

Many students, however, recognized Trenholm’s vulnerable position and the agonizing compromises that attended it. The same day that Trenholm warned activists to desist from further protest, one of them sent a remarkable petition addressed to the governor—the figure whom they correctly saw as the real power behind the repression. This student, Bernard Lee, was expelled, became a plaintiff in Dixon, and subsequently emerged as

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Court House is a symbol of injustice to a part of the citizens of Montgomery. It is a flagrant contradiction of the Christian and Democratic ideals of our nation.

We went to the snack-bar not as hoodlums, but in the same manner and spirit in which other college and university students have done in other parts of the country. Our purpose was to express our resentment of a scheme that fails to recognize its responsibility to decent and orderly persons of all creeds, color or nationalities. …

Our cause is just. We are asking that you study it with an open mind and give President Trenholm the authority to settle this issue with us.

We are reasonable and considerate. We may be crushed, but we shall not bow to tyranny.

Although Lee and the other expelled students won their lawsuit, none of them reenrolled. Eventually, though, their sacrifice did receive a bit of recognition. In 2010, Alabama State College reinstated the nine and conferred upon them honorary degrees.

Dixon involved college students. What

about federal constitutional rights for high school students? The most famous case recognizing a right to freedom of expression for high school students is Tinker v. Des Moines District, decided by the Supreme Court in 1969. In the Tinker case, a principal suspended junior high school students who refused to remove black armbands symbolizing protest against the Vietnam War. Noting the absence of any evidence that the students’ symbolic protest caused any disruption or posed a threat of substantially interfering with the work of the school, the Court ruled that the principal had violated the young dissidents’ First Amendment rights. Writing for the Court, Justice Abe Fortas declared that neither students nor teachers “shed their constitutional rights to freedom of speech or expression at the schoolhouse gate.” As is usual, however, the judgment of the Supreme Court represented a ratification rather than the initiation of a legal proposition. As Fortas acknowledged, courts in the Deep South had previously grappled with the issue of constitutionally protected rights to freedom of expression for secondary school students.

In one of these key disputes, Burnside v.

Byars, the black principal of the black Booker T. Washington High School in Philadelphia, Mississippi, forbade students from wearing “freedom buttons” to school. Emblazoned on these buttons were “One Man One Vote” and “ SNCC ,” the abbreviation, of course, for the Student Non-Violent Coordinating Committee. Students who refused to remove the buttons were suspended. Three challenged the constitutionality of this punishment. They argued that it wrongfully encroached upon constitutionally protected freedom of speech.

The state contended that the prohibition should be permitted under the circumstances because it assisted in the maintenance of proper discipline. Allowing students to wear political buttons would inevitably result in distraction, thereby undercutting the school’s educational mission.

The plaintiffs lost the first round when a U.S. district judge declined to issue a preliminary injunction against the suspensions. On appeal, however, the plaintiffs prevailed. In the Burnside decision, the Fifth Circuit Court

ap images

of Appeals bestowed upon high school students a right protected by the First Amendment to express themselves unobtrusively even against the wishes of school authorities. The Fifth Circuit thus anticipated by three years the Supreme Court’s Tinker decision.

A third case stemming from events at South Carolina State College in Orangeburg, South Carolina, revealed an especially protracted episode of intra-racial conflict over civil liberties. The president of the college was Benner C. Turner. Born into an affluent family in Columbus, Georgia, Turner attended Phillips Academy in Andover, Massachusetts, before attending Harvard College and Harvard Law School. He served as the dean of the South Carolina State law school before being selected in 1950 as the president of South Carolina State College by Governor Strom Thurmond and an all-white board of trustees.

Like other African American presidents of black, segregated public institutions, Turner occupied a precarious position. He served at the pleasure of a political regime committed to the maintenance of white supremacy.

Annually, he had to beg an all-white, segregationist legislature for funding. He had to wrest support from lawmakers who openly and unapologetically favored white schools over black schools. He had to contend with influential arbiters of white public opinion who maintained that, under segregation, race relations were harmonious and that blacks ought to be satisfied with what they had received.

“The Negro,” The Times and Democrat newspaper announced in August 1955, “has much for which to thank the white race. He has been given, through public monies, a splendid educational establishment in this state.”

Under Turner, South Carolina State gained important educational accreditation. He oversaw the building of dormitories, housing for faculty, classroom facilities, a football stadium, and the elevation of faculty salaries and qualifications. In 1950, only two members of the faculty had earned doctorates; by 1967, the number had risen to 27. At the same time, Turner ran South Carolina State autocratically. According to historian William C. Hine, he “segregated himself from most black people. He had little interest in social activities. He took no part in church, lodge, or fraternity affairs. To some peo-

ple, he resembled the overseer of a plantation.”

The suppression of students and employees of the college, including professors, was a salient feature of Turner’s rule. Some contend that his authoritarianism should be understood as a technique that he perceived as needed to protect his institution. He sought, it can be argued, to preempt white extremists who were all too eager to shutter the school by seizing upon provocations—including mere demands for equal treatment—that would alienate segregationists. There is something to that defense. Turner

Constitutional Pioneer: Bernard Lee was expelled for demanding free speech, and later served with MLK.

undoubtedly viewed cracking down on antisegregationist dissent as a price worth paying for the survival of an institution that contributed significantly to the advancement of blacks.

It would be unrealistic, however, to portray Turner’s dictatorial ways as stratagems focused solely on the well-being of the college. Turner liked exercising power and disliked being contradicted by those he viewed as subordinates.

He suppressed dissidents not only because he saw them as threats to his institution; he suppressed them, too, because he abhorred being challenged, especially by other black people.

In 1956, when the student government president, Fred H. Moore, called a strike to protest against threats to send law enforcement personnel onto campus to quell anti-segregationist activism, Turner (with the board of trustees) retaliated harshly. He expelled Moore summarily and notified 14 other students that

they would be excluded from campus after the end of the school year. Several professors were also sent packing, including the faculty adviser to the student newspaper. Her offense?

She had failed, in Turner’s view, to be sufficiently rigorous in excluding from the newspaper objectionable commentary. Turner took decisive steps to foreclose that from happening again; he put into his own hands the authority to pre-clear what was published. “While it is not forbidden that comments on controversial matters be printed in the college paper,” he announced, “final authority as to what shall be printed must rest in the President’s office and not in the faculty adviser.”

On February 24, 1967, three students— Joseph Hammond, John Stroman, and Benjamin F. Bryant Jr.—received notice that college officials had suspended them for three years for having violated college Regulation 1: “The student body … is not to celebrate, parade, or demonstrate on the campus at any time without the approval of the Office of the President.” An unauthorized protest had voiced disapproval of Turner’s dictatorial streak. Previously, his censorship had been resented but not legally challenged. This time, students took South Carolina State College to court and prevailed.

Striking down Regulation 1 as an illicit prior restraint on speech and assembly, U.S. District Judge Robert Hemphill maintained that “[a]cademic progress and academic freedom demand their share of Constitutional protection.” That same year, Turner resigned.

Because of the efforts of activists who demanded rights of due process and freedom of expression as they fought to dismantle Jim Crow pigmentocracy, all students and teachers at public institutions came to enjoy an elevated legal status. In 1950, they had been subject to the dictates of authorities uninhibited by federal constitutional restraints. By 1970, they had won judicially recognized rights. Here, as elsewhere, brave souls committed to battling racial oppression widened the circle of freedoms to which all in America can properly lay claim.

Randall Kennedy is a contributing editor to the Prospect and professor at Harvard Law School. His several books include The Persistence of the Color Line: Racial Politics and the Obama Presidency.

Winter 2018 The American Prospect 49

The New

HEALTH Health RCare E FO R M

2020 Agenda

Even as the battle continues over preserving the Affordable Care Act and fighting cuts in other federal health programs, advocates of a universal, reformed health-care system are already debating what to press for in the 2018 and 2020 elections. Expand Medicare? Open up Medicaid? Regulate health-care prices? Here, with the support of the Century Foundation, we offer a look at these and other options for progressive change post-Trump.

The American Prospect is grateful for the support of The Century Foundation, which co-produced this special report on health care.

50 WWW.Prospect.org Winter 2018

H E A LTH REFORM

2020

A New Strategy for Health Care Looking beyond Trump, Democrats ought to focus on opening Medicare to people at age 50 and capping excessive health-care prices.

B y Pau l S tarr

W

ith the Trump era only a year old and its full impact on health policy as yet unclear, it may seem premature to discuss what ought to come next. But, driven by new enthusiasm among progressives for Bernie Sanders’s single-payer plan, the debate has already begun, and if the past is any indication, supporters of reform will turn to proposals long in gestation when they are finally able to act.

When that time comes, Democrats don’t want to discover they have locked themselves into commitments on health care that they cannot fulfill, just as Donald Trump and Republicans did in 2016. Democrats are justifiably angry today about the Republican efforts to sabotage the Affordable Care Act and cut Medicaid that have put health care for millions of people in jeopardy. Supporters of a universal system also have good reason to believe that the ACA was too limited and a stronger government role is necessary. But going to the opposite extreme and nationalizing health insurance has its own problems. Even by Sanders’s own estimate his plan would require a larger increase in federal taxes than the United States has ever had in peacetime. For that reason alone (and there are others), Democrats need to look at a broader menu of alternatives.

So, imagine it is January 2021, and a Democrat is ready to assume office as president along with a new Democratic Congress: What priority should health care get, and what policies should a new administration push for?

In Trump’s wake, many other legitimate concerns will be clamoring for attention and resources. For four years, the Trump administration will have neglected and in some cases aggravated America’s real problems, including economic inequality and insecurity, climate change, and the decaying public infrastructure that Trump shows no signs of fixing.

The two previous Democratic presidents made health care their top priority for reform in their first year. Although Bill Clinton failed to pass his Health Security Act, Barack Obama succeeded in passing the ACA . But both of them faced a backlash driven in part by their health policies, lost Democratic

congressional majorities after two years, and from then on faced severe limits on what they could accomplish.

I supported Clinton’s and Obama’s decisions to make health care the early focus of reform in their presidencies, but I’d be hard-pressed to make that argument a third time.

That’s not to say the Democrats’ presidential candidate in 2020 should ignore or downplay health care. The Trump era’s damage to national health policy will call for an answer, and the party’s primary voters care intensely about the answer their nominee will give. Democrats, however, ought to learn from experience and focus on health-care priorities that make sense as both policy and politics and build popular support over time. Those priorities will have to deal with core concerns about health care yet not absorb every last dollar of revenue a new administration might hope to raise.

Repairing whatever is left of the ACA , if anything is left, will be important but insufficient. Although the ACA has gained in popularity since Trump’s election, the law’s limitations have also become increasingly apparent. A new Democratic administration should focus on one or two signature health-care proposals that advance the longterm objectives of universal coverage and cost control and respond to people who have insurance but still face financial stress from medical bills. Two ideas could meet these criteria: making available a new Medicare plan for people aged 50 to 64—a program I call “Midlife Medicare”—and directly attacking America’s excessive health-care prices.

Although the two ideas are independent, they’re closely related, since attacking prices also involves an extension of Medicare, in this case the extension of Medicare rates to out-of-network providers in private insurance.

Limits of the ACA

Advocates for broader access to health care have rightly defended the ACA from Republican attacks, but facing up to its limits is crucial for figuring out what to do next. The law has worked well, but it hasn’t worked well enough. From 2010 to 2016, it cut the proportion of Americans without

Winter 2018 The American Prospect 51

Medicare has advantages that make it a stronger platform than Medicaid for the next phase of health-care reform.

health insurance almost in half, from 16.3 percent to 8.8 percent, and it did that without causing the economic havoc that opponents predicted. But it hasn’t effectively addressed the underlying problem of rising costs and consequently hasn’t assured a stable and affordable system. Although millions have received care they wouldn’t have gotten, Gallup data indicate that 29 percent of Americans—37 percent of women compared with 22 percent of men—still put off medical treatment due to cost in 2017, not significantly different from before the ACA . While seeing improvements in the scope of coverage such as the elimination of annual and lifetime caps, many Americans with private insurance now face much higher deductibles than in the past. The sense of many people who previously had good health benefits that their own insurance is deteriorating may account for much of the dissatisfaction with the ACA .

Moreover, the two means by which the ACA has extended health insurance—the expansion of Medicaid and reform of the individual insurance market—ran into problems even before Trump took office. Some of those difficulties stem from the Supreme Court’s decision about Medicaid and redstate resistance to the program, while others reflect limitations of the ACA itself, now aggravated by Trump’s policies.

In 2012, when the Supreme Court made the ACA’s Medicaid expansion optional for the states, it put in question an incremental strategy for expanded coverage that reformers had followed for more than two decades. In the 1980s, Congress began increasing Medicaid eligibility for lowincome pregnant women and children. If states wanted to get any federal funds for Medicaid (and all states did), they had to cover the new beneficiaries and services that federal law mandated. Congress thereby gradually ratcheted up a program that originally covered only special groups among the poor—the disabled, blind, aged, and single-parent families on welfare. But many low-income people continued to be left out of Medicaid, especially in Southern states that severely restricted eligibility.

In 2010, the ACA took the next step in turning Medicaid into a general health-care program for low-income people by extending eligibility to all those with incomes up to 138 percent of the federal poverty level. (In 2017, that’s $16,643 for an individual.) The new national standard would have gone into effect in 2014 if the Supreme Court had not ruled— for the first time since Medicaid’s enactment in 1965—that Congress could not condition all federal Medicaid funds on a state’s agreement to include a new group of beneficiaries.

The Court’s decision hasn’t just allowed 19 Republican-led states to reject the ACA Medicaid expansion; it also prevents Congress in the future from ratcheting up national standards for Medicaid coverage as it did in the past. Indeed, the ratchet now will work in the other direction. If Republicans cut the traditional Medicaid program when they are in power,

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Democrats cannot later restore coverage, much less expand it, and count on states being effectively required to comply.

Leaving Medicaid coverage up to the states has a big impact on low-income people who live in Republican areas.

During the first half of 2017, the share of adults aged 18 to 64 who were uninsured was 19 percent in the states that did not expand Medicaid, compared with 8.8 percent in the states that did.

Although Medicaid will continue to be central to financing health care, it is hard to see how it can serve as a firm basis for universal coverage. Democrats can reduce reliance on Medicaid, however, by shifting to the other national framework for coverage established in 1965—Medicare. Many of Medicare’s original supporters hoped to use it eventually to cover everyone, and in 1972 Congress extended it to cover those on disability insurance as well as patients with endstage renal disease. By incrementally expanding Medicaid in the 1980s and then creating the Children’s Health Insurance Program (CHIP) in 1997, Congress was able to offload some of the cost of expanded coverage onto the states. With that route to a universal system now effectively cut off, reformers need to turn back to Medicare, which as a national program doesn’t give Republicans in the states a veto point. As a result of its popularity and success in both controlling costs and providing broad access to providers, Medicare also has other advantages that make it a stronger platform than Medicaid for the next phase of health-care reform.

Besides expanding Medicaid, the ACA has increased

coverage by helping people afford private insurance.

Instead of trying to restructure all private insurance and put a lid on its total costs—as the 1993 Clinton health plan had sought to do—the ACA leaves employer-based health plans for the most part unchanged and focuses primarily on reforming the individual (or “non-group”) market.

Before the ACA went into effect in 2014, insurers priced policies for individuals according to the beneficiaries’ health and age and limited the scope of coverage through caps and exclusions, including the exclusion of pre-existing conditions.

People who bought insurance directly on their own got poor value for money, and millions of individuals remained uninsured because they couldn’t afford the rates, were deemed uninsurable, or took the risk of going without coverage and depending on charity care if they got seriously ill.

The ACA deals with these problems through new rules and new subsidies. While allowing for considerable patient cost-sharing, the new rules require insurers to cover all applicants for a list of “essential health benefits” at rates not based on their health and only to a limited extent based on their age. A financial penalty for failing to carry a minimum level of coverage—the so-called “individual mandate”—was supposed to motivate the healthy to insure,

H E A LTH REFORM

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deterring people from opportunistically buying insurance only when they needed it. The new sliding-scale tax credits for premiums, available only through state-based marketplaces, go to people with incomes up to four times the federal poverty level, while subsidies for deductibles and co-pays go to insurers for the benefit of people with incomes up to 250 percent of the poverty line.

After an encouraging start in 2014, the individual-market reforms look increasingly inadequate. The premium tax credits have been too low and the penalty for failing to insure has been too small and too weakly enforced to get many healthy people to sign up. The unpopularity of the individual mandate made it a perfect point of attack for Republicans against the whole structure. Insurers have been able to skirt the requirement to sell individual policies at the same community rate by designing separate plans to be sold outside the state marketplaces to lower-risk individuals (a problem that Trump’s policies will exacerbate). Some supporters of the ACA had expected the marketplaces to work so well that they would become a desirable alternative to employer-based insurance. Instead, because of limitations in their design, the marketplaces suffer from adverse selection (disproportionately high-cost enrollment), and the plans they offer typically provide access to a more limited list of doctors and hospitals than Medicare or a good employer plan provides.

The problems of high prices and limited insurance options have intensified in the past year as major insurers have dropped out of many of the ACA’s marketplaces. In much of the country, only a single insurer offers coverage, and rates have soared as a result. Lacking even a fallback public option—a public insurance plan triggered by the lack of private competition—the enrollees in the marketplaces have had to settle for whatever remains available to them.

In retrospect, the ACA has neither been generous enough (in its subsidies) nor tough enough (in the individual mandate) nor realistic enough about the market (in its lack of a public option). But the biggest limitation of the ACA’s market reforms is that they don’t address the underlying problems in health-care prices.

al an dia z / ap images

It’s the Prices, Stupid

In 2016, the United States devoted nearly 18 percent of national income to health care, compared with about 11 percent for peer countries such as Germany, France, and Sweden and an average of 9 percent for the 35 member nations of the Organization for Economic Cooperation and Development. Although national health spending generally rises with per capita income, the United States is an outlier, spending vastly more on health care than its per capita income predicts. The excess is not the result of Americans going to the doctor or hospital more often or using more drugs or generally consuming more medical services than

people in the other economically advanced societies. The single biggest factor is that Americans pay higher prices for health care, as Gerard F. Anderson, the late Uwe E. Reinhardt, Peter S. Hussey, and Varduhi Petrosyan argued in a 2003 article in Health Affairs memorably titled “It’s the Prices, Stupid.” It is the price system, particularly for patients with private insurance or no coverage, that lies at the heart of the cost problem of the American health system.

While other countries regulate health-care prices or budgets, the United States leaves prices in the private market to insurers and providers, a system that has failed to create any effective check on what providers charge. The sources of market failure arise from the structure of health

care and insurance and from trends toward monopoly power that have made a bad situation worse.

Health-care spending is concentrated—I realize this is shocking—among the very sick. In any given year, the most costly 10 percent of a population typically accounts for about two-thirds of total costs. When people face serious health problems, they often have urgent needs and ties to particular physicians that limit their practical options. It’s not realistic to expect most patients in those circumstances to shop around and compare prices, and even if they tried, they usually wouldn’t be able to find out beforehand how much different hospitals and other providers would charge.

Imagine if buying gas for your car worked like hospital care. If it did, when you pulled into a gas station, no prices would be posted. What you’d pay would depend on your car insurance, but no one could tell you what those prices or the total cost would be. It would depend on what several different mechanics—not all of whom would necessarily be “in-network”—determined your car needed. The bill

After an encouraging start in 2014, the reforms to the individual health insurance market look increasingly inadequate.

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would be incomprehensible, and most of it would be paid by your employer’s plan. Eventually, the full cost would come out of the wages you and your fellow employees were paid, although you wouldn’t be able to do anything about it. One thing we could say for sure: Gas prices would be very high under this system.

In the mid-1990s, when managed care was on the rise, insurers did hold down prices and costs for a while, but the effect was short-lived. Partly in response to managed care, health-care providers at the local and regional level began consolidating into massive health systems that have enabled them to regain market power and jack up prices.

Consolidation has also taken place on the insurer side and in other segments of health care, such as pharmacy benefit managers, all to the disadvantage of consumers. Insurers have passed on higher provider costs to employers, who have passed them on their workers, with the sharp increase in deductibles being one of the consequences.

The one relatively bright spot in the American system has been the Medicare program, which has a system of federally set prices. That system, although far from perfect, has kept down Medicare costs relative to private insurance yet still preserved access to nearly all doctors and hospitals for Medicare beneficiaries. So, just as we should think about using Medicare to achieve universal coverage, we should also think about expanding the use of Medicare prices to control costs and sustain a universal system.

The Case for Midlife Medicare

In her 2016 presidential campaign, Hillary Clinton had policies on nearly every issue confronting the country, while Trump had only a few simple positions. Clinton’s nuanced command of the issues was admirable, but many voters were unsure what she would do as president, whereas everyone knew exactly what Trump was promising. If Democrats learn one thing from Trump’s success, it should be focus. While candidates ought to have extensive and detailed knowledge, they need a small number of easily grasped focal ideas that define what their candidacy is all about. With that concern in mind, I am suggesting only two focal points for an agenda in health care—making a new part of Medicare available to people at age 50 and controlling health-care prices. Although the details will be complicated to work out, people won’t need to be experts to understand what they stand to gain from those policies.

Recent Republican alternatives to the ACA hit older adults in the individual market particularly hard. The legislation passed by Republicans in the House in May would have allowed insurers to charge older adults five times as much as younger adults (instead of three times as much under the ACA) and would have provided much smaller premium subsidies with little adjustment for income.

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According to the Congressional Budget Office, in a state that carried out the law without any special waivers, the House bill would have raised the net cost of insurance for a 64-year-old with an income at 175 percent of the federal poverty level from $1,700 to $16,100—an 847 percent increase. In September, Republicans in the Senate fell one vote short of passing their own repeal-and-replace legislation, which would have converted all premium subsidies as well as funds for the Medicaid expansion into block grants to the states. Under that bill, if Republican-led states adopted the same principles that their representatives in the House supported, older adults now getting marketplace coverage would also have faced such radical increases in premiums that many of them would have become uninsured. Since Republicans keep promising to carry out their policies one way or another—through federal legislation, administrative waivers, and state policies—the threat to older adults has not disappeared.

Older adults are particularly concerned about health insurance because of the onset of health problems in midlife. Moreover, as the economists Anne Case and Angus Deaton have shown, rates of illness and death have been increasing in recent decades for Americans in midlife, especially for non-Hispanic whites with a high school education or less. The human costs of deindustrialization are being recorded in their lives. For many of them, finally becoming eligible for Medicare at age 65 is a moment of tremendous financial relief.

The idea of moving that age up to 55 through an early “buy-in” to Medicare has been around since President Clinton proposed it in 1998. In 2017, a group of Democratic senators, led by Debbie Stabenow of Michigan, introduced a bill for a Medicare buy-in beginning at age 55, while a group of Democrats in the House proposed a buy-in starting at age 50. But reform efforts haven’t focused on the potential of the buy-in idea, and there has been no recent effort to cost out the different ways of designing it.

The term “buy-in” may suggest an option wholly financed by premiums, but since many of the people interested in early access to Medicare will have retired before age 65 because of health problems, a program entirely financed by premiums would be unaffordable.

Midlife Medicare, as I imagine it, would be a new part of Medicare for people aged 50 to 64, financed by general revenues as well as by premiums. The general revenue would be set roughly to offset adverse selection and to match the value of subsidies in the ACA , scaled up for a standard Medicare plan, including pharmaceutical coverage. (Like Medicare Part B, it would not draw on the Medicare Trust Fund.) The program would be open to older adults who do not have employer-sponsored insurance and were not offered it, and it would consequently be

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smaller and more fiscally manageable than a single-payer plan. Yet it would still be an important breakthrough not only for the people who would enroll in it but for others as well because it would significantly reduce costs for the remaining, younger pool in the individual market.

Focusing on Midlife Medicare would respond to political realities that advocates of “Medicare for all” have hoped to elide. Shifting all Americans into a federally financed program, as I mentioned earlier, would require a staggering increase in taxes. Advocates say that because of savings people would pay less than they do now in premiums, but this argument ignores several problems. First, many people such as seniors and veterans who are satisfied with their coverage would see the new taxes as an extra burden.

Second, employees with health benefits would have to trust that their employers would pass along savings in the form of higher wages and that the resulting wage increases would offset the new taxes—an impossible calculation for them to make. Third, a single-payer plan would require people to give up their current private coverage, and as long experience has shown, Americans are fearful of doing so, especially once a mobilized private health-care industry has had a chance to raise anxieties about change. Singlepayer proposals have gone down to defeat in state referenda three times in recent decades: 73 percent to 27 percent in California in 1994, 79 percent to 21 percent in Oregon in 2002, and 80 percent to 20 percent in Colorado in 2016— all blue states, and the margins were not even close.

General expansions of Medicare, such as Jacob Hacker’s proposal for a new part of Medicare open to everyone (including employee groups), would also raise concerns about open-ended costs and risk alienating a crucial group—seniors. Many of the elderly see Medicare as their own program, earned through taxes they have paid over their working years, a view they have long been encouraged to hold by Medicare advocates. Midlife Medicare would have a far better chance of winning seniors’ support. The leading organization representing seniors, AARP, welcomes all Americans 50 years of age and older as members and seeks to represent them as a single constituency.

People aged 50 to 64 have also paid Medicare taxes over their working years and can equally be said to have earned Medicare benefits. Since Social Security already has a provision for obtaining pension benefits early (at age 62), the idea of early eligibility is a familiar one. Public opinion data on a Medicare buy-in for 55- to 64-year-olds are encouraging. According to an April 2017 YouGov survey, seniors approve a Medicare buy-in at nearly as high a rate (71 percent) as all age groups combined (82 percent).

Americans who resist publicly financed health care in the abstract often seem more willing to support it when the issue is more specific to an age group. That is how we got

Medicare and CHIP. Age-based public programs may not be ideal, but they are not an intolerable compromise. They have the political virtue of creating an identifiable group of beneficiaries whose problems are readily understood and whose families can be mobilized to defend their rights.

Like “senior” Medicare itself, Midlife Medicare would likely receive support from those too young to enroll who would see it not just as someone else’s protection but as someday their own. People with an employer-sponsored plan would know that if they decide to retire early, they could continue to get good health coverage. By removing older adults from the individual market—in effect, siphoning off much of the high-cost population—Midlife Medicare would also make premiums for younger people more affordable. An additional step, eliminating the twoyear waiting period for Medicare currently facing people already deemed eligible for Social Security Disability Insurance, would contribute to still-lower premiums in the individual market for the population age 49 and younger.

Politically, Midlife Medicare represents a possible point of convergence between the left and center in the Democratic Party. Advocates of Medicare-for-all might support an extension of Medicare to age 50 as a first step toward their larger goal, while others could see it as a positive step on its own. Even if Midlife Medicare didn’t lead to any further expansions of Medicare, it could help show how to make the rest of the system work better. Here it’s important to understand why the Medicare program works better than the ACA and how the latter might be fixed with the benefit of Midlife Medicare’s example.

Several different ideas for expanding Medicare are now in circulation. A key distinction among them is whether they involve expanding Medicare as a plan or Medicare as a program. The distinction is crucial.

When most people think of expanding Medicare, they think of expanding access to the public Medicare plan, as in Sanders’s single-payer, “Medicare for all” bill. But the Medicare program is not actually a single-payer; a third of beneficiaries use it to sign up for one of the many private Medicare Advantage plans. Medicare is now a framework for choice of plan—a marketplace for public-private competition. Expanding use of that framework has distinct advantages over the ACA marketplaces, even if the latter included a public plan.

It’s not only Sanders’s single-payer bill that calls for expanding the use of Medicare as a plan rather than Medicare as a program. Some public-option proposals do the same. Senators Michael Bennet and Tim Kaine have proposed a new Medicare plan, which they call Medicare “X,” for “extra,” that would be offered as an option in the ACA’s individual marketplaces, beginning in 2020 with counties

Politically, Midlife Medicare represents a possible point of convergence between the left and center in the Democratic Party.

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Senator Debbie Stabenow of Michigan has taken a leading role in support of making a Medicare buy-in available at age 55.

required of providers who want to continue participating in “senior” Medicare, as nearly all would. If Bennet and Kaine’s proposal had been part of the ACA , it might have averted some of the problems in the marketplaces today.

But, as an adjustment to the ACA , it also reflects some of the law’s limitations.

To appreciate those limitations, consider the differences between the framework for choice of plan in the Medicare program and in the ACA . The key differences have to do with how plans pay health-care providers, and how much consumers pay for different plans. The federally set provider prices for public Medicare also effectively cap what private Medicare Advantage plans pay providers. In Medicare Advantage, out-of-network providers are paid no more than Medicare rates and are prohibited from billing beneficiaries for any additional amount (so-called “balance billing”). As a result, in-network providers have an incentive to offer insurers even lower prices in order to get an increased number of patients.

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The result is that the Medicare market is similar to European health systems that have multiple insurance funds but more unified payment rates. Even though the cap on out-of-network charges in private plans may seem a small detail of Medicare, it achieves a large effect in protecting Medicare beneficiaries from rising costs.

The other key aspect of Medicare is the dominant role of Medicare’s public plan. Public Medicare doesn’t just offer an “option”; public Medicare’s costs are the basis (or “benchmark”) for determining how much beneficiaries pay for Medicare Advantage plans. But while public Medicare covers roughly 80 percent of expected average costs for beneficiaries, the benchmark in the ACA marketplaces is the second-lowest-cost “silver plan,” which covers only 70 percent of expected average costs. For the same level of coverage, ACA beneficiaries pay a lot more themselves. The difference has had a huge impact on the plans in the ACA marketplaces that consumers choose. The system has driven enrollees toward plans with relatively high deductibles and narrow networks and generated only ambivalent support for the program. In addition, the complete cut-off of subsidies for people with incomes above four times the poverty level has also created a significant group of middle-class people who don’t have their premiums capped and often resent the ACA for forcing them into a risk pool and plans that require them to pay more for insurance than they previously did.

In contrast to the insurer monopolies in many ACA marketplaces, the terms established by Medicare give seniors access to both an affordable public plan and a variety of private options. The Medicare system works as well as it does because it has both a dominant public plan and price regulation on the private side. In contrast, Kaine and Bennet’s Medicare-X proposal calls only for a public plan as an option in the ACA marketplaces, not the price regulation that enables private plans to compete in Medicare Advantage. Insurers will argue that they cannot compete with Medicare-X under those circumstances, and they’re probably right. Although it may seem ideologically inconsistent, insurers need price regulation (that is, of providers) in order to compete with a public plan that sets rates.

Midlife Medicare would have all the features that enable Medicare to work better than the ACA—the strong public Medicare plan, the use of that plan as a benchmark, and provider price regulation in private Medicare Advantage options. All those elements would come as part of the nowestablished Medicare structure. Reformers could also try to introduce these features into the ACA marketplaces if the ACA survives the Trump era.

But regardless of what happens with the ACA , one idea deserves wider consideration as a general cost-control measure: using Medicare rates to cap out-of-network charges in private insurance.

bill cl ark / cq roll c all via ap images

that have one or no private plans, extended three years later to all individual marketplaces, and the following year to small business. The Medicare-X plan would meet the ACA’s requirements for essential health benefits and be financed through premiums, supported by the same subsidies as other marketplace plans.

Medicare-X has advantages over public options that are supposed to be “like Medicare” but unconnected to the Medicare program itself. If stand-alone public plans had to negotiate rates with providers, the plans might not have much bargaining power, and even if they used Medicare rates, many providers might refuse to participate. But participation in Medicare-X at Medicare rates could be

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The New Case for Regulating Prices

Health-care reformers and political leaders need to take a new look at an old idea—price regulation in health care. As of 1980, more than 30 states regulated hospital rates, but during the following two decades nearly all of them eliminated rate-setting in the belief that managed care and the free market would solve the problem of high health-care costs. Instead, prices and costs have continued to rise to far higher levels than in other peer countries, and waves of consolidation in the health-care industry have created monopoly provider systems in many areas. Relying on the market to limit health-care costs was never likely to work, but it is even more implausible today than it was before.

The new case for price regulation isn’t based only on the growth of monopoly power in health care. After 30 years of unregulated private rates and regulated Medicare rates, the evidence is in: Medicare has held down prices more effectively than private insurance. The use of Medicare rates as a cap on out-of-network charges in Medicare Advantage has also demonstrated the value of a limited but strategic intervention to control costs without imposing uniform price controls. A legitimate concern about traditional price regulation is that it would lock in the fee-forservice payment system. But a cap on out-of-network fees still allows insurers to work out contracts that reward innetwork providers for better performance. Out-of-network caps can be a spur to moving the entire health-care system away from fee-for-service. The Obama administration began moving public Medicare itself toward alternative payment methods, and while those methods have so far not yielded big savings for Medicare (and are being eroded under Trump), they have created the basis for a payment system that combines cost containment with incentives for improvements in the quality of care.

Capping out-of-network charges would also hardly be an unpopular idea. At a time when deductibles have been rising and patients are often hit by “surprise” medical bills (for example, from an out-of-network physician at an innetwork hospital), provider payment caps would directly address problems that even the relatively well-insured are facing. The out-of-network caps then would also constrain in-network costs, since they would reduce the bargaining power of the monopoly systems.

Out-of-network prices could be limited in two general ways. Direct regulation based on Medicare rates would be the stronger approach. Commercial rates for hospital care today vary from roughly 130 percent to 200 percent of Medicare; one estimate puts the average for hospital prices at about 175 percent of Medicare. According to a study of private insurance claims by Yale University’s Zack Cooper and colleagues, applying Medicare rates to all private insurance would reduce total private spending on inpatient

hospital care by 31 percent. If the cap were set at 110 percent of Medicare, spending would drop by 24 percent; if at 130 percent of Medicare, spending would fall by 11 percent.

Hospitals have generally been doing very well lately, with average margins of around 7 percent; nonprofit hospitals are a very profitable business. Even so, simply extending Medicare rates would be too severe. A somewhat higher cap—perhaps varying by region, and gradually tightening over time—would be an effective way to keep costs down.

A second approach would be to require hospitals to follow Medicare’s relative prices and post a single figure indicating where they stood in relation to Medicare.

For example, one hospital might choose to offer care at Medicare rates, another at 130 percent of Medicare, and a third at 200 percent of Medicare. Insurers have not had success in controlling costs by providing their subscribers with tools for price transparency. As I suggested earlier, many patients are not in a position to shop around. But a simplified system based on Medicare ratios might have a significant impact, if only because of the force of public opinion on the institutions charging the highest prices. If it’s too difficult to reinstitute rate-setting, requirements for simple transparency would be a good second choice.

Whenever Democrats get another shot at health

reform, that effort will have to fit within a larger national agenda and other demands facing the country. My proposals for Midlife Medicare and price regulation are a guess about what might be both desirable and feasible at that point. If the ACA marketplaces survive in a weakened form, Midlife Medicare could help reduce the burdens on them and demonstrate how a restructured marketplace with a strong public plan can work. If Republicans have succeeded in destroying the ACA , it may be hard to persuade people to revive that model, and Midlife Medicare could offer another practical way forward, as CHIP did in the wake of the defeat of the Clinton health plan.

Since the lower health-care costs of other countries are mainly the result of more effective price restraint, we could get a lot of the benefit of single-payer from adopting caps on provider payment. But price regulation doesn’t have to wait for a change in national politics. State governments could undertake that function as they once did, focusing now on out-of-network charges as a key point of leverage.

State experiments with different strategies for regulating health-care prices could then prove valuable for policy at the national level.

Of course, the struggle over preserving the gains of the ACA isn’t over. States may be able to step in to make up for some of the Republican sabotage at the national level. But it is also not too soon to think about the alternatives that lie ahead when new opportunities for reform emerge.

Health-care reformers and political leaders need to take a new look at an old idea—price regulation in health care.

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BOLD DES IG N ELEMENTS

The Road to Medicare for Everyone Here’s how we get past the political obstacles that have kept America from making affordable health care a right.

WAY BOLD

By Jac o b S. Hac ker

F

or the first time since the passage of the Affordable Care Act in 2010, Democrats are debating the next big steps in federal health policy. What they’re beginning to see is a path toward universal health care that looks very different from that embarked on seven years ago. This path depends on Medicare rather than the expansion of private insurance. And for those most eager to take this route, it depends on achieving something that has proven impossible in the past: replacing the patchwork quilt of American health insurance, including the employment-based health plans that cover more than 150 million people, with a single government insurance program.

In a way that wasn’t true during the last fight—indeed, because of the last fight and its legacies—a growing share of those on the left are making the case that the United States is finally ready for Medicare for All. Is it? And if not, is there another way to achieve the goal it embodies—affordable health care as a basic right?

Lessons of the Past

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These are questions I’ve struggled with for a long time. As a health policy expert, I’m one of the many social scientists and historians who’ve sought to understand why the American framework of health insurance looks so different from the systems found in other nations. Why do we spend roughly twice as much per person as any other nation while leaving tens of millions of people without insurance and many times more with inadequate protection—all with worse health outcomes?

The basic answer is simple: Americans are distrustful of government, and America’s fragmented political institutions make transformative policies hard to enact, especially when they’re opposed by powerful interest groups. Even at the height of the Great Depression, with overwhelming Democratic majorities in Congress, FDR decided not to include health insurance in the Social Security Act of 1935, because he feared the opposition of physicians would kill the whole bill.

FDR’s decision turned out to be fateful. With America’s

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entry into World War II, the nation’s agenda shifted away from domestic affairs. Unions, corporations, and private insurers stepped into the breach—thanks in part to favorable tax laws and federal support for collective bargaining— and by the 1950s, the majority of working-age Americans got health benefits at work. By the time advocates of government insurance finally had another bite at the apple after LBJ’s landslide election in 1964, they had strategically retreated to the goal of covering those left out of the employment-based system: the elderly and the poor. The result was Medicare and Medicaid—the biggest step toward universal health care until the passage of the Affordable Care Act. The system was a mess, but it was also a minefield. You had a huge insurance industry, allied with a range of profitable sectors that benefited from its open checkbook, from drug manufacturers to medical device makers to highly paid specialists. You had excessive costs that government could finance only with hefty taxes. Most important, for every unfortunate American who fell through the cracks, you had eight or nine more who had benefits at work or through Medicare or Medicaid. To make matters worse, most of these eight or nine had no idea how much their health benefits really cost, because the expense was hidden in their pay packages or spread across all taxpayers.

It would be hard to design a less welcoming context for single-payer. Enacting a universal program meant taking on a lobbying juggernaut to impose taxes on people generally suspicious of government, most of whom were insulated from the true costs of their care. Our unique health-financing system was a reflection of our unique political hurdles. But increasingly it was the system itself that posed the biggest hurdle of all.

There’s a lesson in this history: The struggle over health care has always been about politics as much as policy. The evidence that the American model is inferior is overwhelming, and many policies would make it better. The challenge is figuring out how to overcome the political barriers to pursuing those policies—not only to get them passed, but

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to ensure that they foster the political conditions for continuing improvement.

In the 2000s, I began to write about this challenge, too, drafting a proposal for expanded coverage that contributed to the development of what would be called the “public option.” The idea was to let Americans who didn’t have coverage at work or through existing public programs buy into a Medicare-like national health plan. Thanks to the work of advocacy organizations, such as Health Care for America Now!, the public option eventually made its way into the reform plans of all the leading Democratic candidates for president in 2008—including Barack Obama.

The public option was the main addition by left-of-center thinkers to reform blueprints based on the bipartisan law passed in Massachusetts in 2006. That law, which became the template for the Affordable Care Act, sought to expand private insurance to those who lacked it while trying not to disrupt employment-based plans. It did so by creating a new regulated market for individually purchased private plans (called “marketplaces”). These regulated plans weren’t allowed to discriminate against the less-healthy, and there was new government assistance to help poorer people pay for them. In turn, citizens would be required to show proof of coverage (a.k.a. the individual mandate).

The idea of the public option was to give people who bought insurance through the new marketplaces the choice of a public plan that used Medicare’s payment rates to hold down prices. The aim was to guarantee good backup insurance, especially in the many parts of the nation where there are not many competing insurers, while simultaneously putting pressure on insurance companies to bring down their own costs.

Needless to say, those companies were not fans, and they hammered the public option relentlessly. Critics on the right described it as a backdoor route to single-payer, despite the fact that it would be available only to those who were buying coverage through the exchanges. In the end, the public option died a death of a thousand cuts. A pared-back version that lacked the ability to use Medicare’s rates did make it through the House. But it was eventually stripped from the final bill at the insistence of Senator Joe Lieberman of insurance-rich Connecticut (my home state).

Since the bill needed the support of all 60 of the Senate’s Democrats to overcome a GOP filibuster, the public option was dead. It was a painful reminder of just how difficult the politics of government insurance could be.

Republican Destruction, Democratic Resistance

Many progressives rallied to the public option back in 2009. Yet they are now setting their sights much higher.

The threat posed by unified Republican control has galvanized Democratic voters and activists, especially the

party’s progressive wing. Many have spent the past year in the political trenches fighting to preserve the Affordable Care Act in the face of the GOP ’s relentless assault. Now, energized and mobilized, they have turned that passion toward their own party, pressing candidates and public officials to adopt much bolder positions. In progressive circles, “I support single-payer” is fast becoming a required declaration of a politician’s seriousness about health care.

The most visible sign of the shift is the single-payer plan introduced by Senator Bernie Sanders in September. In 2013, a similar bill introduced by the Vermont senator attracted not a single co-sponsor. His most recent has 16—a third of the Senate Democratic caucus. Moreover, they include all of the party’s most-mentioned presidential contenders, including Cory Booker of New Jersey, Kirsten Gillibrand of New York, Kamala Harris of California, and Elizabeth Warren of Massachusetts. Sanders lost the Democratic Party’s nomination in 2016, but he is defining its health-care vision for 2020.

The increasing boldness of the Democratic left reflects more than political calculations. It also reflects serious shortcomings of the Massachusetts-inspired approach.

The individual marketplaces, in particular, have failed to live up to expectations. Their enrollment of around 12 million is approximately half what the nonpartisan Congressional Budget Office projected when the law passed. Those who’ve enrolled have also been less healthy than expected, sharply driving up premiums (though, thanks to government assistance, few pay the full tab, and premiums are roughly in line with initial CBO projections despite these increases). And many of the ACA marketplaces have had trouble getting private insurers to offer plans at all.

One consequence of all this is that most of the coverage gains under the law have come not from private plans offered in the marketplaces, but from Medicaid, the government program for low-income Americans that was expanded under the law. Indeed, Medicaid enrollment has so exceeded expectations that the CBO’s overall projections for increased coverage have largely panned out despite the disappointing individual marketplace numbers. In an outcome that Medicare’s designers never foresaw, Medicaid (the program for low-income Americans) is now larger than Medicare (the program for the permanently disabled and those over the age of 65), with almost 75 million enrollees, including those covered by the Children’s Health Insurance Program (CHIP).

Of course, the ACA’s travails reflect in part the ceaseless Republican attacks. In addition to the 19 Republican-controlled states that continue to refuse to expand Medicaid, many conservative states worked actively to undermine establishment of and enrollment in the individual marketplaces. Congressional Republicans couldn’t repeal the law outright so long as President Obama held the veto pen. (Not

Many progressives rallied to the public option back in 2009. Yet they are now setting their sights much higher.

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for want of trying: They voted more than 50 times to kill it.)

But they sued the president to stop subsidy payments for private plans, failed to appropriate funds to boost marketplace enrollment, and generally tried to turn their warnings about the ACA’s imminent collapse into a self-fulfilling critique.

Republicans have also dragged their feet on re-authorizing CHIP, which once enjoyed broad bipartisan support.

Even with a willing ally in President Trump, Republicans’ repeal ambitions have continued to fall short. But the president who had promised on the campaign trail to provide “insurance for everyone” has done almost everything within his power to undermine the ACA , and congressional Republicans have shown no sign they’re letting up. Witness their willingness to add repeal of the individual mandate to their big Senate tax bill, which was being reconciled with the House version at the time this article went to press.

In short, many of the problems with the Affordable Care Act are a product of Republican sabotage. But there’s another reason Democrats are gravitating away from the approach enacted in 2014. Those once skeptical of the public option now seem willing to embrace it, and many on the party’s left want to go much further. Those more progressive Democrats generally saw mandated private insurance as a second-best route to expanded coverage and political accommodation—one that had a chance of winning some Republican support, if not at the outset, at least down the road. But if the expansion is lackluster and the political accommodation nonexistent, why cling to the second best?

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To a degree that seemed impossible even a year ago, then, the discussion within the party has come to encompass a whole range of ideas for expanding Medicare, not just the public option. These range from voluntary buy-ins for workers and employers, to lowering the Medicare eligibility age from 65 to 55 or 50, or all the way to Medicare for All. Indeed, to those pressing for single-payer, the public option is small bore. It would provide a backup in parts of the nation at risk of having no private plans, and bring some sanity to health-care prices for those it covered. But it would only be relevant to the limited slice of the population getting coverage through the exchanges. Something much bigger is needed, Medicare for All enthusiasts argue, to rally the sustained enthusiasm of grassroots activists and progressive leaders and truly achieve transformative change.

They might be surprised to know I agree. The case for single-payer is much stronger than it was during the strait-jacketed debate of 2009. The question is whether it’s strong enough, and if not, what might be able to deliver on its promise.

Is It Time for Single-Payer?

What is the case for single-payer? The term itself dates back at least to the 1980s, when a small group of Massachusetts doctors founded Physicians for a National Health Program and began calling for a “single payer” to replace all private insurance and public programs. Unlike reformers in the 1940s and 1950s, they looked not to Social Security

andrew hamik / ap images

In 2013, Senator Bernie Sanders had no co-sponsors for his single-payer bill.

Sixteen other senators are co-sponsoring his most recent bill.

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for inspiration, but to the universal health systems found abroad, especially that of Canada—which consolidated a system of universal government insurance (at the provincial level) in the 1970s.

Today, single-payer is generally a synonym for Medicare, not the Canadian system. But the emphasis on foreign experience remains. Introducing his plan, Senator Sanders declared it would “end the international disgrace of the United States, our great nation, being the only major country on earth not to guarantee health care to all of our people.”

In fact, most major countries on earth don’t have singlepayer. They have multiple payers, but all the payers pay the same negotiated health-care prices and play by the same strict rules to ensure more or less equal treatment of all subscribers—rich and poor, well and sick, young and old.

Even Medicare isn’t really single-payer: A component of Medicare called “Medicare Advantage” allows beneficiaries to enroll in private plans that meet strict standards, and roughly a third of Medicare beneficiaries are in such plans.

The defining feature of the systems found in other rich democracies isn’t the way payments are channeled. It’s who’s covered and how medical prices are set. First, these systems are universal. The government guarantees all citizens coverage and then figures out how to pay for it. Only in the United States is the responsibility to get and pay for coverage largely left up to individuals and their employers, leaving tens of millions to fall through the cracks. The ACA dramatically improved things, but roughly 30 million Americans still remain uninsured and the number appears to be rising again.

Second, these systems use government’s bargaining power to restrain health-care costs. In recent years, as Paul Starr discusses elsewhere in this issue, a consensus has formed among health-care experts that the major reason why U.S. spending is so high is that we pay such high prices for medical goods and services and prescription drugs.

When a nation’s leaders commit themselves to providing insurance to everyone, they become much more aware of bill-padding and price-gouging. They also discover that government has a unique capacity to do something about it: It can require that providers charge uniform prices.

Medicare doesn’t cover the entire population, but it’s evolved in the same direction. At first, it paid whatever health-care providers demanded, and costs soared. Since the 1980s, however, it’s increasingly improved its ways of paying for care, and costs have risen significantly more slowly than in the private sector.

My Yale colleague Zack Cooper, a health economist, has gained access to the claims records of some of the biggest commercial insurers. What he’s found is that the prices they pay are much higher than Medicare’s. They also vary enormously across providers. Moreover, the gap between Medicare and private insurance has been growing, as

doctors and hospitals increasingly consolidate into large medical systems demanding premium prices. In recent years, Medicare’s overall tab has risen with the retirement of the baby-boom generation. Yet its spending per enrollee, which is what really matters, has been essentially flat, rising less quickly than either economic growth or inflation.

The experience of Medicare turns on its head the thinking behind the Republican repeal drive. According to many conservative critics of the ACA , patients should be left to pay for most care directly, so they have an incentive to shop wisely. But patients want and need insurance, especially for the big-ticket items that account for most health spending.

And they need the expertise of providers to know what to shop for, especially when they’re sick or injured. So insurance is going to pay for a lot of care, and providers are going to make most of the decisions that determine how that money is spent. This means, in turn, that someone has to put limits on what providers charge. The only institution that has the proven ability to do that is the government.

In short, Medicare for All isn’t just a good slogan—and certainly a much better slogan than single-payer. It’s a policy grounded in evidence about what works both here and abroad. It’s also insanely popular, seen across the partisan divide as a vital part of the American social contract.

Even voters who hate Obamacare love Medicare.

Medicare is also simple—or at least a lot more simple than the Affordable Care Act or the complex tweaks to it now being debated. Everyone pays in during their working lives, and everyone is covered at age 65 (or if they’re permanently disabled). And unlike private plans, Medicare doesn’t limit which doctors and hospitals patients can see: Virtually all accept its payments. It limits what prices those providers can charge.

The message that’s being sent by Medicare for All enthusiasts is that the days of technocracy and triangulation are over. Stop offering Rube Goldberg contraptions that Americans will barely understand and activists won’t rally behind. Stop trying to fill the gaps in a flawed system and smuggle in cost-control through the back door. Just say everyone is covered by Medicare, period. After all, Republicans are certain to call anything that Democrats try to do a “government takeover.” So why not embrace the epithet and offer voters a takeover they seem to like: Medicare?

It’s a powerful message, and it counsels a bold path.

Unfortunately, that path is far more daunting than many embarking on it seem to understand.

Someone has to put limits on what providers charge.

The only institution that has the proven ability to do that is the government.

Political Reality Bites

Our nation’s distinctive policy trajectory has left us with a fragmented and exorbitantly expensive system. At the same time, however, that system all but guarantees that every reasonably well-insured group—whether workers

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Under singlepayer, those with good coverage would suddenly face a steep tax bill for something that they mistakenly believed they were getting on the cheap.

with employee health plans or beneficiaries of Medicare— will be distrustful of change and hyper-sensitive to new costs, even if those costs merely replace hidden charges they’re now paying.

Remember: More than 150 million Americans are covered by employment-based health plans. These plans have become less common, more expensive, and more restrictive. Still, we’re talking half the population, and people with workplace coverage are generally satisfied (though beneficiaries of Medicare are even happier). Replacing these plans with Medicare would be a huge lift. Even the extremely modest dislocations caused by the ACA precipitated a bipartisan scramble to ensure people could keep their current plans, however ill-designed or inadequate.

Financing this transition would also be a formidable challenge. We don’t know exactly how much Medicare for All would cost, but independent analysts who looked at Sanders’s 2016 campaign proposal estimated it would require new federal spending on the order of $2.5 trillion a year. Sanders’s campaign said the total would be closer to $1.5 trillion a year. Yet whatever the exact number, we’re talking about a historic tax increase: $1.4 trillion represents around 8 percent of our economy. By way of comparison, the 1942 tax hike to fund World War II amounted to 5 percent of GDP. The 1993 tax hike under President Bill Clinton that Republicans (falsely) claimed was the “largest in history” equaled just over half a percent of GDP. Financing is always the hardest part of health reform. In recent years, Vermont and California have each flirted with statewide single-payer—only to founder when the scope of required taxes became clear. Vermont and California are not the federal government, with its much greater revenues and power. But the federal government isn’t Vermont or California, either, with Democrats holding unchallenged control.

Now, it’s important to note these taxes would replace private sources of financing. Alas, however, most wellinsured Americans have no idea how much they’re now paying. What they see is their portion of the premium and their out-of-pocket spending. What they’re actually paying is much greater. It includes the lower wages they receive because they get health benefits instead of cash, as well as the higher taxes they pay on everything else because of the lower revenues that government receives because it doesn’t tax their medical benefits as pay.

Our system is almost perfectly designed to hide the true costs of health care. Indeed, it would be hard for a system with such outrageous costs to survive if this were not so. Donald Trump lamented earlier this year: “Nobody knew health care could be so complicated.” But complexity isn’t randomness. Much of what makes health care so complicated reflects the preferences of those who benefit from a lack of transparency: drug companies, highly paid

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specialists, medical device manufacturers, commercial insurers, and so on. Yet the cure offered by Medicare for All—immediately bringing all these costs into the open— could very well kill the patient. Those with good coverage would suddenly face a steep tax bill for something they mistakenly believed they were getting on the cheap.

To be sure, Medicare for All would generate big savings, and not only because it pays doctors and hospitals less than private insurers do. Medicare’s administrative costs are a tiny fraction of commercial plans’. Nor does it have to earn profits or pay high CEO salaries.

But extending Medicare to the whole population would involve new spending as well as new savings—not only to cover those currently uninsured, but also to raise payment levels for the 70 million-plus Americans covered by Medicaid, a notorious under-payer that makes Medicare look lavish. Moreover, single-payer advocates want to upgrade Medicare as well as expand it. Sanders’s new bill offers extremely broad protections, including dental and vision benefits, with no out-of-pocket costs. That’s much more than what’s now offered by Medicare—or Canada, for that matter—and would likely raise spending a lot.

But doesn’t Medicare for All at least make sense as an aspiration? Shouldn’t advocates start with their strongest proposal, rather than compromise even before the debate begins? It’s one thing to aim for revolutionary change—any campaign for social transformation should have a vision that extends beyond the immediate fight.

It’s quite another to put forth a concrete plan to achieve that change, only to find you’ve divided your supporters, galvanized your opponents, and frightened everyone else.

Here it’s worth noting another perverse feature of our system: It enriches a whole set of deep-pocketed stakeholders willing to spend whatever it takes to block changes that threaten them. Any political liabilities of a plan will be found and ruthlessly exploited. That has been the story of every health-care debate our nation has had, including the failure of the Clinton health plan back in 1994. When President Clinton described his plan before a joint session of Congress, it commanded majority support among voters.

But after a few months of GOP and industry attacks, its poll numbers were in the basement. By the time Democrats gave up on trying to pass it, a majority in favor of congressional action had turned into a majority afraid of it.

Medicare for All is much simpler than the Clinton plan was, and it builds on a popular program. But it still has vulnerabilities that opponents will ruthlessly exploit. In polls, support for single-payer declines substantially when these vulnerabilities—higher taxes, a greater government role— are mentioned even innocuously. The longtime reform advocate Richard Kirsch, who headed Health Care for

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America Now! during the struggle to pass the ACA , puts it this way: “The solution is the problem.” When public attention shifts from problems to solutions, every bit of rhetorical ammunition will be used to demonize the solution. And overcoming this initial impression can be close to impossible. In politics, opponents don’t have to offer an alternative. They can just destroy yours.

Even candidates could put themselves at risk. Fast-forward to the 2020 campaign. The Democratic nominee has electrified the convention by promising to enact a Medicare for All bill. The campaign releases a detailed blueprint.

The GOP and a vast assemblage of deep-pocketed organizations respond by hammering Democrats for wanting to raise taxes steeply while taking away Americans’ health care. It’s hard to see how the candidate—or the cause of Medicare for All—wouldn’t be hurt.

Republicans just learned what happens when you make a health-care promise that turns out to be unpopular beyond your base. Democrats should not make the same mistake.

Medicare Part E

But Democrats should not make the opposite mistake either. A proposal must have a realistic path to enactment.

But it also has to be ambitious enough to inspire supporters, and compelling and understandable enough to convince others to become supporters. It has to be grounded in policies that are popular and known to work—policies that can actually reach universal coverage and restrain health-care prices.

Perhaps most important, it has to be able to command support not just before it passes, but also afterward. If the troubled saga of the exchanges tells us anything, it’s that even the most technically sound policy will fall short if it does not generate and sustain pressure for continuing expansion and improvement. Successful policies do not just reflect the politically possible; they reshape it.

I’ve already said I don’t think the public option is robust enough to create such pressure, even though it would do much good. As a rallying cry, “Make Medicare available to the 12 million people buying insurance through the ACA marketplaces!” leaves much to be desired. Instead, the message should be at once simpler and bolder: “Make Medicare available to everyone.” All Americans should be guaranteed good coverage under Medicare if they don’t receive it from their employer or Medicaid.

To achieve this goal, a new part of Medicare would need to be created for those not already covered by the program. I’ve been calling this new component “Medicare Part E” (for “everyone”)—a term that’s been used before by Johns Hopkins’s Gerard Anderson and others.

Medicare Part E would cover the broad range of benefits covered by Medicare Parts A (hospital coverage), B (cover-

age of physicians’ and other bills), and D (drug coverage).

The central feature of Medicare Part E is guaranteed insurance. All Americans would be presumed to be covered. They would not need to go through complicated eligibility processes or hunt down coverage that qualified for public support or even re-enroll on an annual basis.

Once someone was in Part E, they would remain in Part E unless and until they were enrolled in a qualified alternative—whether an employment-based health plan with good benefits or a high-quality state Medicaid program.

Thus, the centerpiece of Medicare Part E is the same as that of single-payer: a guarantee that Medicare is there for everyone. Unlike single-payer, however, Medicare Part E seeks to improve employers’ role rather than replace it. It does so by establishing new standards for employment-based plans and requiring that all employers contribute to Medicare if they do not provide insurance directly to their employees.

In this respect, Medicare Part E builds on the ACA’s requirement that large employers provide coverage or pay a penalty. Under the 2010 law, companies with more than 50 full-time workers are already required to pay a penalty if they don’t offer insurance and their workers get subsidized ACA marketplace coverage. The penalty, however, is modest compared with the cost of health benefits, and there’s no guarantee workers whose employers pay it actually get marketplace coverage.

Democrats knew this was a problem back in 2010. In fact, they tried to fix it: The House version of the Affordable Care Act required that employers that didn’t insure their workers not only pay a fee, but also provide the federal government with the information to enroll those workers in health coverage though the marketplaces. Like the public option, however, this provision was dropped in the Senate.

It should be resurrected. Under the proposal I’m describing, employers would either provide insurance that was at least as generous as Medicare Part E’s or they would contribute to the cost of Medicare Part E, which would automatically enroll their workers. Because the contribution requirement is central to signing people up, it should cover the entire workforce—including independent contractors and other self-employed workers (who would pay the contribution directly, as they do Medicare and Social Security taxes). But the level of contribution should vary with wages. That’s how the House bill worked: The contribution would have risen from nothing for the lowest-wage firms up to 8 percent of payroll for the highest-wage firms.

Health policy wonks call this “play or pay.” Employers would either play by offering qualified coverage to their workers (and their workers’ families) or pay the federal government to cover their workers (and their workers’ families) through Medicare Part E. Under this system, everyone who worked or lived in a family with a worker—including the self-employed—

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would be automatically covered. Those without any tie to the workforce could be signed up when they received other public benefits or filed their taxes or sought care without insurance.

But just as important as signing people up is making sure they remain signed up. Once people were enrolled in Medicare Part E, they would remain enrolled for as long as they didn’t have verified alternative insurance.

What about those eligible for Medicaid? I was once highly skeptical of retaining Medicaid as a separate federal-state program. But Medicaid has evolved tremendously in the past half-century—from a marginal program of welfare medicine into the nation’s largest insurer. And it has proved more politically resilient than many experts,

Instead, the federal government could assume much of the responsibility of enrolling people into state Medicaid programs. When someone receives insurance through Medicare Part E—whether through the workplace or through other outreach and enrollment efforts—the federal government would check to see if they qualified for Medicaid and, if so, transfer their coverage to the states. States, in turn, would be required to tell Medicare Part E whenever someone’s Medicaid coverage lapsed for whatever reason, so they could be covered by the federal government instead.

Finally, the federal government could put up new funding to bring Medicaid’s payment levels closer to Medicare’s—as it did in the initial years of the Affordable Care Act. These simple steps could all but eliminate the most serious problem with Medicaid today: that millions who are eligible never receive its protections. Indeed, they could complete Medicaid’s historical transformation from a complex, stigmatizing program that many health-care providers shun into a system of easily accessible coverage with payment levels high enough to attract broad provider participation.

Once people were enrolled in Medicare Part E, they would remain enrolled for as long as they didn’t have verified alternative insurance.

including me, expected. Nonetheless, it remains highly variable in quality and breadth across the states, is facing severe political and fiscal pressures, and pays doctors and hospitals so little that many providers refuse to accept it. The biggest problem is the continuing unwillingness of many Republican-controlled states to expand their programs. But there are also millions of Americans who are eligible for Medicaid, but who fall through its cracks, deterred by complex and burdensome eligibility rules and the stigma that still attaches to the program.

Medicare for All has a straightforward answer to these problems: fold Medicaid into Medicare. And, indeed, under my proposal Medicaid could be replaced with Medicare Part E, with wraparound benefits for those previously eligible for Medicaid to ensure they continue to receive as broad benefits as in the past. But total nationalization of Medicaid would be both costly and disruptive, and it may not be necessary to achieve the objective of ensuring that state programs are high-quality and that no one falls through their cracks.

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In short, opening up Medicare to everyone would deliver what’s most inspiring about single-payer—health care as a basic right of citizenship. Yet it wouldn’t require replacing employment-based health insurance in one fell swoop.

That’s because a large share of employers now providing health benefits would likely continue to do so.

After all, the penalty in the ACA is modest compared with the cost of benefits, but most larger employers still offer health insurance. Some might feel less compunction about paying the fee if it were a contribution rather than a penalty. Some might not want to upgrade their plans to match Medicare Part E. But previous estimates of playor-pay plans suggest that at any contribution rate close to the House plan’s, most employers providing coverage would continue providing coverage.

Medicare Part E would also begin to deliver on Medicare for All’s second promise—lower prices. For one, more people would be covered by Medicare, which would mean more services financed at Medicare rates. For another, private plans would face competitive pressure to demand better prices so their customers wouldn’t switch to Part E. At the same time, Medicare should be allowed to bargain for lower prescription drug prices as do other rich nations. Americans pay far higher prices for drugs than do citizens abroad, despite the fact that much of the investment in new drug development begins in U.S. federal R&D spending. The Medicare Part D benefit enacted in 2003 by President George W. Bush and a Republican congressional majority explicitly barred Medicare from providing drug coverage directly (it vested this responsibility in regulated

s p e n c e r p l at t / g e t t y i m a g e s

Equality and Efficiency

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private plans)—precisely because drug manufacturers knew they would be required to bring down their prices if it did. Drug coverage should be part of the basic Medicare package, for young and old alike.

Private insurance plans that participate in Medicare Advantage should also be required to offer coverage to both old and young. Medicare patients like these options, and younger Americans will want them, too. No less important, private insurers are deeply invested in Medicare Advantage. Ensuring they would still have a role—especially when it is lessened in other parts of the market—would reduce their inevitable opposition.

So too, of course, would ensuring that large employers still have the option and incentive to provide private coverage. (Most large employers pay medical claims directly—a practice known as “self-insurance”—but they often contract with large insurers to manage the benefits). Indeed, this system might even be more attractive than the ACA to the largest insurers, which have not shown much interest in the ACA marketplaces.

Many policy experts are critical of Medicare Advantage, because private plans have tended to skim off the healthiest Medicare patients. But the program was improved by the ACA , which reduced the payments to health plans to better reflect the actual cost of providing benefits to enrollees. Moreover, the playing field between Medicare and private plans would be even more level if Medicare could provide drug coverage directly. Today, only Medicare Advantage plans are allowed to cover prescription medicine alongside other services, which is one big reason beneficiaries enroll in them. Sweeten traditional Medicare, and private plans will lose this unfair advantage.

According to recent studies, the most efficient Medicare Advantage plans are already delivering Medicare’s core benefits for less than Medicare can. This is, in large part, because these plans operate in a market in which their main competitor is Medicare, with its relatively low rates.

Thus, they can pay rates close to Medicare’s, and still get providers to participate in their networks. (This, by the way, is one reason why privatizing Medicare would be a disaster; without the bargaining clout of the traditional program, private plans would be paying the exorbitant prices they pay in the rest of the market.)

Medicare Part E could even give private plans additional leverage over providers. This idea is counterintuitive—wouldn’t a bigger public program just shift costs onto the private sector?—but it’s borne out in the experience of Medicare Advantage. And if Medicare covered more Americans younger than 65, this dynamic could play out in the rest of the market, too. After all, even the most consolidated and costly provider systems accept Medicare rates for older patients. Once Medicare Part E entered the

mix, these lower rates would be paid on behalf of many younger Americans, too. For providers, the alternative to private payments would increasingly be Medicare rates for younger as well as older patients. As a result, private plans would be able to lower what they paid for nonelderly patients and still attract providers.

Of course, even with these savings, Medicare Part E would require additional financing beyond the employer contributions. For starters, those enrolled in Medicare Part E should have to pay an additional premium beyond the payroll-based contributions made by employers (or by selfemployed workers). As in Medicare Part B, these premiums should cover only a modest fraction of the total cost of Medicare Part E, and they should vary by income, with lower-income enrollees paying a minimal amount. (For workers, these premiums should be automatically deducted from pay.) The exact premium would depend on the precise benefits covered, as well as the employer contribution rate.

But the full charge for higher-income enrollees would likely be in the range of $300 per month for family coverage. This estimate is based on a 2008 analysis conducted by the Lewin Group—an independent consulting firm with expertise in micro-simulation modeling of health-care plans.

To be sure, other sources of financing would also be needed. The improved benefits for current Medicare beneficiaries could be financed, in part, by increasing the Medicare tax paid by workers (which the ACA applied, for the first time, to capital as well as labor income). There is also a strong argument for bridging some of the remaining funding gap with relatively progressive tax sources, such as an income-tax surcharge on extremely high-income households. Still, because most Americans who receive employment-based insurance will continue to do so, the new costs are much more modest than those for single-payer. In its 2008 analysis, Lewin estimated that 99.6 percent of Americans would be covered and that the proposal would lower national health spending and require modest new federal spending. Over time, it was projected to produce enormous savings for employers, households, states, and the federal government.

This system might even be more attractive than the ACA to the largest insurers, which have not shown much interest in the ACA marketplaces.

Daring—and Doable

Medicare Part E is an ambitious proposal, and I’m under no illusion about how difficult it will be to enact. Obviously, any significant expansion of Medicare is a non-starter so long as Republicans control Washington, but Democrats are not unified, either. The Affordable Care Act was the product of a debate within the party that began well before President Obama’s election. The next big steps toward universal insurance will require a similar conversation and convergence.

It will also require tough thinking about how to build support for these steps over time, something Democrats haven’t exactly excelled at. So far, the ACA has failed to

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The big steps implied by Medicare Part E will get us to guaranteed universal coverage.

Unless we can jump across that last political divide, Sanders’s big steps will not.

Jacob S. Hacker is the director of the Institution for Social and Policy Studies and the Stanley B. Resor Professor of Political Science at Yale University.

generate the kind of middle-class buy-in that has made Medicare so popular and resilient. To the contrary, many Americans—including those covered by Medicare—ended up seeing the law as a threat to their benefits, despite the many ways in which it improved Medicare and private plans. Indeed, over three election cycles from 2010 to 2014, Republicans peeled off the votes of older Americans by frightening them into believing that the ACA would cut their benefits—or worse (remember “death panels”?).

Thus, advocates will need to prominently improve Medicare for the elderly and disabled even as they open up the program to the rest of Americans. The two most important upgrades are long overdue: a cap on out-of-pocket costs, which Medicare inexplicably lacks, and a direct prescription drug benefit. No less important, these upgrades need to be coupled with ongoing strengthening of the ACA standards for employment-based health plans as well, so workers covered by their employers rather than Medicare don’t feel they’re getting a raw deal.

Even with these boxes checked, the battle will be intense.

Providers, drug manufacturers, and insurers will vigorously fight any plan that threatens their profits and privileges.

Every interest group will have a pet demand: Big commercial insurers will want new Medicare enrollees to get access to private health plans through Medicare Advantage; drug manufacturers will inevitably try to limit the scope of federal bargaining for better prices; providers will want a premium over Medicare rates. No country has gotten to universal health insurance without making concessions to industry stakeholders. (Asked how he overcame doctors’ resistance, the architect of the British National Health Service replied that he “stuffed their mouths with gold.”) But every step toward a bigger Medicare program increases government’s capacity to resist such special pleading in the future.

How big a step will be possible if Democrats regain unified control of Washington? It’s hard to know and will depend on whether they can come together around a common vision, as they did in the late 2000s. But one of the virtues of Medicare Part E is that its core components could be pursued sequentially if they couldn’t be enacted all at once.

Medicare could be upgraded, and Part E could be added to the exchanges. Employers could be given the option of buying into Medicare Part E to cover their workers; at the same time, the standards for private employment-based plans could be raised. Then, the penalty under the ACA could be transformed into a contribution requirement— first for larger employers, then for all employers. Each of these steps would be popular, do much good, and create momentum for further action.

Even Medicare for All purists understand a staged approach might be necessary. Buried in the back of Sanders’s new bill, for example, are provisions that are supposed

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to go into effect during the law’s first four years, before the complete replacement of private insurance. These include an expansion of Medicare’s benefits, coverage under Medicare for everyone up to age 18, and measures to allow people older than 35 to buy into Medicare. These provisions reflect the idea that an expanded Medicare program may have to be achieved in steps. The problem, however, is that last great leap: the replacement of all employment-based coverage with Medicare overnight. The big steps implied

by Medicare Part E will get us to guaranteed universal coverage. Unless we can jump across that last political divide, Sanders’s big steps will not.

Other proposals on the table—such as lowering the Medicare eligibility age to 55 or 50—might also stall out. The question to ask is whether an expansion will increase or decrease the pressure for more. Those who designed Medicare thought it would be a stepping stone to universal insurance. But because it basically took the most sympathetic group out of the employment-based system, it never moved much beyond its original beneficiaries. (Indeed, those beneficiaries have resisted coverage expansions they see as hurting their coverage.) The same thing might happen if Medicare were expanded to 55- to 65-year-olds: a bigger Medicare program but not affordable health care as a right.

Fortunately, Democrats will be able to move forward even if they don’t have the 60 Senate votes they momentarily had in 2009. That’s because many of the changes I’ve discussed—improved Medicare benefits, stricter rules for employment-based plans, even the establishment of Medicare Part E—could be achieved through the so-called reconciliation process. As Republicans have learned, it’s difficult (though hardly impossible) to use this process to roll back the ACA’s regulations. But advocates of expanded coverage want to build on these rules, not gut them. Nothing is simple when it comes to budget procedures, but many of the big steps toward Medicare Part E should be possible through the budget process, meaning they need just 50 votes in the Senate.

The big unanswered question is whether those now

demanding single-payer will fight for these changes, even if they fall short of Medicare for All. Every social movement in our nation’s past has featured tensions between pragmatists and purists. These fissures can be painful, but they can also be productive. The Social Security Act passed only because powerful grassroots forces were pressing for more.

The passion of those who resist half-measures is essential. But passion should not blind us to political risks. The test of seriousness should not be whether politicians say, “I support single-payer,” but whether they are willing to support policies that will truly achieve its goals: health care as a right, at a cost our nation can afford.

Y BOLD H E A LTH REFORM

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DES IGN ELEMENTS

The Next Big Thing in Health Reform: Where to Start?

LWAY BOLD

By Jean n e Lambrew a nd El len Mont z

T

H E A LTH

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2020

he next Democratic candidate for president or Democratic Congress will likely embrace some sort of public plan as part of the “next big thing” in health reform. Numerous congressional Democrats have thrown their weight behind Senator Bernie Sanders’s “Medicare for All” bill. Support is also growing for various kinds of “public options”—opportunities to expand the role of public programs through Medicare, Medicaid, or the health insurance marketplaces.

These ideas are similar in their goal of providing lowercost, simpler, and more secure health-care coverage for all Americans through insurance plans that are publicly backed and organized. The proposals reflect frustration with private insurers and a belief in a stronger and more direct role for government, but they differ in how they work. Single-payer plans concentrate health-care finance in the federal government, while Medicare and Medicaid buy-in proposals build on existing programs, payment rates, and relationships with health-care providers.

The proposals also differ in where they start. Barack Obama is among the many who have said that if we could start from scratch, a single-payer system would make the most sense. The U.S. health system, however, is far from a blank slate. It is the largest in the world in spending. Relatedly, it is one of the nation’s largest employers, as well as its most lucrative: Nine of the top ten highest-paid occupations are in health care, and both the industry and its employees are likely to resist changes they see as threatening. More than nine in ten Americans now have coverage thanks to the Affordable Care Act (ACA). Changing this entrenched system incrementally has proved daunting; changing it radically may prove impossible. The cliché “don’t bet against the house” is safely applied in health policy.

In light of those considerations, we focus here on four major approaches to expanding the public role in achieving the goals of health-care reform. These approaches do not necessitate picking one preferred plan over all others, nor do any of them inevitably lead to a predetermined outcome.

The expansion of programs often stalls, as is evident in

the long lags between past health reforms. Consequently, the next steps we take are as important as the ultimate destinations that we hope to reach.

Start where private insurance ends

Historically, public coverage has started where private insurance has stopped. The recognition that private insurance would not cover the old, the poor, and people with disabilities contributed to the passage of Medicare and Medicaid in 1965. Nearly five decades later, Democrats designed the ACA to close the remaining gaps, first, by making Medicaid a true safety net for all low-income Americans and, second, by requiring private insurers to cover all people regardless of any pre-existing conditions. The Supreme Court partly undid the first step by making the Medicaid extension optional for the states. Nonetheless, filling the gaps as far as the ACA did led to 20 million more people being covered. The Trump administration’s efforts to undermine the ACA have threatened those gains and led to skyrocketing health insurance premiums for 2018. Additionally, private insurers have balked at offering coverage in the individual market in parts of the country, jeopardizing residents’ access to any plan. The prospect of “bare” counties has been one impetus for bills such as “Medicare X,” which would offer a Medicare-like plan in counties with no or only one other insurer.

Republicans have previously embraced the concept of a public plan as a gap-filler where no private plan is available. The Medicare prescription drug program, enacted under President George W. Bush, has a government-funded fallback plan for areas with fewer than two private plans. Former Maine Senator Olympia Snowe supported a “triggered” public plan for inclusion in the ACA , a proposal blocked by Senator Joe Lieberman. Depending on its design, a fallback public plan could improve affordability in areas where there is low competition and high prices.

This deployment of public plans, however, may not be necessary to address the problems in these areas, since other responses might suffice. For example, federal law could require urban insurers to serve nearby rural areas, or it could

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extend Medicare’s provider payment rates to private insurance plans in places with no or low competition. A public plan, once it enters an area, may make private insurers less likely to return, potentially replacing private with public plans one county at a time. Most of the areas with few insurers are in red states where governors and legislatures have shown little interest in making their health insurance markets work.

While this geographic pattern could make a public option fallback harder to pass through Congress in the first place, it could lessen partisan opposition to public plans in the long run if they succeeded in those areas and built up local support.

LESS OLD NEXT

If the public plan “wins” and gets most enrollment, it would be a transition propelled by individuals’ decisions rather than a government decree.

Another familiar approach is age-based. By far, people under age 18 and over age 65 have the lowest uninsured rates as a result of the programs that America has established for the old and the young. After the passage of Medicare to cover all seniors in 1965, policymakers focused on covering children. Legislation was enacted in 1988 to expand Medicaid to all poor children and in 1997 to create the Children’s Health Insurance Program for near-poor children. In addition to extending these programs, the ACA requires that insurers let young adults stay on their parents’ plans until age 26, one of the law’s most popular provisions.

This year has seen a revival of plans to lower the age of eligibility for Medicare, a proposal first made by President Bill Clinton in 1998 and later debated for inclusion in the ACA . Senator Sanders’s Medicare for All bill includes a version of that idea. The Medicare Buy-In Act and the Midlife Medicare program proposed by Paul Starr would extend Medicare as an option for older adults, variously reducing the eligibility age to 55 or 50.

Proponents of lowering the age of eligibility for Medicare point out that expanding a popular program may be the easiest way to expand government insurance. Starting at age 50 aligns with AARP ’s new definition of “older Americans.” This age group tends to have lower average health costs than those already on Medicare yet higher average costs than those in private coverage, so shifting them to Medicare has the potential to lower the average costs both for Medicare and individuals in private insurance. Lowering average premiums in the private market would help attract younger enrollees. And if the goal is to cover all Americans over time in Medicare—literally using it as the foundational health program for people of all ages—this would be the most logical place to start.

The proposals also highlight the differences between Medicare and the ACA marketplace, forcing hard choices.

Do these older Americans, for example, get Medicare’s lower deductibles or the ACA’s annual out-of-pocket limit? Do they get Medicare’s social insurance subsidies or the ACA’s income-based ones? And, now that the ACA guarantees

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access to private plans for this group, is providing different coverage for older Americans the top priority? Older adults are much more likely to be insured and have higher income than younger adults, who may object to being left out. Last but not least, even though lowering Medicare’s age eligibility is the expansion most similar to the current program, it would likely be subject to the scare tactic often used on senior voters—that it would be “messing with Medicare.”

MAKE IT A CHOICE

Starting about a decade ago, thanks largely to the work of Jacob Hacker, the idea of letting people choose between a public and private insurance plan entered the national debate. Rather than selectively extending public plan eligibility for certain groups, this approach would let people “vote with their feet.” The House-passed version of the ACA included a nationwide public plan (distinct from but resembling Medicare) to be offered alongside private plans to individuals and small businesses. Hacker now proposes that large employers have the choice of a public plan as well. Another option, advocated by Michael Sparer and embodied in a bill introduced by Senator Brian Schatz, would let any eligible individual buy into Medicaid, including those otherwise eligible for individual marketplace or employer coverage.

This approach has appeal in a nation that values the concept of choice. It forces a side-by-side comparison of the different ways to organize coverage, a comparison that proponents believe will dispel myths about public plans.

The Congressional Budget Office estimates that proposals such as the one in the 2009 House bill would stimulate competition, improving the value of coverage and reducing its cost. If the public plan “wins” and gets most enrollment, it would be a transition propelled by individuals’ decisions rather than a government decree.

Choice, however, can undermine a system of insurance.

People know their health status better than insurers or the government, so it stands to reason that sick people would gravitate to the public plan while healthy people would choose private plans—or vice versa—depending on how the program is designed. That problem can be mitigated behind the scenes through mechanisms such as risk adjustment (compensating health insurers for enrolling a disproportionate percentage of higher-cost enrollees in the market), as is done in Medicare Advantage (although such a system comes at a cost to the federal government). Alternative ways to keep private plans competing alongside a public plan include setting that plan’s provider payment rates closer to private plans’ rates than Medicare’s or requiring Medicare rates for out-of-network providers in private plans, as recently proposed by Zirui Song in The New England Journal of Medicine. Failing to adopt measures such as these could result in private insurers pulling out of the markets,

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in which case people will be deprived of the choice this model promises. For choice models to work, policymakers would need to make periodic adjustments (as has been done for Medicare Advantage), and that kind of calibration may not be feasible in today’s politically polarized environment.

GO WHERE THE MONEY IS

Another historical point of entry for public programs has been people with serious health needs. Medicaid covers people with certain disabilities, including, in some states, people whose monthly or quarterly medical bills are so high that the bills impoverish them. Medicare covers people with end-stage renal disease and beneficiaries of Social Security Disability Insurance after a two-year waiting period. Proposals to eliminate Medicare’s waiting period have been considered for decades. As Harold Pollack argues, addressing the needs of people with disabilities requires the development of distinctive capacities in public programs, which some states have done. Building up those capacities nationally would not only improve the care of our most vulnerable but also stabilize private insurance markets. The historical impediment to such an approach has been the cost to the federal government.

Now that the ACA has fully integrated people with preexisting conditions into private plans, policymakers are considering public means of lowering the cost of private insurance. In 2015, private plans paid more than Medicare for the top 1 percent most expensive Americans. Public reinsurance has become a popular, bipartisan idea to lower premiums and improve the functioning of the individual market. By reimbursing health insurers for high costs (for example, for organ transplants or treatment for hemophilia), reinsurance lowers cost uncertainty for insurers and thus the premiums they charge. Alaska and Oregon are implementing such programs in 2018, and legislation sponsored by Senators Susan Collins and Bill Nelson supports additional state programs. The “Invisible Risk-Sharing Program,” a type of reinsurance offered by Republicans in 2017, would pay the costs of people with high-cost conditions like cancer at Medicare provider payment rates. Such a program could, as we have suggested in an article in Health Affairs, extend to employer plans as well, efficiently spreading risk to lower premiums for the 175 million Americans with private coverage.

Public reinsurance has the benefit of lowering premiums and allowing people to “keep their plans.” It builds on a well-established role for government: helping people who face financial hardship, as the federal government does in floods and other natural disasters. Reinsurance was the only proposal in both the Republicans’ 2017 “repeal and replace” bills and Democratic alternatives. And it has the potential of lowering health costs generally depending on its design.

Public reinsurance, however, would primarily replace pri-

vate reinsurance, and some employers may balk at the strings attached to the money. Because it is a back-end program, employers and insurers rather than the government (and members of Congress who voted for it) would likely get credit for its results. Republicans may reject it as another insurance company bailout, while Democrats may reject it as propping up private insurers rather than expanding “true” public plans.

Like other proposals that lower reimbursement, this one could also engender opposition from physicians and hospitals.

WHICH PATH FORWARD?

It is hard to work out the details of the next advance for affordable coverage when the specter of “Obamacare repeal and replace” still looms. Preventing dramatic reductions in coverage under a Republican-controlled White House and Congress remains a priority.

What the health system looks like at the end of the Trump era will affect future choices. If today’s major health programs are frayed but structurally intact, a future Congress or president may prefer less-dramatic proposals, especially given what else might be on the national and international agenda. Starting with a back-end public reinsurance program to lower costs would build trust and support among employers for a program that could be expanded by making more costs, and thus more people, eligible. A fallback public plan or a public plan choice may be the natural solution for the marketplace. While lowering the age of eligibility for Medicare may be considered a partial solution to private insurance problems, it could be part of larger Medicare reform. And an “all of the above” approach could be taken.

Alternatively, if the health system is in shambles when the next president takes office, the appetite (although not necessarily the ability) to move more rapidly to some type of public plan may be greater. Widespread problems—from few unsubsidized enrollees in the individual market to a watered-down Medicaid program to a return to large annual premium hikes in Medicare and employer-based health plans—could fuel proposals that give all Americans the promise of more affordable, reliable health coverage.

No matter the state of the system, proponents should consider calibrations of various ways to expand public plans in recognition of Americans’ distrust of change. We tend to look back before looking forward. Fear of change worked against the ACA’s movement of people to reformed private plans; many preferred to “keep their plans,” despite their flaws. That same fear worked against Republicans’ attempt in 2017 to take away the ACA’s Medicaid expansion. A recent survey found that nearly half of Americans do not realize they would have to change plans under a single-payer system. Regardless, ideas across the spectrum we described should be ready since the Trump administration’s health policies will almost certainly necessitate a response.

Jeanne Lambrew is a senior fellow at the Century Foundation and former deputy assistant to the president for health policy in the Obama administration. Ellen Montz is a fellow at the Century Foundation and a former senior health policy adviser at the White House.

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BOLD DES IG N ELEMENTS

Capping Provider Payment: An Alternative to a Public Option

WAY BOLD

By John Holahan a nd Lind a J. B lumber g

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efore the Trump administration adopted policies undermining the Affordable Care Act, the ACA’s marketplaces were working well where there was competition, but faced high and rapidly increasing premiums in areas with only one or two insurers or a limited number of providers. Without significant competition, insurers have little incentive to negotiate lower payment rates for hospitals and doctors, and when a provider system is essentially a monopoly in a region, even a well-motivated, dominant insurer has little negotiating leverage. One answer some people have suggested for these problems of high premiums and concentrated market power is to create a public option—a government-run plan to compete with private insurers. We suggest a simpler and more politically feasible approach that has had a record of success and bipartisan support in the Medicare program.

The Medicare program allows private insurers to compete with traditional Medicare. The option, known as Medicare Advantage, has been attractive to many insurers, including large national insurers, and it now serves about one-third of all Medicare beneficiaries. Private insurers’ premiums are set in relation to a benchmark determined by the costs of the traditional Medicare plan in a region. Insurers charge beneficiaries higher premiums if the insurers’ average costs are above the benchmark, and they charge less or provide additional benefits if their average costs fall below the benchmark.

A key provision in Medicare Advantage is that it does not allow “balance billing” by providers, even if they are out of network. In other words, out-of-network providers cannot charge beneficiaries more than Medicare rates—a cap that has had the effect of constraining rates for in-network providers as well. Limits on payment rates for hospitals and doctors have not only kept down costs to seniors but also enabled commercial insurers to compete effectively with the traditional Medicare program. If this policy were applied to all insurance in the individual (or nongroup) market regulated by the

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ACA , providers could not demand any more than Medi-

care rates (or Medicare plus some percentage Congress approved). This approach would control costs in areas where premiums are high, and it would reduce barriers to entry for insurers in markets where monopoly conditions currently exist.

Where Competition Hasn’t Worked The ACA sets up online marketplaces where individu-

als can easily compare coverage options and, if eligible, obtain financial assistance in the form of premium tax credits and cost-sharing reductions. The premium tax credits cap how much people eligible for assistance pay for coverage as a percentage of their family income. The ACA allows for a range of plans, varying in the proportion of average medical costs they’re expected to cover, from the low, bronze level (60 percent) to silver (70 percent), gold (80 percent), and at the high end, platinum (90 percent). If enrollees choose a plan that’s more expensive than the second-lowest-cost silver plan, they pay an extra amount, while they pay less if they choose a cheaper silver or bronze plan.

Since the structure of the premium tax credits creates strong incentives for enrollees to choose lower-premium plans, many markets have seen intense competition to be one of the two silver plans with the lowest premiums.

Markets with relatively large populations are more likely to see competition of this kind, which often includes Medicaid managed-care plans, Blue Cross health maintenance organizations (HMO s), and plans sponsored by local providers. These plans frequently have narrow networks because plans can negotiate lower payment rates by being selective in an area with abundant providers. Research has shown that the more competing insurers there are, the lower premiums and premium increases tend to be.

States vary dramatically in how much silver plans cost and how fast those premiums have grown. For example, Washington state in 2017 had an average monthly lowest-

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cost silver premium of $238, while the comparable figure for Arizona was $497. From 2014 to 2017, premiums fell an average of 2.0 percent a year in Washington but rose an average of 35.6 percent a year in Arizona.

Many high-cost markets have only one or two participating insurers or only a limited number of providers, or both.

These are often in less-populated states, or sub-state areas, where providers can set their payment rates, knowing that if an insurer declines to pay them, enrollees will have no accessible hospital or doctor. A similar pricing power dynamic can occur in more-populated areas that have a “must-have” hospital system (a system that controls leading hospitals and a large share of the market). And even if insurers do have the ability to negotiate lower payment rates, they may not face competition from other insurers and consequently have little incentive to hold down prices.

In many areas, particularly in less-populated areas and in much of the South and West, insurers have exited the marketplaces in large numbers, often leaving a single Blue Cross plan dominating the individual insurance market, as it did long before the ACA .

What to Do

A variety of policies are needed to address these problems.

Policies that expand enrollment—including more outreach and enrollment assistance and more generous premium and cost-sharing subsidies—would also enlarge markets that are currently too small to attract and support competing insurers. A permanent reinsurance program would bring down premiums for many, addressing areas where markets suffer from adverse selection. But while these and other measures would make sense, they would not reduce the problems stemming from the concentrated control of insurer and provider markets.

A public option developed particularly for areas with little or no competition would be one way of addressing those problems. Such a plan would likely have many features in common with traditional Medicare, such as a provider fee schedule as well as a broad provider network linked to Medicare participation. Although a public option could enter all markets, it would be less likely to play as significant a role in areas that are already competitive.

But developing a public option would require substantial investment in systems for marketing coverage, signing up enrollees, collecting premiums, and paying claims. A public option would also surely face insurer opposition, as it did during congressional debate about the ACA . Insurers were then, and are still, likely to argue that any government plan would have an unfair competitive advantage and make it impossible for them to compete.

The alternative we propose involves capping pay-

ment rates, following the broadly accepted precedent in Medicare Advantage, rather than building new organizational capacities. In plans complying with the ACA , out-of-network providers would be prohibited from billing above Medicare rates (or Medicare rates plus a percentage). That policy would also cap in-network provider rates at the same levels. Insurers able to negotiate lower payment rates could do so, but rates could not go higher. Capping provider payment rates would limit the pricing power of providers, particularly local provider monopolies.

Caps on provider payment rates would also reduce the power of dominant insurers by opening up markets to more competition. An insurer that is new to an area can find it difficult to negotiate with providers when it doesn’t have a large group of enrollees to offer providers in return for discounts. An established insurer with longstanding relationships with doctors and hospitals has most likely negotiated more favorable rates than any newcomer could expect to achieve. Caps on provider payment rates would allow new entrants into a market to offer coverage at premiums closer to those of long-established insurers. In more competitive insurer and provider markets, payment rates may already be below Medicare levels, so the effect would not be as great.

If payment rates were capped as we suggest, some providers might refuse to take patients with nongroup coverage that complied with the ACA . Policymakers could reduce that risk by setting payment rates at some percentage above traditional Medicare. The incentive for providers to participate should be great enough considering the large number of patients and reduced losses from unpaid bills. A public option would face the same potential provider resistance to caps on payment, depending upon the level at which payment rates would be set. In either case, providers could be required to accept nongroup insurance enrollees at capped rates if they wish to participate in Medicare, though that linkage might provoke a strong political reaction. The best approach would be to set payment rates at an intermediate level— below those in noncompetitive markets, but at least modestly above the levels that most providers already accept in Medicare.

Providers will always resist policies that reduce their revenue, but where monopoly or near-monopoly power exists, the only way to bring down high premiums is to limit the high fees that providers are demanding. Capping provider payment rates for nongroup plans could answer a central problem that has arisen with the law, promoting insurer competition and reducing premiums. Policymakers need only look to the example of Medicare Advantage to see how to proceed.

Where monopoly or nearmonopoly power exists, the only way to bring down high premiums is to limit the high fees that providers are demanding.

John Holahan is an Institute fellow at the Urban Institute, where he was previously director of the Health Policy Center. Linda J. Blumberg is an economist and senior fellow at the center.

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BOLD DES IG N ELEMENTS

Health-Care Reform’s Disability Blind Spot

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By Haro ld P o llac k

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magine that you attend a country music concert or a quiet Texas church service, or are simply stopped at a local red light. In a flash, you are shot in the neck by a mass murderer. You wake up two days later in a hospital bed, a C45 quadriplegic. You will require home health-care aides, a $45,000 customized sip-andpuff electronic wheelchair, long-term services, and supports for the rest of your life.

Such atrocities highlight massive defects in American gun policy. That part is obvious. Less obvious is how these atrocities also highlight massive defects in our health policies. Many of those disabled by gunfire will face a blizzard of medical bills and struggle to get needed services, rejoin the workforce, or ever resume a normal economic life. The next generation of health-care reform needs to address these problems more effectively.

The Affordable Care Act made things better, particularly in Medicaid expansion states. Many of the 200 people shot last October in Las Vegas will be well treated through private insurance or Medicaid. Fewer people will be denied care because they were uninsured, had no coverage for essential benefits, or required costly surgeries that blew out their insurer’s annual cap. We won’t have as many gunshot wound victims walking around with helmets covering missing skull fragments or with colostomy bags because they couldn’t find a surgeon to close their abdominal wounds, as there were in Chicago and Detroit before the Medicaid expansion.

The ACA also included a host of smaller measures designed to help states improve disability services, including demonstration projects and Medicaid waivers designed to offer individuals viable alternatives to institutional care.

The law reauthorized and expanded the Money Follows the Person (MFP) demonstration to help people living with disabilities transition from institutions to the general community. The Community First Choice option (CFCO) and the Balancing Incentive Program increased the pertinent Medicaid match for states that provide new or expanded home and community-based services.

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For these reasons and more, the ACA was the greatest advance in decades for the disability community, and Republican repeal-and-replace proposals were the greatest corresponding threat. Those proposals went beyond mere repeal to block-grant and significantly cut Medicaid services critical to people with disabilities. So across red states and blue, millions of Americans mobilized to defend Medicaid and the ACA . Disability advocacy groups played a central role in this fight, most dramatically in nationally televised sit-ins and arrests outside the office of Senate Majority Leader Mitch McConnell. As Andy Slavitt, the former administrator of the federal Centers for Medicare and Medicaid Services, told me: “The voice of groups like ADAPT and a number of others was essential to holding off ACA repeal this year, and millions of Americans should be grateful to them for that.”

Despite its accomplishments defending ACA , the disability community has been marginalized in current Democratic Party debate over what comes next, whether a new public option, single-payer health plan, or other alternatives.

That’s a big blind spot. Consider what will happen to Las Vegas gunshot victims who will require long-term services and supports. Many will require some combination of Medicare, Medicaid, Supplemental Security Income (SSI), and Social Security Disability Insurance (SSDI). Many of their lives will be diminished by our nation’s needlessly fragmented and inhumane patchworks of supports for disabled Americans.

The details will differ for each person. These will depend on the state in which she lives, the services she needs, her years in the paid workforce, and whether she has the resources, education, and social connections to get the right legal representation. If that’s you, one thing will be the same no matter where you are: You will face complicated bureaucratic barriers, perhaps waiting lists for key services, and income and asset limits that will limit your resources for other needs. The gunshot victims from mass shootings are in good company. Americans who become disabled from

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car wrecks and wrestling injuries, cancer, intellectual disabilities, or dementia generally face similar predicaments.

If you’ve worked long enough, you might qualify for SSDI, the federal disability insurance program, which provides a reasonable monthly income if you’ve had a strong earnings history, though the average is more like $1,200. SSDI imposes big penalties for continued paid work. Its accompanying Medicare coverage leaves big gaps, too. Eligibility determination can be an arduous process, depending on the severity of your condition. After you have been approved for SSDI benefits, you also face a two-year waiting period for Medicare before your health coverage kicks in.

Particularly if you are young or low-income, you’ll likely end up on SSI. You will receive a smaller monthly check, around $735 if your state doesn’t boost the federal benefit.

You will then discover that you’re no longer allowed to possess more than $2,000 in countable financial assets. In principle, you can own a home and a primary vehicle. No one will take your wedding ring or your work tools. That’s usually about it. No more retirement savings. No strategic reserve in case your roof leaks or the furnace blows.

I simplify a bit. With the right lawyers and personal circumstances, a special needs trust may help. If you were shot one week before your 26th birthday, you and your loved ones can contribute up to $14,000 every year to something called an ABLE account, which can be used to procure many basic necessities to work around the $2,000 asset limit. If you turned 26 two weeks before being injured, you’re ineligible. If you do have an ABLE account but you and your family lack funds to stoke that account, you’re out of luck, too.

On SSI, you’ll receive Medicaid rather than Medicare.

That has its advantages. Medicaid’s benefit package is richer. You won’t face SSDI’s two-year waiting period. If you are severely disabled but can still work, SSI ironically provides better pathways to return to work and retain your health services. To further complicate things, some people receive both SSDI and SSI, both Medicare and Medicaid, depending on their circumstances.

American disability policy is a costly, fragile, and complicated mess.

In fiscal year 2014, Medicaid spent $186 billion on services for individuals who qualify on the basis of disability.

That’s the costliest overall category of Medicaid recipients, and it actually understates things, since people living with disabilities are well represented within every other qualifying category of Medicaid recipients.

Although most Medicare recipients are seniors, Medicare covers millions of Americans younger than 65, particularly those who live with disabilities. Under-65 recipients are, on average, about one-third more costly than the Medicare average. Much of the difference appears to arise

from higher prescription drug costs for people with disabilities. Young recipients with disabilities are also more likely than seniors (23 percent versus 8 percent) to report that they were unable to see a doctor to address a health problem. When this happens, it’s usually for financial reasons. Such financial barriers reflect Medicare’s deductibles and copayments, which can be punishing.

Almost exactly one-third of expenditures for both Medicare and Medicaid finance services are for “dual-eligibles,” who receive assistance from both programs. My brotherin-law Vincent is one of these recipients. Living with an intellectual disability known as fragile X syndrome, Vincent receives Medicare and survival benefits based on his father’s work history. He also receives Medicaid, which finances most of the services he receives.

Millions of people benefit from dual eligibility. Medicare helps recipients avoid access barriers associated with Medicaid’s low provider reimbursement.

Medicaid provides a tapestry of disability services that Medicare doesn’t cover. It also plugs the holes left

by Medicare’s painful cost-sharing.

This divided structure can be administratively incoherent.

States and the federal government each face incentives to foist costs on the other level of government. The need to coordinate Medicare with 51 separate Medicaid programs hinders efforts to craft properly integrated care arrangements for some patients with the most complex problems.

Dual eligibility raises, yet again, uncomfortable questions about the minimum standards America should tolerate across the states. States such as Massachusetts and Minnesota provide excellent Medicaid services. Others, including my own state of Illinois, fall far short of that standard. Under Barack Obama, the Justice Department actively monitored and sued states that failed to meet basic needs, including people’s right to live with proper supports in their own communities. Under Donald Trump, the future of such oversight is now in doubt.

Then there is the precarious private insurance market for disability services and long-term care. As of 2014, only 7.2 million Americans held long-term care policies, and only about 14 percent of Americans over the age of 60 had that coverage. This market has dete-

Artist Mariam Paré, rendered quadriplegic in a random shooting

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riorated in recent years, with major insurers exiting the market, and with premiums sharply increasing for new policies sold to people over the age of 55. Sales of individual policies are far below levels of even 15 years ago.

It’s hard to see that situation improving, since the problems stem from the fundamental nature of the market.

Consumers have no real way to evaluate the quality of the coverage they buy to protect themselves against serious risks. Many people mistakenly believe that Medicare covers long-term care services. In the absence of an individual mandate, insurers have their worries, too. Consumers know more about their health and personal risks than insurers do, and the proliferation of online genetic services on the model of 23andMe may further encourage people at high risk of long-term care to buy coverage and people at low risk not to buy it. Insurance doesn’t work under those conditions.

In addition, these markets suffer deep structural challenges. Most insurance markets, say automobile collision insurance, protect individuals against immediate risks, like the risk of an accident over the next year. Disability insurance seeks to protect people against risks that might play out over 20 years. Many factors could intervene over that long timespan to alter individuals’ risks. Every year,

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there are hundreds of thousands of car accidents. Any one driver’s accident risk is pretty well understood. Because the risk comes in the form of so many independent discrete events, auto insurance is a stable business.

As Harvard economist David Cutler has pointed out, the market for long-term care is fundamentally different, and thus fundamentally less stable. Many of the most important uncertainties are not tied to specific individuals.

They are instead systemic, potential tidal waves that could smash the entire market. Perhaps costly new dementia treatments will emerge that extend patients’ lives without improving cognitive function. Perhaps autonomous vehicle technologies will create new opportunities for mobility for individuals with spinal cord injury. Perhaps changes to Medicaid will make such policies less valuable to consumers. Then there is the challenge of predicting medical inflation and prevailing interest rates. Insurers face enormous uncertainties in determining fair prices, and consumers realistically worry that insurers will get the price wrong and might not even be in business when it comes time to submit a claim.

The ACA included one worthy but ill-fated effort called the CLASS Act that sought to address these challenges. Under this voluntary workplace-based insurance program, indi-

drew angerer / get t y images

People with disabilities played a crucial role in fighting Republican efforts to “repeal and replace” the ACA. Here members of the group ADAPT get ready for a news conference in opposition to the Republican bill in the Senate, September 26, 2017.

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viduals could have bought a long-term care policy financed by community-rated monthly premiums that would have helped cover the cost of home health aides, a wheelchair ramp, or other supports to live an independent life. But the law included no public subsidies to attract low-risk consumers and no mandate to require people to enroll. Although those problems might have been fixed, CLASS got caught in the partisan crossfire and was never implemented.

Like the ignominious reversal of the Medicare Catastrophic Coverage Act of 1988—repealed the year after it was passed— CLASS ’s demise highlighted the tensions between the disability community and advocates of expanded health insurance coverage. These tensions are now submerged, as the two groups have cooperated beautifully in defense of the ACA and Medicaid. Yet their priorities and political approaches are different. When Congress was debating the ACA , key proponents of the law quietly opposed CLASS, regarding it as unworkable, sometimes grumbling that CLASS was an embarrassing budget gimmick. Later, neither the advocacy groups nor the Obama administration expended much political capital to defend CLASS after analysts raised doubts about its financial feasibility.

Single-payer and public-option advocates seek straightforward, economical coverage expansions that can— ideally—­be presented in a simple “Medicare for all” bill.

Although disability advocates want to see coverage extended, they need other things, too, including additional funding for disability services and stronger oversight of existing programs. Universal coverage advocates must decide how much they wish to become enmeshed in these daunting matters.

Senator Bernie Sanders’s plan includes valuable provisions to improve disability services. Perhaps most important, it would address excessive patient cost-sharing, so punishing to people with disabilities. It would also eliminate SSDI’s two-year waiting period for Medicare benefits. The plan’s expanded package of services, such as dental care, would also be valuable for individuals with disabilities.

A number of health policy experts have suggested federalizing the costs now borne by the states for people who are eligible for both Medicaid and Medicare. That would allow a more unified payment system and relieve states of about one-third of their Medicaid costs. In designing his own legislation, Senator Sanders made a more restrained choice, which may surprise some observers of the singlepayer debate. While folding Medicaid’s general insurance coverage into Medicare, the Sanders bill would leave Medicaid-funded disability services as they are, outside the scope of its proposed Medicare-for-all plan. Although Sanders may encounter criticism for this departure from a comprehensive single-payer vision, this choice seems sensible. It not only retains states’ financial contributions for disability

services but avoids trying to rewire the different systems the states have established for dealing with disability issues.

States have spent 50 years weaving Medicaid into nursing home care, school-based services, and a complicated array of other programs adopted under federal waivers and in response to litigation. Creating a single national disability system would require legislation that is probably more complicated than the ACA was, with all the attendant wrangling, winners and losers, and legislative screw-ups that would inevitably occur.

From a political perspective, Democrats are probably wise not to make disability the centerpiece of their national health reform efforts. But they could make significant progress through measures of three types: 1) incremental improvements to current policies; 2) structuring public options so as to address disability problems; and 3) longterm reforms, demonstration projects, and programs for the decades to come.

Incremental improvements. A few obvious measures could be taken that would really matter. SSDI’s two-year Medicare waiting period is a relic from another time. It should simply be abolished.

Congress should also expand the alphabet soup of ACA provisions and Medicaid waiver efforts designed to allow Americans with disabilities to live less-restricted lives in their own communities. For example, it ought to increase MFP ’s modest current budget, which prevents the program from serving more than a tiny fraction of eligible clients.

Many of these programs enjoy quiet bipartisan support across different levels of government. Disability is less disfigured by partisan polarization than are other areas of American public policy. Such matters have the additional advantage that they are generally too boring and complicated to make the front page.

Two arbitrary restrictions—the limit on personal assets and age threshold for ABLE accounts—ought to be eliminated. I’ve never met a Republican or Democrat who believes that the $2,000 Medicaid/SSI cap made sense. In 1972, the cap on personal assets was $1,500, equivalent to $8,800 today. For reasons that baffle me, it’s been stuck at $2,000 since 1989. I would eliminate the cap. After all, the ACA Medicaid expansion does not include an asset test. If that’s politically impossible, raising the cap to (say) $20,000, with annual cost of living increases, would allow SSI recipients to live more normal lives, while deterring truly affluent people from signing up.

Raising the age threshold for ABLE accounts would also help. I see no compelling reason these accounts should be restricted to those who become disabled before age 26. The federal government might even consider making modest contributions to such accounts. At every age, people with disabilities need money to plan and live.

States have spent 50 years weaving Medicaid into nursing home care, school-based services, and a complicated array of other programs.

Winter 2018 The American Prospect 75

The disability community won’t take the starring role in the next round of health reform. They still deserve a place onstage.

Harold Pollack is the Helen Ross Professor at the University of Chicago’s School of Social Service Administration, and a nonresident fellow at the Century Foundation.

Beefing up the Social Security Administration’s organizational capacities would also help. Faster eligibility determination is especially important for rejected applicants.

The sooner these applicants get the bad news, the more likely they are to obtain gainful employment.

Marketplaces and the public option. Disabilityrelated provisions could also be strengthened on the state marketplaces and on new public option proposals. Policymakers need to understand the likely implications of a public option that might disproportionately attract people who experience some level of disability. They also face a basic strategic choice: whether to encourage and welcome such differential take-up, which would increase direct program costs while helping to stabilize and implicitly subsidize private marketplace plans.

Prospect co-editor Paul Starr’s “Midlife Medicare” proposal, for example, is mostly silent on disability matters.

Underneath, however, Starr and other public option proponents expect and may even hope that many individuals with disabilities will obtain some form of public rather than private marketplace coverage. Starr would eliminate SSDI’s two-year Medicare waiting period to help stabilize the marketplace risk pool. He would not, however, enrich the package of Medicare disability-related benefits beyond what is offered in Medicare Advantage plans.

Disability advocate Joe Entwisle suggests that marketplace plans could include as essential health benefits a package of rehabilitation, durable medical equipment, and habilitative services pertinent to disabilities. The most ambitious approach would require this of all public and private plans. I wouldn’t go that far, since this would require deeper rewiring of a private marketplace which is already stressed by competitive and policy uncertainties.

Another possibility would be to openly design the public option to provide more attractive disability-related provisions integrated with Medicaid than would be available in private coverage. This would require a complex structure of additional public subsidies, since this arrangement would draw the most costly consumers into the public option.

However, it would not require intricate rewiring of private marketplace coverage.

Such measures would increase the public option’s onbudget costs. This is not, in itself, a problem. It would relieve financial pressures on the ACA marketplaces, providing de facto reinsurance to address the most costly beneficiaries. Such a policy would help constrain health insurance premiums for other marketplace participants, while providing secure coverage for recipients who truly require disability services.

What about the decades ahead? America faces a looming long-term care challenge we have yet to acknowledge, let alone address. It seems to me that the immediate

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task is to take useful steps that modestly help to address these challenges, and not allow the health policy debate to become dominated by these issues until we can solidify the gains brought by ACA .

Looking over the next hill, one might try to support market-based efforts to support long-term care. One possibility is a publicly subsidized but largely private insurance market, in which government provides some sort of backstop to cover catastrophic care costs. Such an approach commands some academic support across ideological lines.

Another possibility would be to set the stage for some actuarially solid modification of CLASS. The federal government (or individual states) might require everyone to buy long-term care insurance, with a well-articulated essential benefit package, a strong individual mandate, and subsidies to keep premiums low and to keep healthy lowincome consumers comfortably in the risk pool. Yes, these plans could be sold and regulated on the ACA marketplaces.

Ten years ago, I would have supported such partnerships between the private marketplace and government. Had the ACA marketplaces been a smashing success that now commands bipartisan support, I would support that today.

After witnessing the ACA fight, I am less enthusiastic about ideologically moderate but politically fragile and organizationally complex approaches. Republicans have made the individual mandate politically toxic. For the moment, anyway, their scorched-earth opposition to everything ACA has discredited the very idea of pragmatic bipartisan compromises to health policy within the Democratic Party.

I suspect some straightforward Medicaid expansion would prove more popular and politically durable. So I would eventually abolish Medicaid’s spend-down requirements and asset tests. A society that seems so ambivalent about imposing a “death tax” on $11 million estates might someday consider the wisdom of imposing more brutal provisions on men and women who contract dementia, spinal cord injuries, or cancer, and thus require long-term care.

All that’s for a future fight.

For now, though, first things first. The most important task is to defend and build on the ACA . The disability community won’t take the starring role in the next round of health reform. They still deserve a place onstage. As Henry Aaron of the Brookings Institution has said to me, the immediate challenges of disability policy require the granular incremental skills of a Henry Waxman, the longtime Democratic health-policy champion in the House of Representatives. We must craft disability-related additions to Democratic proposals, and begin to build the platform for future ambitious reforms.

We all know more is coming, someday, when our nation is finally ready to face the looming financial and human challenges of a rapidly aging society.

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DES IGN ELEMENTS

Buying Into Medicaid: A Viable Path to Universal Coverage

LWAY BOLD

By Mic hael S. S pa r er

W

ith the failure (so far) of Republican efforts to repeal and replace the Affordable Care Act, emboldened Democrats are releasing proposals and drafting legislation that would expand coverage to some (or all) of the nation’s remaining uninsured. Most such proposals call for expanding Medicare, the federal program that covers the aged and disabled. The argument here, however, is that Medicaid, the federal-state program for low-income populations, offers the best path forward, from both a political and a policy perspective. Medicaid could be an affordable and attractive option for those buying coverage on the ACA exchanges, stabilizing markets that otherwise lack adequate competition and offering a realistic path to an American version of universal coverage.

Medicaid’s Political Resilience

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During the last year, congressional Republicans mounted a concerted effort to shrink Medicaid by repealing the expansion under the ACA and putting the entire program on a fixed budget that would grow more slowly than medical inflation. With those proposals defeated for now, the Trump administration is encouraging states to adopt policies such as work requirements for non-disabled adults that offer a backdoor strategy to Medicaid cutbacks. The administration argues that Medicaid should return to its original roots as a welfare medicine program for poor children, the disabled, and the elderly.

At the same time, Medicaid has arguably emerged from the repeal-and-replace debate stronger than ever, its political strength clear. By a large majority, for example, voters in Maine this past November approved a referendum in favor of an ACA Medicaid expansion. Just a few months earlier in July, the Nevada legislature voted to permit any state resident to buy into Medicaid, and although the state’s Republican governor vetoed the bill, lawmakers in other states from Massachusetts to Iowa are drafting similar proposals. Indeed, the Medicaid director of a conservative Republican state told me that Medicaid in his state is far more popular than “Obama­

care.” And at the national level, Hawaii Senator Brian Schatz has introduced legislation that would encourage all states to offer a Medicaid plan on their ACA insurance exchange.

What explains the popularity and political resilience of Medicaid? How has Medicaid evolved from its welfare roots to a program that today provides decent and affordable coverage to more than 75 million Americans, becoming in turn the nation’s most successful program for aiding the uninsured?

One explanation is that the program enjoys surprisingly strong interest-group support from providers (especially hospitals and nursing homes), insurers (especially those that participate in Medicaid managed-care programs), and employers (whose low-wage employees are often Medicaid beneficiaries). Indeed, savvy consumer-advocacy groups in Arizona let the local chamber of commerce take the lead (successfully) in lobbying Republican Governor Jan Brewer to support a Medicaid expansion.

How Medicaid is funded also contributes to its political durability. The federal government and the states share the cost, which incentivizes states to expand during good economic times (since the federal government pays most of the bill) but discourages contraction during bad economic times (since state dollars saved lead to federal dollars lost).

To be sure, the lure of federal funding has not overcome political resistance in the 19 states that have so far declined to implement the ACA Medicaid expansion. Nonetheless, the Republican governors in Arizona, Nevada, Ohio, and other states that have expanded Medicaid were fierce opponents of the recent repeal proposals.

Finally, with more than 75 million enrollees, most Americans now know someone on Medicaid, which personalizes the program, and lessens the stigma associated with enrollment. This is especially so given the program’s popularity with its beneficiaries, and the increased recognition that it not only provides decent access to primary and acute care, but also is the nation’s primary payer for long-term care (for both the aged and the disabled) and the default insurance plan for the nation’s most vulnerable populations, including the homeless, mentally ill, and substance abusers.

Winter 2018 The American Prospect 77

What About Medicare?

The Medicaid benefit package and its managedcare delivery system are a better fit for the remaining uninsured than is Medicare.

Many liberals prefer the Medicare model to its Medicaid counterpart. For starters, Medicare is a national program with uniform rules governing eligibility, benefits, and reimbursement, while Medicaid is a state-administered program, with a long history of (sometimes troublesome) inter-state variation. Medicare also is a social insurance program, viewed positively by most Americans as an “earned right,” unlike its means-tested counterpart, in which eligibility depends on income (and on fitting into eligible categories in states that have rejected the ACA Medicaid expansion). Medicare also pays higher reimbursement rates than does Medicaid, thereby making it more popular with providers. Moreover, lowering the Medicare eligibility age to 55 arguably would stabilize the exchanges by leaving them with a younger and healthier population. So why not coalesce around this incremental path, drawing on the inspiration of Bernie Sanders and the pragmatism of his more incremental colleagues?

One answer is sure, lowering the Medicare eligibility age to 55 (or even lower) is an excellent idea, but since it will not happen without Democratic control of the White House and Congress, why not encourage states to adopt a Medicaid buy-in right now? Perhaps a liberal state such as Massachusetts would target such a program toward persons with income too high to receive subsidized coverage on the ACA exchange. Or maybe a rural state like Montana would create a Medicaid plan to stabilize an exchange suffering from inadequate competition. Alternatively, what if the Republican leadership in a state that has not yet expanded its Medicaid program sees this as a backdoor strategy to such an expansion, offering a low-cost buy-in as a “marketplace” alternative to a more traditional expansion?

At the same time, the argument for relying on Medicaid as the best path to universal coverage rests on more than short-term political expediency. It is not an accident, for example, that for more than 30 years, Medicaid has regularly expanded its eligibility criteria, under both Democratic and Republican administrations, while Medicare eligibility has remained constant. Nor has the assumption that Medicaid would be the far more politically vulnerable program proved to be necessarily so. For example, the assumption that Medicare’s Trust Fund financing would provide political cover turned out to be wrong, as evidenced by the ongoing concerns that the program is soon to go “bankrupt.” While predictions of Medicare’s insolvency are vastly overstated, those concerns will have an impact on any effort to expand program eligibility, especially for current beneficiaries worried about the program’s long-term fiscal stability. Ironically, however, Medicaid’s reliance on general (federal and state) revenues provides unexpected political protection.

That Medicaid is administered by the states offers

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another important political advantage, shielding it from claims that it is a “big government” bureaucratic monolith.

States have used their discretion to enroll most Medicaid beneficiaries in private managed-care plans, which provides additional political protection. Moreover, while states sometimes use their flexibility to cut back programmatic entitlements (proposals to impose work requirements may turn out to be one example), far more common are state experiments with novel approaches to care management, especially for the vulnerable populations the program serves. Nearly a dozen states, for example, are engaged in comprehensive efforts to restructure how care is delivered to the poor, encouraging collaborations with community-based social service organizations, and implementing efforts to deal with the so-called “social determinants.”

There also is a more practical argument for a Medicaid expansion strategy: The Medicaid benefit package and its managed-care delivery system are a better fit for the remaining uninsured than is Medicare, with its more limited benefits and its Medicare Advantage health plans.

There are of course political downsides to a state-led Medicaid buy-in strategy, and its success is far from assured.

Doctors and hospitals complain about low payment rates.

The stigma associated with the program’s welfare roots persists. Beneficiaries have trouble accessing certain specialty services, such as child psychiatry. The state-based flexibility has its downsides, as evidenced by the 19 states that have not adopted the ACA expansion, and the current wave of red-state waiver submissions. The strategy could reward states that have so far refused to adopt the ACA Medicaid expansion by giving them a backdoor way to pursue a more limited approach. States could even try over time to convert their entire Medicaid program into a buy-in, thereby undermining the legal entitlement of beneficiaries.

Despite these concerns, the lesson of the last 50 years is that the U.S. path to expanded coverage generally goes through Medicaid, adding groups by raising income thresholds incrementally, using shared governmental funding to finance these expansions, experimenting with care management strategies focused on our most vulnerable populations, providing an insurance safety net for public health crises (from AIDS to Flint), and relying on interest groups to carry much of the political weight. The state-led Medicaid buy-in approach could well be the next step on this path.

Eventually, however, federal action likely will be required to ensure that all states provide adequate coverage, either through an ACA Medicaid expansion, or through a separate buy-in program. Much like any effort to expand Medicare coverage, such an initiative at a minimum will require Democratic control of Congress and the White House. But there is a further obstacle to a Medicaid mandate: the Supreme Court’s decision in NFIB v. Sebelius, which struck down the Medicaid

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mandate in the ACA. Nonetheless, I believe Congress could get around that decision. Here’s why. The court held that Congress unconstitutionally threatened to pull “all” federal funding from the traditional (or pre-existing) Medicaid program if states did not participate in the “new” ACA Medicaid program. The court distinguished this “coercive” provision from a permissible funding condition, such as when Congress threatened to withhold 5 percent of a state’s highway funds if the state did not have a drinking age of 21. It is thus entirely plausible that new legislation imposing a milder penalty—say 10 percent to 15 percent of federal funding—could be classified as noncoercive. To be sure, some states could still opt out, but the odds of them doing so are small.

How Would a Medicaid Buy-In Program Work?

Proponents of the Medicaid buy-in strategy generally call on states to create a “Medicaid plan” that would be offered as an option on the various ACA exchanges. How this would work is less clear. Indeed, there is no single model, which is one of the strengths of the approach. Before proceeding, states would need to consider a host of issues—the devil will be in the details. At the same time, the various options offer a policy menu for a laboratory of federalism.

What is the target market? Would the program permit anyone in the state to buy in, including employers, or would it limit enrollment to those on the individual market or perhaps to those with income below a certain level? Alternatively, a state could offer the buy-in to a specific group, such as the parents of children enrolled in CHIP. What would be included in the benefit package? If sold on the ACA exchange, the benefit package would need to meet ACA standards (including the “essential health benefits”), but states might well exclude certain traditional Medicaid benefits such as long-term care support services.

How would premiums be set? Should there be a cap on the percentage of income charged as a premium?

What would the delivery system look like? Would the new plan subcontract to existing Medicaid managed-care plans? If those plans are already on the exchange, they might be required to take on this additional population.

How much would the Medicaid plan pay providers for treating buy-in enrollees? Participating providers might

receive some sort of reimbursement bump-up.

Would the premiums cover the true cost of enrollment, and if not, how would either the state or federal government subsidize the additional cost? One possibility would be for eligible individuals to use their ACA tax subsidies to

pay part of the premiums.

How would the new Medicaid buy-in deal with adverse selection (the likelihood that sicker folks would be more inclined to buy in to the program)? One answer is a

strengthened individual mandate, though states might

also consider tools such as reinsurance, risk adjustment and risk corridors, the same strategies that were included in the ACA . The problem of adverse selection, however, is potentially less pressing for a vast program like Medicaid than for much smaller markets such as the ACA exchanges.

How much inter-state variation should the federal government permit or perhaps encourage? While states ought

to be able to vary benefit packages and premiums, national standards may be necessary for some critical areas, such as payment levels for primary care and eligibility criteria.

Medicaid and the Path to Universal Coverage

The partisan rancor over the future of the American health-care system reflects a broader debate over the role of government and also the division of labor between the federal government and the states. The effort to repeal and replace the Affordable Care Act emerges from a view that the federal government has overstepped its legitimate role and that health-care markets could and would be more competitive and more successful with far less government interference. In contrast, those who support the law, and the effort to move the nation closer to universal coverage more generally, start from the premise that access to decent health care is a basic right of citizenship that can be realized only by deliberate government action.

The nation will not resolve this debate anytime soon; we have long had different versions of this same argument.

Indeed, the political conflict over the appropriate role for government is likely to increase during the remaining years of the Trump administration, given its ongoing efforts to scale back the size and scope of the public sector.

The election of 2020 may produce a Democratic administration that is able to overcome this partisan divide and enact federal legislation moving the nation closer to universal coverage. In that scenario, nearly any of the proposals to expand either Medicare or Medicaid would be desirable, and the Democrats ought to have the various alternatives ready for such a window of opportunity.

States, however, do not need to wait till 2020 to begin expanding coverage. We should encourage the 19 states that have not yet enacted the ACA Medicaid expansion to do so. The recent referendum in Maine suggests political opportunity on that front. In addition, different versions of a Medicaid buy-in could both stabilize the ACA exchanges and also provide health insurance right away to low- or middle-income persons who need it.

Medicaid is the longstanding heart of the nation’s effort to aid the uninsured, and it remains our most plausible path to universal coverage. We should thus push for a Medicaid buy-in strategy, as a way of providing immediate assistance to some and continuing our incremental path to better coverage for all.

Michael S. Sparer is professor and chair of health policy and management at the Mailman School of Public Health, Columbia University.

Winter 2018 The American Prospect 79

Redemption for Offenders and Victims A new variation on an age-old tradition helps criminal defendants redeem their lives, far more effectively than prison does.

J

udge Leo Sorokin, 56, has spent his professional life working in the criminal justice system. A graduate of Yale College and Columbia Law School, Sorokin served as an assistant attorney general, a federal public defender, and a magistrate judge. In 2013, President Barack Obama nominated Sorokin to the federal district court in Boston; he was confirmed by the Senate in 2014.

Sorokin, a soft-spoken, balding man with pale blue eyes, has an unassuming manner that gives no hint of his tenacity. In the fall of 2015, Sorokin launched a pilot program he had been envisioning for years, with no precedent in the federal system. He called it RISE—Repair, Invest, Succeed, Emerge. RISE offered a rare second chance for adult defendants convicted of serious federal crimes to avoid prison.

Beginning in October 2015, a committee of judges, prosecutors, defense lawyers, and probation officers met monthly to screen possible RISE participants. To be eligible, defendants had to have a verifiable history of addiction or a life of extreme deprivation. They also had to plead guilty, and have their sentencing hearings postponed for 12 months, during which time they had to get clean, get jobs, go to school, and find a place to live.

But the core, non-negotiable component of RISE was attendance at a two-day restorative justice workshop. Sitting in a room for eight hours a day, the RISE participants came face to face with people who had lost children and close family members to overdoses and shootings. Also in the room were prosecutors, defense lawyers, judges, and probation officers, but not in their traditional roles. They, too, par-

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ticipated, sharing personal experiences, and offering support and encouragement. Mostly, they listened without judgment as the offenders haltingly described their own victimization. They spoke of their addiction, mental illness, abuse, and poverty.

Restorative justice is a centuries-old approach to crime, with roots in tribal cultures. It seeks to empower people to address the harms, needs, and obligations that arise from crime by bringing together victims, offenders, and members of their respective communities. The face-to-face open dialogue process is focused on personal accountability and reparation. It requires the seemingly impossible: that victims and offenders share deeply personal and painful life experiences with the least likely person in the world—each other. Restorative justice requires its participants to lay bare feelings—self-loathing, suffering, rage, loneliness, rejection—they have hidden from the world and often from themselves. They must face reckonings they have long resisted and engage each other with radical empathy.

It had taken months for Sorokin to convince skeptics within the criminal justice system that RISE was worth a try. A key ally was Maria D’Addieco, a federal probation officer with a master’s degree in social work and extensive training as a restorative justice facilitator. D’Addieco said that many participants have told her that the restorative justice workshops were harder than doing time, where they could “put their game faces on and just get through it without facing up to what they did.” Most had long told themselves that their crimes were “victimless,” as they never saw the

direct effects of the drugs and guns they sold.

In February 2016, D’Addieco co-facilitated a restorative justice workshop for the first RISE class of eight offenders. They were a diverse group: men and women, black, white, and Latino; one young man was 19, others were in their early fifties. Their offenses included trafficking in heroin, cocaine, and marijuana, selling illegal firearms, and assaulting a federal officer. Judge Sorokin and Magistrate Judge M. Page Kelley, who had been holding monthly meetings with the program participants to monitor their progress, came to observe at the end of the second day. Assistant U.S. Attorney James Herbert participated, as well as several activists from the community.

One offender was Bobby Fitzpatrick, 39, a bald, trim, middle-aged man with a broad Boston accent. Fitzpatrick came from a working-class background in Quincy, near Boston.

Fitzpatrick signed up for RISE knowing that he was in the worst trouble of his life and the program was his only way out. In late September 2014, he had been indicted for conspiring with three others to bring more than 50 kilograms of marijuana into Massachusetts from California.

He did it on behalf of the New England branch of an organized crime family that claimed him as “an associate.” A cocaine addict and alcoholic, Fitzpatrick had been using his position as a driver for UPS and other delivery companies to bring in drugs for the mafia, off and on, for more than 15 years. He spent the money on drugs.

Fitzpatrick agreed to get clean, spending more than two months in a residential drug treatment facility, and emerging in June 2015.

Since then, he had followed every RISE directive: His twice-weekly drug tests were all clean,

h u lya - e r k i s i / i s t o c k b y g e t t y

By Lara Baz e l o n

he had steered clear of his co-defendants, and he was working 70 hours a week for a different delivery company, which was aware of his ongoing case but agreed to give him a second chance.

Late in 2015, Fitzpatrick reinitiated contact with his 15-year-old son, Brendan. They had not seen each other in two and a half years.

Brendan was struggling, smoking marijuana daily and failing school, and his mother could not control him. Fitzpatrick was trying to regain Brendan’s trust and be a real father for the first time in the boy’s life.

But despite his progress in RISE thus far, Fitzpatrick viewed the restorative justice workshop skeptically. Introspection and selfreflection—never mind sharing his feelings with a roomful of strangers—seemed like a lot of touchy-feely fluff. “Rainbows and lollipops,” he called it. His father was a truck driver, his mother stayed at home and later worked at a daycare center owned by a friend. He first described his upbringing as “very normal, very middle-class. Or at least it seemed that way,” he added after a moment. In fact, Fitzpatrick’s father was a drug addict who was gone for long periods of time, because of both his work and his own addiction.

Fitzpatrick’s paternal grandfather was an active member of the Winter Hill gang, an affiliation of Irish and Italian American gangsters whose members included the notorious criminal boss Whitey Bulger. Growing up, Fitzpatrick was very close with his grandfather and impressed by his power, his associates, and his gangster persona. It all seemed glamorous and high-stakes, he says, “The money, the women, the booze.”

Fitzpatrick was drawn to drug dealing to support his cocaine habit and to live the lifestyle that his grandfather had enjoyed. A brief attempt to “clean up my act” in 2005 by getting married and going straight ended when his wife divorced him two years later. By 2012, he had moved back to Quincy and “got heavily into the whole criminal enterprise thing again.” He never believed he would get caught, having gotten away with it for so long. When he did, he said, “I was once again in the throes of addiction.”

The exercises Fitzpatrick did in the restorative justice workshop asked him to acknowledge that beneath the image he cultivated—of a man who took what he wanted and did what

he wanted—“I hated myself so much.” On the second day, when it was his turn to speak, Fitzpatrick was asked to list the people he had harmed over the years. At the top of the list was his son, Brendan. As Fitzpatrick talked, he realized he was perpetuating a family cycle of ruinous relationships between fathers and sons. Fitzpatrick’s grandfather, an alcoholic, hated Fitzpatrick’s great-grandfather. Fitzpatrick’s father, a drug addict, hated Fitzpatrick’s grandfather, whom he viewed as an unrepentant criminal. Fitzpatrick grew up alienated from his own father, whose addiction made him seem weak and neglectful. Fitzpatrick’s

Victims and offenders share deeply personal and painful life experiences with the least likely person in the world: each other. son, in turn, felt abandoned by Fitzpatrick, an alcoholic and drug addict who had played little or no role in the first 15 years of the boy’s life.

The revelations were painful, but also motivating. There was a larger purpose to his sobriety beyond getting off drugs and staying out of prison. He could reclaim his son.

Two months later, in April, with the support of Brendan’s mother, Fitzpatrick took physical custody of Brendan. The probation department was supportive, albeit concerned that Fitzpatrick might buckle under the additional challenge: He had been sober less than a year, and his criminal case was hanging over his head. Judge Kelley was concerned too, telling him, “Bringing home a 16-year-old boy that you haven’t had a relationship with is pretty much a life-changing experience.”

At first, the transition was difficult. Brendan had to change schools and make new friends.

He was angry, fell in with the wrong crowd, and

failed two classes. “His level of trust with me,” Fitzpatrick said, “was low.” A breakthrough came when Fitzpatrick sat Brendan down on the couch one day in the late spring of 2016.

“I started off the conversation by telling him about me and my father and how I live every day with a huge hole in my heart knowing that we could never be honest with each other. I talked to him about my addiction and my father’s addiction and how we never really connected and that I saw it happening all over again with him and me.”

The turnaround did not happen overnight, but the dynamic changed. Brendan trained all summer to try out for the football team, went to summer school, and got a job mowing lawns.

In the fall, his grades went up and he made the football team. “Now we have normal parent-kid problems,” Fitzpatrick said, “I told him ‘I ain’t going nowhere,’ and he trusts me now.” Fitzpatrick focuses on maintaining what he calls “a good clean healthy environment so we can have this life that we should have had a long time ago.”

Fitzpatrick, who pleaded guilty to using a cell phone to distribute marijuana, was sentenced on March 17, 2017. More than two years had passed since his arrest. Referring to his sobriety, Fitzpatrick said, “I don’t even count the days anymore. It’s just my life.” He was a full-time single parent working 70 hours per week whose idea of cutting loose was spending Sunday mornings running football drills with his son and going for long swims at the YMCA .

But Fitzpatrick was facing 18 to 24 months under the federal sentencing guidelines. In the weeks leading up to the court date, he became increasingly anxious, especially fearful of the impact on Brendan if he was sent to prison.

Four days before the hearing, Timothy Moran, the assistant U.S. attorney assigned to the case, filed a short memorandum requesting no prison time. Moran wrote that Fitzpatrick’s “excellent” results in RISE have “served as an example to others and ought to be rewarded.”

Fitzpatrick’s lawyer called his client’s turnaround “extraordinary.” He continued, “More importantly, Mr. Fitzpatrick has recognized the importance of not just acting, but being a real role model for his son.”

Appearing in front of Chief Judge Patti B. Saris in the early morning of March 17, Fitzpatrick, dapper in a gray suit and blue tie, felt

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fearful and overwhelmed. His apprehension grew when Saris noted that she had given his co-defendants prison sentences; she wanted to hear from Fitzpatrick directly about why he deserved greater leniency. “I didn’t write anything or prepare anything. No poems, no cards, no quips.” Instead, Fitzpatrick talked about RISE and its impact on his relationship with his son. “I keep going back to the values, and that’s really what’s changed in me. The things I value today are my son, my family. And I love those things. And I wish to God I woke up earlier.”

When Saris imposed a sentence of probation, it was, Fitzpatrick said, “one of the best feelings of my life. I was so ecstatic and thankful.” D’Addieco and her colleague Allyson Lorimer Crews, who had come to watch the proceedings, embraced him afterwards.

“They told me I earned it.”

Often, restorative justice is an adjunct

to the criminal justice system or occurs years after that process has concluded. But it can also be a stand-alone alternative. There are few pre-determined expectations other than openminded and full-throated participation on all sides and a commitment to accountability by the offender. The scholar Howard Zehr, who led the movement to bring restorative justice into mainstream American thinking about crime, is emphatic that “we don’t impose a goal of forgiveness.” Still, he says, “it often happens.

There are so many misunderstandings about what forgiveness is: that if you forgive that means you are not holding people accountable or forgetting about the harm that was done to you.” But the victims who do forgive, he says, talk about it as a kind of personal liberation, a gift as much to themselves as to the offenders.

Although most restorative justice programs are not overtly religious, for many it is a profoundly spiritual experience. Many describe participating in a restorative justice process as one of the most intense and life-altering experiences of their lives.

These concepts are foreign to many accustomed to a justice system modeled on retribution, usually in the form of lengthy prison sentences and permanent social ostracism.

And yet, restorative justice was practiced for centuries on our soil by Native Americans, and it is widespread in other cultures. Beginning in

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the 1970s, it was rediscovered by activists like Zehr, who were searching for ways to reform the system. Over the years, restorative justice has slowly gained a certain level of acceptance in pockets of the country. Today, it is used in a small number of jurisdictions across the United States and pilot programs have been launched in others, with the hope that a show of successful results will allow it to gain a permanent foothold.

One of Fitzpatrick’s classmates in the RISE program was Laura Santana, 27, a petite

woman with shoulder-length dark hair. Born in the Dominican Republic in 1987, she came to the United States with her mother, Yvonne, and twin brother, Gus, when they were infants.

They followed Santana’s father, who lived in New York, but she rarely saw him. Her primary relationship was always with her mother, whom she describes as “the love of my life. She was my everything.”

But Yvonne struggled financially to support Laura and Gus. She also struggled psychologically—she was an alcoholic prone to severe depression, at one point slashing her wrists and having to be hospitalized. The family moved constantly, and not always for rational reasons.

“If she didn’t like the vibe, it was like, ‘We’re leaving.’” In 1999, Santana’s mother settled the family in Boston, where they remained for six years—the longest they had ever been in one place. Like her mother, Santana was also plagued by depression, but the newfound stability helped her. Santana developed friendships, and committed to her studies.

But in the fall of 2005, when Santana was 18, Yvonne announced that she was moving to New Jersey. Caught off-guard, Santana became overwhelmed by anxiety—her mother had made it clear that she had no intention of staying in Boston for the duration of the school year. In February 2006, Santana tried to commit suicide. In April, Yvonne carried out her plan to move to New Jersey. Without a place to live, Santana dropped out of high school six weeks before graduation and never went back. She decided not to follow her mother, and instead took a friend up on his offer to spend time at his house in a small town in Vermont “to try to get my life together.”

Santana decided to return to Boston later

that year. In 2007, she got a job at Virgin Atlantic Airlines as a cargo agent. The fast-paced work was consuming and cathartic: Santana excelled and was promoted, first to cargo supervisor, then station manager. In 2009, at the age of 21, she got married.

In 2012, Santana took a job with Embassy Freights, where she worked as an export agent.

Santana lived by the work-hard/play-hard ethic.

“I partied a lot. I traveled a lot. I was always working. Pretty much I was just enjoying life. I clubbed a lot and went out drinking. Living very carefree.” Her marriage grew troubled.

Yvonne continued to be Santana’s primary source of support and love. Though the relationship was long-distance, mother and daughter spoke on the phone daily. When her mother’s heart disease got worse, Santana took every opportunity to visit her.

One day in 2013, Yvonne called to say she was very sick. Frightened, Santana immediately starting driving from Boston to New Jersey. Her mother died before she got there.

Though Yvonne’s health had been poor, there had been no hint that she was nearing the end of her life. After the shock, Santana felt crushing despair. Her marriage collapsed, and suicidal thoughts returned.

For the next 18 months, Santana had trouble eating and sleeping, going off and on medication, unable to find a combination that didn’t make her feel like a zombie or a robot. She tried different coping mechanisms: partying, taking days off to isolate herself in her room, and putting on her game face when she went back to her job. Nothing worked.

In February 2014, Santana was out at a club in the Dominican Republic when she met a charming older man who called himself Choco.

“He kind of like complimented me and I got the attention I needed. Usually, I don’t go for that, but I wanted to be irresponsible and I was on a very self-destructive path and I didn’t care.”

They flirted, went out to dinner, and stayed in touch by phone when Santana went back to Boston. Santana flew back to see Choco in June.

When he asked her to bring back a package into the United States and deliver it to his friend at the airport after clearing customs, she agreed.

In exchange, he promised to pay her $5,000.

Santana’s flight left at 4 a.m. on June 16.

She boarded the plane drunk, having been up

all night dancing and drinking with friends.

When she headed to the customs checkpoint, a border patrol agent pulled her aside for secondary inspection; he and his partner then searched her carry-on bag and her suitcase.

Inside, agents found two purses. They were empty, yet bulging at the sides. When they cut into the lining, the agents found just under a pound of cocaine. Stricken with fear and sick from the alcohol, Santana immediately threw up. She then confessed and was charged with importing drugs into the United States.

Santana’s assigned federal public defender, Jennifer Pucci, was on the RISE committee.

She thought Santana fit the program’s criteria—she had already pleaded guilty to the offense, was out on bond, and still working at Embassy, which knew about her criminal case and continued to support her. Pucci encouraged her to consider applying and Santana entered the RISE program on October 28, 2015.

The following month, Santana attended RISE’s first restorative justice workshop. Like Fitzpatrick, she was skeptical, though for different reasons. Santana expected to be judged harshly for her crime, the way she felt when she went to court and “the prosecution was kicking me down so much.” And in fact, some in the prosecutor’s office had been opposed to Santana joining RISE , believing she had no insight into her conduct. They felt strongly that she needed to go to prison. But to her surprise, the members of the restorative justice circle, which included a different prosecutor, James Herbert, offered her acceptance and hope. “They told me, this crime does not define who I am, and I gained confidence.”

Talking about her mental illness and her suicide attempt, always a source of shame, was much harder. D’Addieco asked Santana to describe her state of mind when she committed the offense. Santana described her unbearable grief after losing her mother and her growing sense—given her intense identification with her mother and their psychological similarities—that she was destined to the same fate.

Heartsickness, depression, and an extreme sense of isolation made her good-girl choices seem pointless. In a perverse way, it felt good to tear her life down by taking crazy chances, because it made her feel, however briefly, more alive. Describing the events of the past several

years and what her life had become, Santana broke down in sobs.

The process marked the beginning of facing her pain, anger, and fear. The following month, Santana began seeing a therapist every week.

“At the beginning, it felt forced, because I had to go.” But after a while, Santana began looking forward to the sessions. She got her GED and began taking business and writing classes on Saturdays at Bunker Hill Community College, earning As and Bs in the first year. “I love school and consider it a form of therapy,” she said. A relationship she had with an on-again, off-again boyfriend became steadier shortly

To succeed, participants must be willing to engage with the darkest parts of themselves. For many people, that is not possible. after the crime; in May 2016, they bought a house together.

On October 26, 2016, Santana graduated from the RISE program. Appearing in court before Judge Kelley, Santana spoke at length about her accomplishments and her determination to get her associate’s degree. While there was no changing the fact that she was a convicted felon, Santana planned to “emerge on the other side triumphantly.” When she finished speaking, Santana was wiping away tears. Clearly moved, Kelley said, “You are just a great person.”

Exactly one month later, on November 28, Santana appeared before Chief Judge Saris, the same judge who had sentenced Fitzpatrick.

Under the federal guidelines, Santana faced three years in prison. Santana said she walked into court prepared “to accept whatever happened.” But she was still terrified.

Pucci pushed hard for probation, listing

Santana’s accomplishments and writing, “In every way, she has proven to be a star.” Even the prosecutor, convinced by Santana’s progress in the program, agreed that Santana did not deserve to go to prison. Saris sentenced Santana to three years of probation instead.

Looking back, Santana feels relief that “everything turned out okay,” and a determination to continue moving forward.

As of this writing, the RISE program has 15 graduates, and 11 current participants. Four people have been terminated from the program for failing to complete it. Shortly before Fitzpatrick was sentenced, Sorokin traveled to Washington, D.C., to testify about RISE before the United States Sentencing Commission, hoping to encourage other federal trial courts to adopt it as a model. Saris says that “it is too soon to tell” if RISE will be a successful program in the long term because there is not enough data to make an empirical assessment.

But, she says, “the initial signs are excellent.”

There is an impulse among some to dismiss restorative justice as a lot of kumbaya hooey.

But if you ask the men and women who have engaged in it, they will tell you emphatically that it is not. At the same time, restorative justice is not a magical antidote for everything that is wrong with the criminal justice system.

It is hard—programmatically, logistically, and emotionally. To work, the participants must approach it with an open mind, willing to engage with each other and with the darkest parts of themselves. For many people, that is not possible. Of the four people who left RISE , Judge Kelley says three failed to comply “with the rules of the program,” resulting in them re-entering detention before being sentenced.

But for those who are willing and able to do the hard work—victims, perpetrators, prosecutors, defense attorneys, judges, family members, teachers, community activists, and other leaders—the results are well worth the effort.

It’s not overstating it to say that restorative justice has the power to heal and give hope to those who had long ago resigned themselves to lives of brokenness and despair.

Lara Bazelon is an associate professor at the University of San Francisco School of Law. This essay is adapted from her forthcoming book, Rectify.

Winter 2018 The American Prospect 83

The Battle of the Georgetown Mill

To black workers in this picturesque South Carolina town, the unionized steel mill anchors their community. To the town’s white civic leaders, it blocks Georgetown’s gentrification.

For the past two years, they’ve been fighting it out.

B y Ma x R ose

E

d Green worked in Georgetown, South Carolina’s steel mill for almost four decades, overlapping with his father, who helped build the mill. His friends died, he won and lost union elections, and he challenged management to hire more black craftsmen. In later years, Green’s hips gave out, victims of contorting his body into crevices of the mill. His buddies called him Fred Sanford, after the television series’ title character, who wobbled more than walked. Though the mill closed in 2015, Green still regularly comes to the Steelworkers Union Hall.

Paul Skoko, a retired English teacher, grew up in the historic district of Georgetown, across Front Street from where Green’s father helped to build the mill. Skoko has remained in the house so he can continue to play the organ at his church, as he’s done for the past 52 years. The steel mill turned Skoko’s house a shade of rust.

Since 2002, he has refused to paint. Skoko sup-

84 WWW.Prospect.org Winter 2018

ports a city plan to rezone the land to prohibit steelmaking. If enacted, he says, it would “clear up all that crap, which would be really nice.”

The Georgetown steel mill sits on 62 acres on the edge of the Sampit River, rare waterfront property for heavy industry. It’s bracketed by two neighborhoods, whose residents see different futures for the hulking metal structure.

Skoko’s historic district includes an increasingly active downtown, with five museums, restaurants, and the region’s largest furniture store. Across a busy highway, Green lives in the West End, which once included dozens of blackowned businesses but now has only three. Both neighborhoods used to be racially integrated.

Now, white families live in the historic district, black families in the West End. ArcelorMittal, the Luxembourg-based company that owns the mill, shut it down two years ago. When it closed, a small group of the region’s leaders began to make other plans for the site—

plans more in line with an economy increasingly based on tourism and wealthy retirees.

But today, the mill’s mural has a fresh coat of paint, and Liberty House, a U.K. steelmaking conglomerate, says it will reopen it in the next few months. A low-income black community with few remaining institutions has been working with the union to reopen this imperfect one. In this majority-black city, white people have maintained control subtly and quietly, with civility. Once again, the ugly, hulking steel mill threatens that order.

Some Neighborhoods

When City Councilman Brendon Barber walks through the West End, he points out where particular black businesses used to stand.

He shows me the site of three grocery stores, Poot’s Beauty Parlor, a combined shoe shine and corner store, and his parents’ supper club. Those businesses have long since disap-

photo courtesy of ma x rose

peared, losing out to competition and rezoning.

When the mill opened nearly 50 years ago, most African Americans in Georgetown County still worked on farms and had little access to higher-paying jobs. The mill quickly got the reputation for hiring African Americans, even in skilled craft positions.

Most residents of the West End have a mill story, about kids put through college, houses purchased, and union battles won. Green, the Steelworker local’s vice president, sent two kids to college. Pastor Robert Davis bought his first car, a Toyota Corolla, in the late 1970s, with money from his job at the mill. During one shutdown, Davis got a real-estate license and attempted to find a realtor who would take him on. The local agents—all of them white—refused.

In April, ArcelorMittal announced that it had reached an agreement in principle with a buyer—Liberty House—to purchase and reopen the mill. The sale is slated to complete by the end

of 2017. If all goes well, workers will re-enter the mill within months. The union, working with residents of the black community, has led the fight to clear any obstacles to reopening.

Opponents of the mill’s reopening hold a different vision for the city, one where heavy industry will move inland and leave the waterfront pristine for families and tourists. Front Street is the center of downtown, and runs perpendicular into one end of the mill. Behind the Front Street stores, a harbor walk, where boats dock and signs warn of alligators, includes a prominent view of the mill. Georgetown is nearly 60 percent black, but the downtown establishments are full of white people. One Georgetown native told me that several of the long-standing restaurants had never hired a black employee.

In 2004, David Kossove, a Charlotte-based entrepreneur with a second home near the county’s beaches, bought a furniture store on Front Street. Downtown was dead, he says.

“When I was coming here, people were saying, ‘He’s out of his mind.’”

Kossove claims some of the credit for downtown’s uptick. During a lunch at a Front Street Italian restaurant, in which he invested, he tells me about a new four-story mixed-use development he’s planning. If the mill reopens, he worries that banks will not provide the right financing. “The reasons that Georgetown hasn’t thrived is that we have this steel mill in the center of community,” he says. “You can’t have a steel mill at the expense of destroying a community.”

In the summer of 2016, with ArcelorMittal refusing to communicate with local officials, Georgetown civic leaders decided to engage a Washington-based think tank to analyze the site’s best use. Skoko liked the study. The city moved to rezone the property to allow multiple uses, envisioning light industry, retail, and parks. And though the mill now has a buyer and appears poised to reopen, the battle for Georgetown’s future is still far from over. arcelor Mittal— Global Capital Comes and Goes

For years, the mill survived on a thread far flimsier than the wires it produces for suspension bridges.

The Georgetown mill is essentially a recycling plant, taking scrap metal, melting it down, and making wire rod, which goes into

construction projects and automobiles. It has survived a succession of owners and bankruptcies, closing down in 2003 and again in 2009.

Mitt Romney’s Bain Capital was one of the owners that put it into bankruptcy.

When Gordon Spelich, an Ohio-based entrepreneur, came to town for the first time, the mill was in one of its periodic bankruptcies.

Spelich represented the International Steel Group (ISG), which had formed when his long-time colleague had pitched the idea to New York financier Wilbur Ross (now Donald Trump’s secretary of commerce). The colleague and Spelich became the leaders of ISG and put in a bid for the then-shuttered mill. Under ISG, the mill restarted and became profitable.

In 2005, ArcelorMittal, at the time just Mittal, bought ISG as part of a global shopping spree that would saddle the company with billions of dollars in debt. In the last quarter of 2014, ArcelorMittal lost $955 million and blamed Chinese dumping of steel at prices Western companies couldn’t match. In the following year, its losses rose to $6.7 billion. Faced with that deficit, the company announced that it would close its Georgetown mill, writing off the $19 million decline in the mill’s estimated value. When matched against the company’s overall losses, the savings from closing the mill amounted to “a rounding error,” says one former steel executive.

ArcelorMittal told the Georgetown steelworkers that it would shut down the plant and that this closure would likely be permanent. The company abandoned the property but retained ownership. Brian Tucker, the county’s economic development officer, and Paul Gardner, the city’s administrator, called and emailed ArcelorMittal every week for months, but Tucker says the company failed to answer. They forwarded offers for the mill to the company, but the bidders never received a phone call.

Ten years after his initial trip, Spelich also returned to the Georgetown mill, this time hired by a private equity firm with interest in purchasing and reopening it. He quietly put together a business plan. ArcelorMittal “didn’t care if it reopened or not,” he says. “They just wanted it gone.” The private equity firm could not agree with ArcelorMittal on a price.

ArcelorMittal finally met with Georgetown’s officials—but only at the insistence of Tom

Winter 2018 The American Prospect 85

Rice, the area’s congressman. In June 2016, a company public relations official f lew to Georgetown, and the company’s real-estate team, including Keith Nagel, the head of U.S. real estate, tuned in by phone. The ArcelorMittal representatives said the company would never reopen the mill, nor sell to a competitor.

Community leaders came away believing that they should proceed with other plans.

For years, Hayne Hipp, a South Carolina businessman who owns a second home in Georgetown, had been talking about the future of the mill site, anticipating its closure.

“It looks like a wart at the end of Cinderella,” he says. Once it closed, he helped convene a small ad hoc committee, including foundation executives, government officials, and a few wealthy retirees, which began meeting quietly.

The group never had a formal membership, and only one black official, the chair of the county council, attended the early meetings.

The team raised money and invited the Urban Land Institute (ULI), a D.C.-based organization that helps communities figure out how to use space, to conduct a study.

ULI came to Georgetown in September, interviewed more than 100 people, analyzed surveys of hundreds more, and produced a report that suggested a process for engaging Georgetown residents in discussions of the mill site’s future. ArcelorMittal politely declined to participate, but did allow access to the property. The city and county quickly moved forward with next steps, to begin the process of rezoning the property and to convene three public meetings to ask for community members’ input in the process.

That summer, Vik Sharma also came to Georgetown, but with less fuss. Originally, he wanted to examine the mill’s equipment for sale. Sharma found a mill fully intact with potential to reopen. A friend, Sanjeev Gupta, chaired a steel company in the United Kingdom, which was looking to open a mill in the United States. Sharma introduced Gupta and his company, Liberty House, to the leadership at ArcelorMittal.

For months, they negotiated in private.

In early 2017, Liberty House called Spelich, and brought him to the table to help with the purchase.

The union toured the mill with represen-

86 WWW.Prospect.org Winter 2018

tatives of Liberty House in November. The union contract has a successorship clause, which would have allowed it to veto the purchase. In February 2017, the union began formal meetings with Liberty House. When television stations asked James Sanderson, the local union president, the identity of the buyer, he says he would say, “I’m not at liberty to tell you.” ArcelorMittal released a statement, through Sanderson, saying that a purchase was possible. Sanderson says he had “forced their hand” by talking publicly, and in easily decipherable code.

Sanderson has been president of the local union since 1988, and acknowledges that he at times can be loud and divisive in a city whose leaders have been accustomed to settling matters in quiet conversation among themselves.

His voice reaches a yell when excited. Sanderson, who is white, is the public face of the local union, while Green, the black vice president, stays behind the scenes.

The three community meetings all filled to capacity. The civic leaders intended the meetings to be the start of a public engagement process. Mill workers and their families took it as a threat to the mill. Throughout, Sanderson said the reopening of the mill might come soon. In one meeting, Green asked political leaders to stand up if they agreed with the mill reopening. Workers and their families protested more vocally than Georgetown is accustomed to.

Sanderson does not blame the leaders for thinking of new uses for the property when there was no buyer in sight. However, he insists, they should have changed their minds when it became clear that the mill could reopen. “If we think we’re under attack” and are about to launch nuclear missiles, he says, but “the minute before, we get more information, do we still push the button?”

On April 21, Liberty House and ArcelorMittal announced that they had reached a tentative agreement to transfer ownership, and that Liberty House would reopen the mill. Three days later, the Georgetown Planning Commission, a volunteer group that makes recommendations to the city council, met to consider the plan to rezone the property, a direct outgrowth of the ULI study. The rezoning would allow the mill to reopen, but only for five more years.

After months of refusing to engage with

local officials, Nagel of ArcelorMittal showed up at the commission meeting and threatened a lawsuit. “If this ordinance passes and hinders this sale and/or future sales of the mill, they will have no choice but to seek legal actions for damages,” he said.

The commission voted 4 to 3 to keep the property as is, but the final decision belonged to the city council.

The Mill

The steel mill has always been a source of Georgetown’s hopes, fears, and divisions.

On October 13, 1967, the news that Korf Industries would build a mill in Georgetown took over all 16 pages of the Georgetown Times, including exultant advertisements from elected officials and local merchants.

Before the mill opened, the German-based company’s leadership chartered a 707 jet for more than 25 of Georgetown’s elected and appointed leaders to attend the opening of a similar mill in Germany. After the opening, they were treated to a Rhine River cruise up to Cologne.

The Georgetown mill opened during a period when the civil rights and labor movements often fought side by side. As the mill was opening, hospital workers in nearby Charleston were trying to organize a union; the governor arrested hundreds of strikers. Estes Riffe, an organizer for the steelworkers who had been shot at for his efforts in Miami, came to Georgetown to help organize the mill.

On April 17, 1970, the company dedicated the mill in front of a crowd including hundreds of Georgetown’s and South Carolina’s most powerful people. Strom Thurmond, the state’s legendary segregationist senator, attended and gave a speech of “great praise.” The next week, black and white workers voted by a margin of 4 to 1 to form a union.

The first contract negotiations broke down, however, over work rules. At an 11 p.m. shift change later that fall, the workers spontaneously initiated a picket line. They struck for six months. From the start, business leaders in Georgetown dismissed the strike as “a racial dispute.” White workers were immediately criticized for their association with black strikers.

The union leaders had made progress on unifying white and black workers, but needed more help. On December 5, they were joined

by Reverend Ralph Abernathy, Martin Luther King Jr.’s close friend and successor as the leader of the Southern Christian Leadership Conference. Abernathy marched with Georgetown residents to the town clock, where they knelt and prayed. Then he spoke: “The Civil War broke the ability of the plantation-owning class to make war and oppress people, but it did not kill their desire to do so,” he said. “I want to commend us because we are here together, black and white. And that has been our dream for centuries. That has been our hope for years. … And I know that the power structure of South Carolina and of this city and of the South looked up and saw us coming today and notified the Pharaohs that it’s all over now.”

After Abernathy’s visit, he often talked and wrote about how he saw hope for the South in the steelworkers of Georgetown.

The early debate over the mill’s role in the local economy previewed what would come.

The mill needed a site with access to both rail and the water. “It’s a tragedy the mill is here; we are a historic area,” one Front Street resident told The New York Times in 1972, noting the pollutants the mill produced. “This was a lovely town. It could have been a tourist attraction.”

The union representatives countered that complainers wanted to sacrifice good jobs.

At its height, the mill employed more than 1,200 people. Jo Camlin, the plant’s first local hire, would hand out a turkey for Thanksgiving and a ham for Christmas, plus a $25 present for each of the employees’ children. In those days, the mill and the union co-sponsored a basketball tournament, the Steel Town Shoot-off, providing practice jerseys and game jerseys.

Brendon Barber coached.

In its initial decades, 13 people died at the mill, according to Green. On a down day, scheduled for maintenance, one worker backed one of the machines into his friend, crushing him. Green was on the other side of the mill, but word traveled fast. The friend’s kids were playing at Green’s house. Green called his wife.

“I said, ‘Whatever you do, don’t tell those kids.’

He died later that night.”

No one has died since 1988, thanks in part to the union’s advocacy. The union successfully fought for a policy that requires that all employees in parts of the mill remove a lock before a machine operates. That would

have prevented his friend’s death, Green says.

Green eventually worked as the union’s fulltime safety representative. Where Sanderson is confrontational and loud, Green is laidback and thoughtful. When we talked outside the Estes Riffe Union Hall in Georgetown, he thought through every answer. Green preferred to work in partnership with the mill’s administration. But under the final manager, he says, the relationship turned adversarial.

The sole focus became production, the tonnage per worker of steel produced. The company deprioritized safety. Green filed multiple complaints to federal authorities, including one charging that ArcelorMittal cut corners that

The steelworkers all had physical ailments, but still said the mill had provided them with the best jobs they’d ever had. And it wasn’t just about the pay and benefits. could cause lead poisoning. When the union won, one worker had to be removed from his workplace because of elevated lead levels.

Every steelworker with whom I talked had physical ailments. Green had just recovered from two total hip replacements and a back surgery. In 1991, a contractor from Texas dropped a 300-pound pipe on Sam Wragg.

The next seven years remain fuzzy in Wragg’s memory. He had three back surgeries, a titanium plate in his neck, and a bone taken out of his right shoulder. “Oh god, I can’t even think of all these things that pipe did to me,” he said.

Yet workers still describe the mill as providing the best jobs they ever had, even as a kind of family. A unionized steel mill has a certain mystique among its workers. Part of that is the pay and benefits, but it can’t be explained solely by money. Part of it might come from the danger. Many of the older men had fought in the Vietnam War, some coming back with

PTSD, and then stationed themselves in what was a dangerous work site. Part of it might come from the satisfaction in a finished product. “It was just a blessing to know that I came into contact with some of the steel they used around the world,” one retired worker told me.

Blatant bigotry didn’t go away in the steel mill, but the union hall provided an all too rare place for both the development of black leadership and an ongoing discussion among its black and white members. “There’s no color line,” says Wragg, 88, a black native of Georgetown, who served multiple terms as president of the local. “You represent everybody by a book, you have a contract book that you go by.

If it’s in that book, I enforce it, I don’t care who you are.” An SCLC memo, following the 1970 strike, described white steelworkers learning about civil rights for the first time.

The mill always hired African Americans, but usually in the most dangerous, lowestpaying jobs. When Green started to work the mill in 1978, he says he was one of three black people among the ten skilled mechanics in his division. He was the last black person hired in a craft position, however, for at least a decade.

The union’s civil rights committee eventually brought a complaint to the general manager.

Hiring improved, but only marginally.

In recent years, under ArcelorMittal, Green noticed a return to old patterns. The last black mechanic—a skilled craft position—retired in January 2013, Green says, leaving a workforce of more than 50 white mechanics. A new hiring process required potential supervisors to take a test. Because the current supervisors are white, Green says the younger white guys received an inside scoop on the testing. When the mill shuttered, there were two black people in management, out of about 35. Fully 45 percent of hourly, lower-paid employees, however, were black.

“It’s hard for anybody to convince me that you can’t find” qualified black craftsmen, Green says. ArcelorMittal did not return multiple requests for comment.

When the Georgetown steel mill closed in 2015, 226 people lost their jobs. The union contract included supplemental pay, which meant that workers received a portion of their pay until July 2017. Some workers transferred to other plants, others retired with pensions.

Winter 2018 The American Prospect 87

For those who wanted to stay in Georgetown, it was hard to find comparable work. Many waited months in hopes the mill would reopen, and eventually found jobs that paid a great deal less than the mill did.

The 226 workers whom ArcelorMittal laid off entered an economy that would offer fewer jobs with middle-class pay. In a nation of increasing inequality, we have run out of new ways to demonstrate that wealth does not lift all boats—but Georgetown still provides some.

Poor children in the county end up worse off than those in all but 3 percent of the nation’s counties. Half of the city’s black people have incomes below the poverty line, compared with just 6 percent of white people.

How a City Decides its Future

The debate over the future of the steel mill quickly spilled over to the race for mayor.

Councilman Barber, with the union’s support, sought to become Georgetown’s first black mayor. That would first require unseating two-term incumbent Jack Scoville in last June’s Democratic primary.

By South Carolina standards, although not

by Georgetown’s, Scoville is a rarity—a white Democrat and a self-described union man.

While making the rounds on Election Day, he recounted how he took apart the good ol’ boys network in Georgetown’s city government, replacing unqualified white personnel with qualified black folks. He ticked through the city departments led by black people. Nonetheless, he understood the electorate would break down along racial lines. If he were to win, it would be due to high turnout in the white areas, aided by Republicans who crossed over in the primary.

Barber, on the other hand, would count on high turnout in the black precincts. Barber is a seventh-generation Georgetownian on his mother’s side. He started at all-black Howard High, then, when integration came, became one of the first black students to graduate from previously all-white Winyah High. He went on to be a wide receiver at Michigan State, a distinction his constant sports metaphors reinforce.

To the extent that issues mattered in the primary, the steel mill mattered. Barber initially supported the rezoning, then opposed it when it became clear the mill would be purchased.

88 WWW.Prospect.org Winter 2018

He attempted to finesse his pro-mill stance by arguing that Georgetown did not have to choose between industry and hospitality. “The history of Georgetown tells us that we can do both,” he said. He promised to work with the steelworkers union, and stay out of the way of negotiations between the current and prospective owners.

Scoville, by contrast, continued to advocate for rezoning the property, even when Liberty House emerged as a potential buyer. He supported reopening, but said that he wanted to protect the community if the mill closed again.

The election didn’t really come down to policy, however. When Scoville’s white support-

A sanitized legacy of slavery still remains central to the Georgetown area’s brand. It helps white folks deny just how brutally blacks were treated—and how excluded they still are today. ers finished talking about the mill or praising his opposition to offshore drilling, they would whisper to me why “other people” supported Barber. It’s all about race, they’d say.

What Scoville’s supporters wouldn’t say aloud is that politics in Georgetown, as in much of the South, has always been about race.

Scoville entered politics by proximity. He joined the law firm of the Rosen brothers, one who served in the state legislature and the other as mayor. The Screven Street Gang, an informal group of attorneys and political officials, would get together at the firm to select each year’s candidates. The Rosens invited Scoville to meetings. The Gang members were mostly Democrats, even progressive by the day’s standard, but also all white.

African Americans in Georgetown have always sought a share of leadership. During Reconstruction, a black Georgetownian forged

an agreement that allowed Republicans, predominantly black, to select the local senator, a house representative, a probate judge, a county commissioner, and the school commissioner.

As in the rest of the South, the state eventually but thoroughly wiped out this fusion politics.

Wragg, a Georgetown native, returned in 1972 from Chicago, where he’d worked at a union shop. Three days later, he went to work at the mill, and immediately entered politics, both at the mill and in the broader community.

The steelworkers union had black leadership well before the local government: its first president was black.

The union leaders often became political leaders. Wragg helped to start a group that pushed for single-member council districts, which would allow neighborhoods to elect members to the council. Wragg says that he has seen less political interest from young folks in today’s Georgetown—but, he added, this year’s mayoral election brought new people to the table to support Brendon Barber.

The results bear that out. Barber took almost 60 percent of the vote in the primary. Turnout was up. The largest black district, Dreamkeepers, went to Barber by a margin of 10 to 1. The night of the primary, Scoville shook Barber’s hand, put another hand on his shoulder, and endorsed him for the general election. Barber would still have to overcome a formidable white opponent—the Republican nominee— and that has never come easy in Georgetown.

A Plantation Economy

Take the highway east from the steel mill, across the Winyah Bay on the way to Myrtle Beach, and several exclusive housing developments list multimillion-dollar homes. Kossove’s second home is in the DeBordieu Colony, the most exclusive of the developments. One of his friends came to his furniture store to buy $500,000 in furniture for a DeBordieu home.

A sanitized legacy of slavery remains central to the area’s brand. Private golf courses, quail hunting lodges, and gated second-home communities sit where slaves farmed rice. Take your pick of at least six plantations for a wedding, including a few named for plantations that never planted anything. Play a round of golf at Heritage Plantation, which also never existed.

“People will purchase 200 acres of nothing and

put a plantation name on it,” says Chip Hall, president of Plantation Services Inc., which buys and sells “plantations” in the region.

In the last couple of years, Hall sold the 766-acre Georgetown County property where Michelle Obama’s great-great-grandfather lived as a slave, then as a sharecropper. The property still includes a slave village, six or seven cabins, and a graveyard with stone and cypress tombstones. Oscar Johnson Small II, a Greenvillearea real-estate developer, paid $4.26 million for the property, and has used the land for hunting.

Marketing materials for the golf courses and wedding venues rarely mention slavery. But occasionally Georgetown’s Rice Culture Myth shows up. In the Rice Culture Myth, West African slaves brought their expertise in rice growing with them, teaming up with slave owners to create the legendary Carolina Gold. “Historians agree that South Carolina’s rice economy was the product of Anglo-American entrepreneurship coupled with African-American knowhow and labor,” writes one plantation, which offers authentic Southern weddings starting at $4,500. “After completing the work, any remaining time belonged to the slaves. During this period, they were free to work their own gardens, fish, and some even hunted wild game—though hunting was very rare.”

White folks in Georgetown, and sometimes even black folks, repeat the Rice Culture Myth.

It’s been extended through Reconstruction, when freed slaves purportedly chose to remain with their former owners in neighborhoods where whites lived amicably next to blacks. The myth moves forward to the years of school integration, where the all-white Winyah smoothly merged with all-black Howard.

No one disputes the skill and even responsibility of the enslaved people who built Georgetown’s economy. The myth just leaves out the beatings, rape, and miserable working conditions of slavery. It ignores the teacher who told the white students in Green’s class that they would just have to make the best of integration, and the countless instances, big and small, of discrimination and exclusion from the institutions that shaped how Georgetown would run and how Georgetownians would live.

When slavery ended, rice farming lost its viability. The planters sold their farms, often to wealthy Northerners for duck and quail hunting.

The Northerners and planters would come together at the Winyah Indigo Society, an exclusive social club. The rules, reprinted in 1958, lament that records “were lost or destroyed during the War Between the States, when Georgetown fell into the hands of the Federal Forces.” After the Civil War, the white citizens of Georgetown met at the Society’s Hall, organizing “a Club for self defense.” The Society still meets quarterly and includes many of Georgetown’s most prominent leaders. They eat, drink a special punch, and make toasts to Georgetown, the press, and the bar. The society has about 150 members—now, as always, all of them white men. Nowhere do the rules mention race or gender. New members must receive a nomination from an existing member, but anyone can get married at the Hall.

Most Southern places have a Rice Culture Myth. It is the story many Southern whites—my people—tell when they want to make clear how racism long ago went away. It’s the story that enables us to say, “This shouldn’t be about race.”

We tell our Rice Culture Myth when we want to forget that we enslaved, separated, and continue to exclude black people from our economy.

The Rice Culture Myth serves to validate the closed circles of decision-making, and the wisdom of the few white people who decide. In a foundation board room, leaders of a handful of institutions meet to determine the fate of the mill. In the mill itself, supervisors tap their friends for promotion. They might not set out to put less value on the livelihoods of black folks.

In Georgetown, it just works out that way.

Personal relationships between blacks and whites appear genuine. I saw Skoko greet his black neighbor on her porch, and the white storeowner who knew the black customer’s previous order and carried the next order to the car. Brendon Barber is the great-grandson of a Jewish merchant as well as the great-greatgrandson of a black woman who married a white plantation owner and bred horses. At least two people who share Sam Wragg’s name were members of the Winyah Indigo Society.

In the small-town South, where lives if not bloodlines run together, it’s complicated. Rice Culture Myths are dangerous not because they inf late relationships, although they can do that. They are dangerous because they confuse those relationships with justice.

Changing Times?

After his primary victory, Barber still had to beat the Republican nominee, Ron Charlton, who owns a local cable company and sits on the county council. As in most of the South, Republicans have increasingly claimed the lion’s share of the white vote. Despite a Democratic advantage in voter registration, Scoville had won the 2013 general election by just 40 votes.

In November, however, Georgetown residents overwhelmingly elected Barber to be their first black mayor. Election officials think the 41 percent turnout might be the highest for a municipal election in Georgetown’s history.

While Barber won in black districts, he also garnered votes in the white parts of town. The union helped win support from some white working-class voters.

At a council meeting the next week, the rezoning came up for another vote. The council voted 4 to 3 to continue with rezoning—the four white members voting yes, the three black members voting no. The compromise rezoning would allow the mill to continue to operate indefinitely, as long as it is not abandoned for more than a year.

The rezoning will likely pass its second reading in December. Spelich said the rezoning will not prevent finalizing the purchase in midDecember, and the mill could be up and running by late March. The union has agreed to a pay cut, and the new jobs will average $90,000, including wages and benefits. Spelich projected that the mill will employ slightly more workers—250—than when it closed.

Georgetown’s order certainly appears to be changing. The union and the black community intend to take a role in deciding the city’s future. After Barber becomes mayor, the council’s composition will shift to five black members (including Barber) and two white members.

But myths die hard, and Georgetown’s Rice Culture story might persist long after the mill reopens and the first black mayor takes office.

“Georgetown has always been a community that’s been united, and that was due to the rice culture,” said Barber, a couple of weeks after his win. “So, we’ve got to bring that back.”

Max Rose is a freelance writer and a consultant to community foundations.

Winter 2018 The American Prospect 89

Mobility

Gateway To Nowhere on the Hudson

Donald Trump could well kill more funds for the construction of critical rail infrastructure projects—which doesn’t bode well for the Northeast.

By G ab rie lle G u rle y

E

verybody was in the room where it happened. Shortly after Labor Day, Senate Minority Leader Chuck Schumer went to the White House to talk trains and tunnels with President Trump. Present were two junior senators, Kirsten Gillibrand of New York and Cory Booker of New Jersey; New York and New Jersey representatives; and Governors Chris Christie of New Jersey and Andrew Cuomo of New York. The president’s key people were there, too: Transportation Secretary Elaine Chao; John Kelly, the president’s chief of staff; Gary Cohn, the chief economic adviser; and Mick Mulvaney, the budget director.

New York and New Jersey had secured a pledge from the Obama administration for federal funding to cover half the cost of the Gateway Program, estimated to be up to a $30 billion undertaking to rebuild and replace the more than century-old rail, tunnel, and bridge networks that move people between New York City and northern New Jersey, and up and down the spine of the Northeast from Boston to Washington.

In the wake of Christie’s 2010 veto of the $9 billion Access to the Region’s Core (ARC) project, the Obama administration ultimately pledged to move ahead with the broader Gateway project. But Trump is methodically dismantling anything remotely redolent of the first African American president’s legacy.

The country’s largest metropolitan region is at risk of massive gridlock if a rail shutdown or slowdown forces riders to pile into vehicles and onto the congested roads into New York City and the highways between the New England and mid-Atlantic states. As long-suffering air passengers in and out of LaGuardia Airport can attest, plane travel is not a good substitute either.

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Republicans spun the White House Gateway meeting as a positive step. Cuomo found it “productive” but “inconclusive,” leaving Booker to underscore the obvious: “President Trump,” the senator said in a statement, “has made plenty of promises on infrastructure, which so far have fallen flat.” More likely the meeting was another set piece of political theater.

The Trump administration has no compre-

hensive infrastructure policy, and no commitment to seek the appropriations that Gateway requires. The administration sent Congress a budget plan that zeroes out important sources of funding for Gateway. The $1.5 trillion tax cut will only add to these fiscal pressures.

William Howard Taft was president when the original Pennsylvania Station and the Hudson River Tunnel opened nearly 110 years ago.

Today, the tunnels are decaying monuments to America’s failure, unique among the world’s developed countries, to continue to invest and maintain its public transportation assets. Hurricane Sandy inundated those tunnels for the first time in history, closing them for days and leaving behind a residue that continues to eat away at the concrete and steel—making Gateway more urgent, if remote, than ever.

Rail has advantages over the region’s perpetually clogged highways and congested airports. But delays, derailments, fires, and other hazards turn New York–area rail travel into a journey of existential frustration for the commuters and visitors who also endure Penn Station’s mobbed concourses, dank passageways, and sour waiting areas.

“For the average New Yorker, whether it’s Gateway or subways, all of the region-wide breakdowns in infrastructure are all of a

piece,” says John Raskin, executive director of the Riders Alliance, a New York City transit advocacy group. “A breakdown at Penn Station or in a tunnel under the Hudson River is part of the story that is the same story as subway malfunctions and other infrastructure failures that come from decades of under-investment.”

The Northeast Corridor economy generates $3 trillion, roughly one-fifth of the country’s gross domestic product. For area workers, Manhattan is the obvious choice—wages in every sector are higher than elsewhere in the region. But Manhattan is punishingly expensive to live in, and commuting is a way of life.

An August 2017 report published by the Regional Plan Association, a New York-New Jersey-Connecticut economic research organization, calculated that rail trips in and out of Penn Station have tripled in the past 25 years.

The RPA projects that work trips will continue to increase by 2040. Much of the travel between New York and Boston or Washington is done on Amtrak, as air travel has fallen out of favor for short hauls.

Gateway is crucial for modernizing the Hudson River tunnels that Amtrak owns and operates. Preliminary construction has already begun. Once the new tunnel opens, the original tunnels would be closed and rebuilt.

Amtrak officials conduct regular inspections and monitor the condition of the saltwatercompromised concrete. But constructing the new tunnel could take up to a decade.

The tunnel comprises just one component of the Gateway program. There are eight other projects, including building new bridges to replace the Portal Bridge, another century-old span (which opens for ships and sometimes gets stuck open). Penn Station, the busiest in

Watch This Space: The entrance to future Hudson River tunnels. (We could be watching for a long time.)

courtesy amtr ak

North America, needs a total overhaul and is also part of the Gateway rebuilding. The upgrades affect Amtrak, along with the Long Island Rail Road—operated by the Metropolitan Transportation Authority (MTA), New York City’s regional network—and New Jersey Transit, the statewide commuter rail network.

But there is no discernable Plan B to replace federal funding. Private industry would be unwilling to take on all the risks—even publicprivate partnerships depend on government dollars. Building a new rail tunnel and related infrastructure is simply too big and expensive a feat to pull off without some help from Washington—even for well-off states like New Jersey and New York.

Delayed infrastructure spending for metropolitan New York is now complicated

by Trump, but the current inertia has deeper roots in the personality clashes, parochial turf battles, and competing priorities of the two states. In the United States, New Jersey has the most denizens crossing state lines for work, and most of them head to New York jobs. Hundreds of thousands of people swarm through Penn Station every weekday, most of them via commuter rail or subway lines. But there are no votes for New York politicians in New Jersey, and cross-river projects perceived to benefit New Jersey residents typically get short shrift.

“New York is very different from every other region because there is no one government agency that does any kind of regional planning,” says Philip Mark Plotch, a former MTA planning manager and assistant professor of

political science at Saint Peter’s University in Jersey City. So New Jersey and New York governors take care of their own.

Although the Port Authority of New York and New Jersey comes the closest to being a regional agency, Plotch adds, it has its own priorities and interests. The authority oversees a roster of transportation networks, including airports, bridges, tunnels, ports, the Port Authority Trans-Hudson (PATH) commuter rail network, and the World Trade Center complex.

Through the Port Authority, Christie and Cuomo enjoyed a transactional relationship.

While the agency had been created to provide an efficient framework to build, operate, and maintain major transportation assets, it has long since morphed into a soft landing space for political cronies of governors. It also served as a kitty to fund pet projects that governors could not finance elsewhere in their states’ budgets.

It further served as a vehicle for political payback. The 2013 Bridgegate scandal featuring Christie’s Port Authority people manufacturing traffic jams in a northern New Jersey city as political retribution against its Democratic mayor signaled the end of Christie’s gubernatorial career.

Yet Christie had already sealed his place in regional infamy with his decision to cancel the project that led Amtrak to set up Gateway.

ARC had already broken ground when Christie killed it. The project running from North Bergen, New Jersey, to a station in Macy’s Midtown Manhattan department store would have offered relief to New Jersey Transit’s miserable New York–bound commuters. Christie quickly

glommed onto ARC ’s nickname: “the tunnel to Macy’s basement.”

Like fellow conservative Republican Governors Rick Scott in Florida, John Kasich in Ohio, and Scott Walker in Wisconsin, Christie took great pride in deep-sixing public transit projects. He declared that ARC was headed for cost overruns (a claim later found to be overstated). The state had to pay back a portion of federal funding, but Christie promptly used the state contribution to stave off a gas tax hike and build highway projects like the Pulaski Skyway in northeastern New Jersey, and for other politically motivated ends.

Two years later, Hurricane Sandy pushed the Atlantic Ocean into upper New York Harbor and into the Hudson and East Rivers. Amtrak officials had considered allowing Penn Station to flood but chose the train tunnels instead.

Sandy closed down the Northeast Corridor for days, producing mind-numbing traffic jams as train commuters turned to cars and buses.

Despite that huge heads-up, Cuomo and Christie continued to spar over paying for the Hudson River crossing projects until 2015, when the Obama administration publicly shamed the two men into a deal: The states would pay 50 percent of the costs and the federal government would fund the remaining half of the program.

Yet the prolonged conflicts and delays over investment in transportation infrastructure operate within the political parties as well as between them. After the ARC debacle, Cuomo did not want to talk about tunnels unless the federal government planned to chip in. For most of his tenure, he had focused like a laser on other New York infrastructure projects, including LaGuardia Airport and Moynihan Station across the street from Penn Station.

His signature accomplishment was the $4 billion replacement of the Tappan Zee Bridge (renamed the Mario M. Cuomo Bridge after his late father, a former New York governor, much to local residents’ dismay). The new Hudson River span upriver from New York City connects suburban Rockland and Westchester counties—two critical suburban voting blocs.

The sum total of the projects raises the governor’s infrastructure profile, an important consideration for a man whose name has long been in the mix of possible 2020 Democratic presidential contenders.

Winter 2018 The American Prospect 91

But the ongoing MTA subway crisis, itself the product of inadequate long-term investment, shredded Cuomo’s getting-big-stuff-done reputation in a New York minute. As subway commuters endured the daily hell of getting around, Cuomo and New York Mayor Bill de Blasio engaged in a war of words over whether the city or the state was responsible for the subway’s dire condition and who should pay up. Yet both men and their predecessors brought on the current crisis by failing to prioritize rail maintenance.

According to a recent New York Times investigation, state transportation officials regularly steered MTA funds to all sorts of people and places, including ski resorts the state manages, and failed to keep or hire the key officials required to run one of the world’s largest subway networks. New York mayors have either reduced funding or declined to provide additional dollars. Plagued with deficits, the authority coped by borrowing, and now spends a good chunk of its budget on debt payments.

More subway mishaps in early 2017 raised the stakes. Transportation advocates redirected New Yorkers’ fury from City Hall to Albany by pointing out that it was the governor, not the mayor, who controls the agency and has the real power to fix the mess.

“Cuomo is not down here riding the trains and the subways,” says Laurie Williams, a Long Island Rail Road commuter who works in the city. “This is a huge thing—it impacts millions of people every day.”

The governor finally declared a state of emergency at the MTA , at roughly the same time that Amtrak, which owns and operates Penn Station, launched its intensive repair program after several derailments. (Paid out of existing funding, the repairs had long been shunted aside by other station projects and scheduling concerns.) The one-two punch prompted Cuomo to catastrophize about a “summer of hell,” which prompted a snide threat from Chris Christie, who wanted to “smack” him for not being “more disciplined.”

The much-feared commuter chaos at Penn Station never quite materialized. But the bad optics of the Cuomo-DeBlasio-Christie crosstalk not only illuminated the travesty that is transit in New York and New Jersey; it distracted from the summer’s fight to fund Gateway. It also exposed the region’s institutional

92 WWW.Prospect.org Winter 2018

defects that undermine cooperation and turn transportation policy into crisis management rooted in a failure to plan for the future.

Shortly before President Obama’s Treasury Department turned out the lights, officials published a hefty report, “40 Proposed U.S. Transportation and Water Infrastructure Projects of Major Economic Significance.”

Northeast Corridor rail improvements that included Gateway made the cut. The report identified the four major barriers for completion of the projects: inadequate funding, increasing capital costs, lack of consensus, and regulatory problems. The report singled out Gateway specifically, not for its funding difficulties but for its “lack of consensus among multiple public and private partners.”

The Gateway Program Development Corporation, the organization tasked with coordinating the project with the federal government, and its partner agencies, including Amtrak, New Jersey Transit, and the Port Authority, are hurtling into the unknown. Transit has usually gotten short shrift in attention and dollars in a country that prioritizes highways and air travel. Major transportation projects do not advance without a significant federal funding component, and Gateway is no exception.

The local partners have identified their funding contributions for one project, the Portal North Bridge. The New Jersey state transit agency’s roughly $400 million contribution relies on a federal Railroad Rehabilitation and Improvement Financing (RRIF) loan backed by state transportation fund revenues and additional trust fund revenues. The Port Authority also received a $300 million RIFF loan and contributed additional authority net revenues. A pending Federal Transit Administration Capital Investment Grant (CIG) would provide roughly half of the remaining funds.

With New Jersey’s Transportation Trust Fund reliant on gas taxes and other monies, and the Port Authority collecting tolls, fees, and rents, among other revenue generators, taxpayers could certainly see price hikes in local taxes, tolls, and other fees. (Amtrak has sent more than $300 million to the project to date; its tunnel contribution has yet to be determined.)

The trouble is that the bridge funds add up to far less than the multi-billions Gate-

way needs, especially if the federal money falls through. Trump’s first budget eliminated the FTA’s Transportation Investment Generating Economic Recovery (TIGER) grants and CIG funding, which kickstart projects nationwide.

(There are two CIG grant applications in progress, one for the bridge and another for the tunnel.) The 2018 House appropriations bill also eliminated funding for TIGER grants, while the Senate version funds them. Both the House and the Senate fund the capital grants, though the Senate proposal provides more money.

Although public-private partnerships could play a role in Gateway, it is highly unlikely that a single private company would take on the megaproject without a sweetener such as tolls—and there are no tolls for the rail bridges and tunnels.

One scenario that could prove attractive to a private entity might involve fixed payments made

by Amtrak or New Jersey Transit. These “availability payments” could be leveraged against the rail operators’ revenues or their tunnel usage.

New York and New Jersey might also make payments that dedicate a fixed amount of state revenues to a private entity. California, Colorado, and Florida have recently used availability payments for major transportation projects.

The complex governance, mercurial political players, and general Washington dysfunction pose barriers that are as difficult to overcome as financing. “In New York, I can’t even imagine anybody thinking that the politics are conducive to any kind of partnership,” says Robert Puentes, president of Eno Center for Transportation, a Washington, D.C.-based think tank.

Gateway has sought advice from private firms. An August Request for Information attracted nearly 50 American and international firms, which offered suggestions about everything from procurement and design to construction and financing. Some of the firms suggested that certain technical components of the project could be broken up into smaller contracts to minimize private-sector risks, which would make Gateway a more attractive investment prospect. But when firms ask about federal funding, no one can give them an answer.

The Gateway Program is being mowed

down in the ideological crossfire. Tepid platitudes from Secretary Chao about the project being “an absolute priority” fail to instill confi-

dence, since the infrastructure package promised by Trump has not materialized. Last June, the Department of Transportation sent another ominous signal by withdrawing from Gateway’s Board of Trustees. In a terse, one-paragraph letter to the board chair, the department noted that it does not sit on the boards of local transportation projects, a pronouncement overlooking other development corporations that involved the department, such as New York’s Moynihan Station and Union Station in Washington, D.C. “It sends the signal that [the Department of Transportation is] not going to be playing an active role in the project; it’s going to be the local players that are going to be funding and planning this work,” says Richard Barone, RPA’s vice president for transportation, of the department’s decision, adding that the department may only play an oversight and technical assistance support role.

Gateway is the poster child for the types of projects that many Trump administration ideologues want the federal government to exit. When it comes to public transportation, there is a “If you want it, you pay for it” mentality at work in Washington.

The Republican tax reform program complicates cobbling together the funding for Gateway, since it does not support the kind of privatesector infrastructure investments that Republicans have traditionally touted as alternatives to using public-sector money. The tax-exempt private activity bonds, or PABs, that would make Gateway more attractive to private investors are on the chopping block in the House (which may bring other projects across the country to a halt and force a scramble for new financial plans).

According to Politico, Democratic Representative Elizabeth Esty of Connecticut told the bipartisan Problem Solvers Caucus that Chao had assured her the problem “would be fixed in the infrastructure bill—they’re aware that [the elimination of PABs] is a big problem.”

Yet the GOP tax legislation will send the national deficit soaring, all but assuring that Trump Republicans are likely to rediscover their inner deficit hawks when the time comes to talk about infrastructure. The vitality of one of the country’s prime economic engines appears to be of little concern to red-state Republicans who cannot stomach sending billions to the Northeast. After Representative Rodney Frel-

inghuysen, the New Jersey Republican who chairs the House Appropriations Committee and represents parts of several northern New Jersey counties near Manhattan, managed to steered $900 million to Gateway in the House 2018 fiscal budget, other Republicans like Ted Budd of North Carolina lobbed verbal grenades at the allocation, calling it an earmark.

“How long are urbanists and progressives going to go along with a system of federalism that in reality extracts money from urban areas … and doesn’t return money to those areas for things that really matter to us, and instead widens highways in rural Alabama with tax dollars that are paid in New York and Califor-

Gateway is a core modernization project of basic infrastructure. It urgently needs government capital, and there is no Plan B. nia?” says David Bragdon, executive director of the TransitCenter, a New York City think tank.

The decades-long ordeal to transform the Hudson River crossings into assets worthy of the 21st century is in a precarious place.

Amtrak officials warn that the tunnels have less than 20 years (if not much less) left. Catastrophic structural failure or another hurricane could close them again. But a more mundane scenario is likely: Amtrak decides that one tunnel is too hazardous and orders a shutdown. The closure of one tunnel would reduce rail capacity by 75 percent: Instead of 24 trains every hour, there would be six.

“If you lose those tunnels, you don’t get from Boston to Washington anymore on a train without getting off. You’ll get on a local train or take the ferry over to New Jersey. It’s going to be a real pain in the butt and it’s going to add to your travel, or you are not going to do it,” says Barone.

But crises like the 2007 Minneapolis bridge col-

lapse and the Flint water debacle have not convinced Congress to speed up on infrastructure.

Constructing a megaproject in a climate of ideologically driven austerity and hostility to paying for transit demands what Plotch of Saint Peter’s University calls an “effective public-sector champion” in Politics Across the Hudson, his book on the Tappan Zee Bridge construction.

On Capitol Hill, Schumer and Frelinghuysen have the interest, clout, and tactical skills to fill that role, but they are likely to be outvoted.

Gateway needs other powerful allies to drive home the reality that supporting passenger rail in the Northeast is integral to the regional and national economy. Raising the profile of the project should fall to the governors and members of Congress of the eight northeastern states and the District of Columbia that are under the aegis of the Northeast Corridor Commission, a rail advisory planning body established by Congress nearly a decade ago.

“You need everyone from Congress, from Boston to D.C., to come together to make a series of investments in the Northeast Corridor and … to be pushing and lobbying hard, as a bloc,” says Barone.

A permanent Gateway executive director could lead this effort. But whether that position will command a big enough megaphone will depend on the individual selected. A pick could be announced by the first quarter of 2018.

Polling data and the commuter rail and subway crises demonstrate that the riding public can be a powerful pressure group, but neither commuters nor business leaders have yet to be effectively harnessed to support Gateway. And Trump remains disdainful of states that tend to elect Democrats, even at grave public cost.

The United States has arrived at a point in its history where the political norms have eroded so much that Washington continues to undermine a critical project and ignore the economic consequences of failing to improve train travel to and through New York City for millions of people. Gateway is a core transportation modernization project for the country, not a niceto-have novelty on some over-ambitious wish list. It urgently requires an infusion of capital, since there are no alternatives and no cheap fixes. The main obstacle is not tunneling under the Hudson. It’s getting the right people in the room to make the big bucks happen.

Winter 2018 The American Prospect 93

The Congressional Review Act: A Damage Assessment

How Trump’s Republicans have used an obscure Gingrich-era law to eviscerate health, safety, labor, environmental, and financial protections B y T ho m as O. M c G arit y

P

resident Donald Trump has boasted that he had signed far more bills during his first months in office than many of his predecessors.

Like many of his boasts, this one was misleading. Apart from purely ceremonial bills, the vast majority of bills enacted during his first six months in office stemmed from the Congressional Review Act of 1996 (CRA).

This relatively obscure statute passed by the Gingrich Congress, which President Clinton ill-advisedly signed, empowers Congress to overturn major federal regulations within 60 “session” days of promulgation by passing a joint resolution of disapproval signed by the president. If Congress permanently adjourns prior to the end of 60 days that it is in session, the next Congress gets another 75 session days to pass a joint resolution. The current Congress therefore had until late May of 2017 to overturn any major regulation promulgated by the Obama administration after early May of 2016. While “midnight” regulations of a prior administration have gotten most of the publicity, the CRA allows a legislative veto of any major agency rule. A special provision in the law simplifies enactment by amending the Senate’s rules to prevent filibusters.

The current Congress has thus far passed 15 joint resolutions overturning federal regulations designed to protect consumers, investors, workers, low-income women, students, the environment, and potential victims of gun violence. But with the stroke of a pen, the presi-

94 WWW.Prospect.org Winter 2018

dent consigned those protections to oblivion.

Unless Congress passes specific authorizing legislation in the future (which would be subject to a filibuster), the agencies may never promulgate regulations that are “substantially the same” as the disapproved rules. Protections that in many cases were years in the making are now effectively lost forever.

The disapproved regulations would have protected real people from serious risks. Many of the resolutions advanced the economic agendas of narrow special-interest groups, and some advanced the ideological agendas of the Tea Party wing of the Republican Party. Although it is unlikely that an executive branch agency will promulgate a regulation that attracts a joint resolution of disapproval during the remainder of the Trump administration, the independent Consumer Financial Protection Bureau (CFPB) has promulgated two final rules during the Trump administration that have attracted CRA joint resolutions, one of which has recently passed.

An Obscure Statute with a Vicious Bite

Since presidents are generally unwilling to sign joint resolutions overturning regulations promulgated by the executive branch agencies under their supervision, the CRA has served primarily as a vehicle for publicizing Republican dissatisfaction with particular regulations when a Democrat occupies the Oval Office.

During the Clinton and Obama presidencies,

Republicans introduced dozens of joint resolutions aimed at regulations that irritated powerful economic or ideological constituencies, but the Senate rarely wasted its precious time with resolutions that the president was not going to sign. President Obama only had to veto four CRA joint resolutions.

Prior to 2017, only one CRA joint resolution was signed by the president, and that was during a change in administrations. The Occupational Safety and Health Administration (OSHA) spent most of the Clinton administration writing a regulation requiring employers to establish “ergonomics” programs to protect workers from musculoskeletal injuries associated with jobs involving repetitive motions, lifting heavy objects, and other tasks that strained their bodies. Unfortunately for the workers who would have benefited from the regulation’s protections, it was one of the “midnight” regulations finalized at the very end of the Clinton administration. The Republican-controlled 107th Congress quickly passed the resolution of disapproval, and President George W. Bush signed it in early 2001. The protections never went into effect.

And OSHA may not promulgate a regulation on that topic until Congress passes an authorizing bill, despite a growing scientific understanding of musculoskeletal injuries and how they can be prevented.

As in previous administrations, executive branch agencies pushed out a large number of regulations toward the end of Obama’s sec-

e va n v u c c i / a p i m a g e s

ond term. Having run campaigns against federal regulation in 2016, President Trump and Republican congressional leaders were eager to demonstrate to their conservative populist base that they were going to bring about the “deconstruction of the administrative state,” in the memorable words of presidential adviser Steve Bannon. And what better way to begin that project than by throwing out regulations that might contribute to a positive legacy for President Obama?

Within weeks of the inauguration, nearly 40 joint resolutions were introduced to declare recently issued regulations “without force or effect.” Between January and May 18, when the CRA window closed on regulations passed during the previous administration, Congress passed and Trump signed 14 such resolutions, reversing hard-won consumer, worker, or investor protections in several key areas. More

recently, the president signed a joint resolution overturning a key consumer protection issued by the Consumer Financial Protection Bureau.

Protections for Workers

Fair Pay and Safe Workplaces. The Department of Labor’s Fair Pay and Safe Workplaces rule required any company bidding on a federal contract worth more than $500,000 to disclose to the contracting agency violations of minimum-wage and wage-theft regulations, sex discrimination and sexual harassment regulations, occupational safety and health standards, and several other labor laws over the previous three years. The primary purpose of the regulation was to make information on violations of labor laws available to contracting agencies to consider in determining whether bidders were responsible companies. The department also hoped that the

regulation would incentivize prospective federal contractors to comply with those laws.

A CRA joint resolution overturning the rule easily passed the House and passed the Senate on a 49–48 party-line vote. Apparently law-and-order Republicans were not as enthusiastic about laws protecting vulnerable workers from wage theft, sex discrimination, and workplace injuries as they were about punishing immigrant workers without green cards.

Injury Recordkeeping. For 40 years, OSHA required employers in high-hazard industries to maintain accurate records of on-the-job injuries for five years. Accurate information on workplace injuries was essential to OSHA’s efforts to write effective safety standards, and injury information assisted the agency in prioritizing workplaces for inspections by its very limited enforcement staff. OSHA’s ability to cumulate violations over a five-year period also

Winter 2018 The American Prospect 95

allowed it to seek large penalties that made it worth the effort.

The program hit a snag in 2012 when a court of appeals held that OSHA’s regulations did not support its long-held position that violations of its recordkeeping requirements were cumulative. The agency therefore had only six months from the time that a violation occurred to discover and prosecute it. Given the agency’s tiny inspectorate, this effectively rendered the recordkeeping requirements unenforceable, and citations for violations fell by 75 percent.

OSHA fixed the problem in late 2016 by amending its recordkeeping regulations to clarify that the failure to record an injury was a continuing violation until it was reported.

In early April 2017, Trump signed a CRA joint resolution that took away the fix. OSHA therefore remains powerless to prosecute failures to record workplace injuries after six months following the failure. Employers are free to fudge the numbers, secure in the knowledge that OSHA will probably not catch them in time to make them pay a fine. And a vital source of information about the nature and extent of jobrelated injuries has become far less dependable.

Retirement Savings Plans. In recent years, seven states and several cities have established retirement savings programs for employees of small businesses who do not have retirement plans of their own. These so-called “autoIRA” programs automatically enroll uncovered employees in a state or city program, unless they opt out. More than 25 other states have been considering similar programs.

In addition to providing an opportunity to help some 55 million workers prepare for retirement, these programs could save taxpayers billions of dollars in Medicaid expenditures by lifting more retirees above poverty levels. An American Association of Retired Persons poll found that 80 percent of workers and 77 percent of conservative private-sector workers supported state-facilitated retirement programs. Many states were worried, however, that the federal program for large employers that contribute to employee retirement funds would preempt state and local programs.

Hoping to encourage states and cities to adopt these retirement plans, the Department of Labor promulgated two rules near the end of the Obama administration making clear that

96 WWW.Prospect.org Winter 2018

these programs would not be subject to federal preemption. Since they freed states and cities, the rules were deregulatory in nature and should have been music to the ears of smallgovernment Republicans.

The rules, however, attracted fierce opposition from Wall Street banks that could have lost business opportunities when employees enrolled in the state programs, rather than in bank-run retirement plans. Joined by the Chamber of Commerce and the Heritage Foundation, they successfully lobbied Congress to repeal the rules under the CRA . The states and cities that have adopted retirement programs now run the risk of lawsuits claiming that they are preempted, and the shift will discourage other states and cities from adopting such programs.

Drug Testing for the Unemployed. Prior to 2012, a few states attempted to cut off unemployment insurance benefits to “undeserving” applicants who tested positive for drugs in mandatory testing programs. The Obama administration and most courts, however, concluded that drug testing was not authorized by the statutes governing unemployment insurance.

In that year, Congress enacted compromise legislation that extended the expiring unemployment insurance program but also empowered the Labor Department to promulgate regulations specifying occupations in which applicants could be tested for drugs. Late in the Obama administration, the department issued rules narrowly limiting the occupations to those where drug testing was already common, like aviation, trucking, and law enforcement.

Presuming that the Trump administration would allow drug testing for a much larger class of jobless applicants, Republicans on a nearly straight party-line vote passed joint resolutions voiding the Labor Department regulations. They may, however, have outsmarted themselves. With the regulations thrown out, the law reverted back to the judicial interpretations before it was promulgated, under which drug testing was generally prohibited in all occupations. And the Trump Labor Department is now powerless to promulgate a regulation that is “substantially the same” without explicit congressional authorization.

The Republican regulatory reformers should have been careful what they wished for.

Protections for the Environment

Stream Protection. The Department of the Interior’s Office of Surface Mining (OSM) spent multiple years of the Obama administration working on a major overhaul of its stream protection rule. The regulations issued in mid-December 2016 required operators of surface mines, including enormous mountaintop removal mines in Appalachia, to monitor streams and groundwater for pollutants before and during mining operations, to keep discarded trashpiles (“overburden”) more than 100 feet away from streams, and to restore mined areas to a condition capable of supporting prior land uses. In addition to protecting aquatic life in 6,000 miles of Appalachian streams, the rule aimed to protect vital sources of drinking water for residents near the mines.

The coal mining industry adamantly opposed the regulation, and it assigned a high priority to persuading Congress to overturn it under the CRA . The joint resolution easily passed the House, and four Democratic senators from coal states joined all but one Republican in passing it in the Senate. The mining industry is now free for the foreseeable future to add to the 2,000 miles of streams that it has already destroyed with mountaintop removal mining.

Landscape-Level Planning. In December 2016, the Department of the Interior’s Bureau of Land Management (BLM) published an update to its 1983 procedures for land-use planning on federal lands, called “Planning 2.0.” The new procedures provided for public input early in the process of developing plans, focused on “landscape-level” planning that took into account wildlife corridors and important habitats as well as potential disruptions due to wildfires, invasive species, and climate change, and suggested that approvals of private-sector projects on federal lands should result in “no net loss” of environmental assets.

Oil and gas companies that leased public lands for fracking operations and ranchers who grazed cattle on public lands opposed the new procedures because they appeared to elevate environmental concerns over their economic interests and to centralize authority in Washington, D.C. After Congress killed the rule in March 2017, planning at BLM reverted to the far less transparent 1983 procedures, and local BLM officials were free to ignore the “no net loss” goal.

Hunting in the Arctic National Wildlife Refuge. At the insistence of lobbyists for hunt-

ing interests (gun manufacturers, sporting goods stores, professional guides, and hunters), the state of Alaska passed a law allowing licensed predator controllers to gas mother wolves and their pups in their dens, shoot hibernating bears, kill bears with steel traps and wire snares, use donuts and other sweet baits to set up bears for easy kills, and use airplanes to scout and (in the case of state wildlife officials) shoot bears. The reason for allowing all of this unsportsmanlike carnage was to preserve more elk, moose, and caribou for hunters.

Toward the end of the Obama administration, the Department of the Interior’s Fish and Wildlife Service (FWS) promulgated a regulation that effectively prohibited this “on the 76 million acres of federally managed National Wildlife Refuges in Alaska” where predator control is scientifically managed to ensure sustainable populations of predators and prey.

Claiming that this restriction on the use of the federal government’s own land was an unnecessary restriction on states’ rights, members of the Alaska delegation introduced joint resolutions in both houses of Congress to declare the rule null and void. Their Republican colleagues (and a few Democrats) joined them in passing the joint resolution. Now FWS is powerless to protect bears and wolves on lands specifically designated as federal “refuges” for wildlife until Congress passes a law specifically authorizing such protection.

Protections for Consumers

Internet Privacy. Concerned that “online pri-

vacy” was rapidly becoming an oxymoron, the Federal Communications Commission (FCC) promulgated a regulation in October 2016 providing privacy protections for customers of internet service providers (ISPs) like AT&T, Comcast, and Spectrum. ISPs had to provide “reasonable data security” to protect information concerning their customers’ use of the internet from hackers, and they had to secure the consent of customers before selling “sensitive” information on activities like web browsing, transactions, and app usage to advertisers and other entities. Public reaction to these protections was uniformly positive, except, of course, for the ISPs and the advertising com-

Lobbyists for the financial industry swarmed Capitol Hill, pressing members of Congress to kill the Obama era rule that protected consumers from forced arbitration. panies to whom they sold the information.

Knowing that public opposition to an effort to overturn the privacy rule would be vociferous, the affected companies hit upon a strategy of quietly passing a CRA joint resolution in the Senate while the House was attracting media attention as it debated the attempted repeal of the Affordable Care Act. Taken by surprise, consumer and civil liberties groups were outlobbied 50 to 1, as the Senate passed the resolution by a 50–48 vote. But the resolution almost failed in the House, where several libertarian Republicans were not persuaded that it was a good idea to give ISPs free rein with the intimate details of internet users’ habits and predilections. The resolution passed that body by a mere ten votes.

In the maelstrom of public protest that followed Trump’s signing of the resolution, its House sponsor, Representative Marsha Blackburn of Tennessee, introduced legislation empowering the FCC to write privacy regulations and extending the authorization to all internet firms, including Google and Facebook. Unlike the joint resolution, however, that bill will be subject to a filibuster in the Senate, and Trump will have to be persuaded to sign it.

Consumer Class Actions. Created by the Dodd-Frank Act of 2010, the Consumer Financial Protection Bureau (CFPB) is an independent agency, the head of which could not be fired by the president other than for specific derelictions of duty. Its arbitration rule, promulgated in July 2017, addressed a little-known

clause in most consumer contracts with financial institutions that waived the consumers’ constitutional rights to a jury trial and required them to adjudicate any complaints before an arbitrator chosen by the bank. A lengthy CFPB study demonstrated that the arbitration process was so heavily weighted in favor of financial institutions that consumers prevailed less than 10 percent of the time.

These forced arbitration clauses also prevented consumers from joining together to file a class-action lawsuit. Since the amount of money involved in individual claims is usually small, it is seldom worth it to pursue a single arbitration action. As former judge Richard Posner put it, “only a lunatic or a fanatic sues for $30.” Therefore, the vast majority of consumers just eat their losses, and the offending financial institutions, ranging from payday lenders to the country’s largest banks, avoid any accountability for their misdeeds. In those rare cases where consumers do pursue arbitration and prevail, the forced arbitration clauses swear them to secrecy, and nobody learns of the institution’s misdeeds, not even regulatory agencies with the power to prevent them from fleecing other consumers.

The arbitration rule addressed these problems by prohibiting companies from using forced arbitration clauses to deny consumers’ ability to bring class-action lawsuits. It also required financial institutions to submit records to CFPB concerning claims, counterclaims, and awards in arbitrations.

Lobbyists for the financial-services industry and the Chamber of Commerce swarmed Capitol Hill pressing members of Congress to pass a joint resolution killing the regulation. Because soldiers were frequent victims of financial scams protected by arbitration clauses, the American Legion joined consumer groups in supporting the regulation. Even the head of Tea Party Nation editorialized against the joint resolution.

The House passed the joint resolution killing the regulation by a 231–190 majority that included no Democrats. While the Senate was considering the joint resolution, an Alabama district judge upheld Wells Fargo’s motion to dismiss a class-action lawsuit brought by victims of its fake-accounts scheme in that state. Ignoring this indisputable evidence that

Winter 2018 The American Prospect 97

banks were abusing arbitration clauses to avoid accountability for despicable conduct, the Senate passed the joint resolution in late October with Vice President Pence casting the deciding vote while Republican senators Lindsey Graham and John Kennedy voted against it.

A protective regulation that took the CFPB five years of careful research and deliberation to promulgate was undone by a Republican Congress that conducted not a single hearing, suffered little floor debate, and attracted not a single Democratic vote.

Protections for Investors

Foreign Corruption. As part of the 2010

Dodd-Frank legislation, Congress enacted the bipartisan Cardin-Lugar Anti-Corruption Act, which required the Securities and Exchange Commission (SEC) to issue regulations requiring domestic companies to report the payments—often bribes—they make to foreign governments to secure access to oil, gas, and mineral resources. Congress meant for the regulations to protect investors who were worried about the impact of possible corrupt foreign practices on the value of their investments as well as citizens of foreign countries who wanted to hold public officials accountable for how they managed their countries’ resources. The implementing regulations that SEC promulgated in June 2016 required U.S. companies to report payments of more than $100,000 on both a project-by-project and a cumulative basis to the agency. The agency denied a plea for an exemption in cases where laws enacted by foreign governments prohibited such reporting.

Several companies in the oil, gas, and mining industries lobbied Congress vigorously for a joint resolution declaring the rule to be null and void, and Trump signed the joint resolution in mid-February 2017. The joint resolution created a real dilemma for the SEC. The CRA forbids the agency from promulgating a regulation that is “substantially the same” as the 2016 rule, but the Cardin-Lugar Act told the agency to promulgate them within 270 days of the enactment of the statute. The agency has an obligation to publish final rules, but it apparently cannot perform that duty until Congress passes legislation authorizing it to do so. It is not clear, for example, whether SEC

98 WWW.Prospect.org Winter 2018

Enacting rules to carry out a law passed by Congress requires extensive and public deliberation. But killing a rule under CRA is done in great haste, and in secret. could promulgate the same rule, but with the exception that the industry demanded.

Protections for Potential Victims of Gun Violence

Gun Background Checks. The internal management regulation that the Social Security Administration (SSA) promulgated in December 2016 seemed like a no-brainer. It directed its personnel to submit to the National Instant Criminal Background Check System (NICS) relevant records of Social Security recipients who were not allowed to possess guns because of severe mental illness. A 2007 statute prohibited individuals who had been “adjudicated as a mental defective” by a court or other authority from purchasing guns, and it required their names to be added to the NICS. The regulations simply implemented a law designed to keep firearms out of the hands of mentally deranged individuals. Who could argue with that? The National Rifle Association, of course.

The NRA argued that the regulation was unlawful, unsupported by empirical evidence, and deprived persons accused of being mentally ill of due process and of their Second Amendment rights. Despite the fact that many firearms advocates supported the SSA regulation, the NR A successfully lobbied Congress to pass a joint resolution overturning it. All Republican senators and four Democrats voted for the resolution. Since the agency may not promulgate a regulation that is substantially the same absent an act of Congress, the joint resolution has effec-

tively emasculated the 2007 statute. So much for the Republican mantra that the solution to mass killings like the recent Las Vegas massacre is to keep guns out of the hands of mentally impaired people.

Protections for Low-Income Women

Family Planning. The Title X Family Planning

Program provides federal funds to states to distribute to private organizations that provide family planning and related health services to women who are unable to obtain health insurance. For decades, the program has helped millions of women to obtain preconception health care and counseling, vaccines, Pap tests, and other services. Although federal funds may not be spent on abortions, Title X funds are available to organizations like Planned Parenthood that provide abortions with separate money.

Reacting to reports that some states were attempting to keep low-income residents from using Planned Parenthood, the Obama administration promulgated a rule preventing states from distributing Title X funds based on whether the recipient organization also performed abortions. That motivated antiabortion activists and other longtime critics of Planned Parenthood to demand a CRA joint resolution voiding the rule. The resolution easily passed the House, but Vice President Pence had to cast the deciding vote in the Senate when Republicans Lisa Murkowski and Susan Collins voted against it.

Politicians who have for years railed against Planned Parenthood are now more free to defund it. Vulnerable women who have relied on that organization for family-planning services must now seek help from providers deemed acceptable to male-dominated state legislatures.

Protections for Students

Education Accountability and Teacher Preparation Programs. The Every Student Succeeds Act of 2015 (ESSA), which delegated most

of the responsibility for managing federal primary and secondary education grants to the states, required the Department of Education to promulgate regulations ensuring that state accountability plans were equitable and addressed needs of low-income and minority students. It also required the Department of

Education to issue regulations on reporting requirements for teacher preparation programs at schools receiving federal grants.

The Department of Education’s fairly innocuous regulations of November 2016 gave states a great deal of leeway, but did clarify state responsibilities and created timelines for submission of adequate accountability plans. The teacher preparation regulations were aimed at ensuring that teacher preparation programs were of “high quality.” The regulations allowed the states wide discretion in creating the metrics for determining quality, but they also required programs to file reports on eight indicators of quality, including student learning outcomes. They did not specify how the indicators should be measured or what their relative weights should be.

Republican members of Congress thought the provisions on treatment of historically marginalized groups retained too much federal control over federal money. Surprisingly, Republican critics of the teacher preparation regulations had the support of teachers unions that feared states would use student test scores as a surrogate for student learning outcomes.

Both regulations went down in flames. Unless Congress enacts a new law, states will have no guidance from the Department of Education on how to implement the accountability and teacher preparation programs, and the federal government will have little say over how the federal dollars are spent.

Regulations That Survived the Assault The CRA initiative ran into serious opposi-

tion toward the end of the statutory review period. The Senate voted down a joint resolution aimed at overturning the Department of the Interior’s regulation of oil and gas fracking operations in federal wildlife refuges. And the Senate leadership pulled back a joint resolution to overturn the CFPB’s prepaid debit card rule that provided the same protections to those cards as applied to regular credit and debit cards. Both joint resolutions attracted loud enough howls of outrage from an aroused public that a few Republican senators decided to oppose the joint resolutions. As time ran out in mid-May, more than 20 joint resolutions remained unaddressed.

Poor Public Policy

As should be apparent from the preceding abuses, the CRA is a profoundly bad idea. It provides a vehicle for special interests and ideologues with access to the congressional leadership to disrupt the administrative process and destroy carefully crafted regulations with minimal deliberation and little explanation.

Issuing a regulation of any consequence takes a great deal of time and resources. The agencies must gather and analyze information on the harms that the regulation is addressing and the benefits and costs of various options for dealing with those dangers. All agencies must invite public comment on their proposals and be prepared to modify them in light of those comments. Agencies often hold public hearings on the proposals in various locations.

They must then assemble a record, explain their conclusions by reference to their statutes and materials in the record, and respond to significant public comments. Proposed regulations must run a further gantlet in the form of approval by the White House Office of Information and Regulatory Affairs, which was designed to be anti-regulation. And agencies must be prepared to defend their factual determinations and policy judgments in court.

The companies, trade associations, and interest groups that oppose a rulemaking initiative have multiple opportunities to persuade agency decision-makers, administration higher-ups, and courts that the regulation is a bad idea or should be changed. The CRA gives opponents a far less transparent opportunity to lobby behind closed doors, to flood the media in congressional districts with advertisements, and to make strategic campaign contributions in pursuit of a joint resolution to kill a regulation outright. And this can be accomplished without a single hearing and without any serious deliberation over the regulation’s virtues and detriments.

The CRA allows piecemeal attacks on agency implementation of protective statutes that are almost always inconsistent with the policies underlying those laws. Congress typically enacts new regulatory statutes like the Gun Control Act of 1968 or the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 in response to crises that create demands for governmental action to protect

the public. Lacking sufficient public support to repeal the law, the proponents of CRA joint resolutions can accomplish the same result by preventing the agency from implementing regulations. There was no public demand for repealing the SSA’s mental illness reporting rule or the CFPB’s arbitration rule, but Congress killed them anyway at the behest of the NRA and Wall Street bankers.

Furthermore, the CRA is rigged against protective regulations. By eliminating the Senate filibuster, the CRA makes it much easier to kill a protective policy initiative than it is to enact the legislation authorizing the rule. Most controversial legislation these days requires 60 votes in the Senate. Two of the joint resolutions that Congress passed this year could not even attract a majority of senators and required Pence’s vote to break ties. It will be much more difficult to pass legislation re-empowering an agency to act in the future because it will have to overcome the 60-vote filibuster hurdle. Even though Congress would never have passed a statute allowing bounty hunters to kill bear cubs and wolf pups in their dens on National Wildlife Refuges, it will be extremely difficult for proponents of the FWS’s regulation to secure the 60 Senate votes necessary to prevent that carnage.

The CRA is a sleeper statute that only awakens when a single political party gains control over both the presidency and Congress after a period of regulatory activity by the other party. Nevertheless, it has played a powerful role in the Trump administration’s efforts to deconstruct the administrative state. Because it eliminates filibusters, it has allowed the president to declare a series of legislative victories without having to cut a deal with a single Democrat. And it has caused a great deal of damage. The 15 regulations that Trump has signed so far would have protected all of us from serious threats to our health and safety, our shared environment, and our pocketbooks.

Unless Congress enacts legislation allowing those agencies to address those threats at some point in the future, the damage will be permanent. The best remedy for the harm wrought by the CRA would be to repeal it.

Thomas O. McGarity is a professor of law at the University of Texas School of Law and a board member of the Center for Progressive Reform.

Winter 2018 The American Prospect 99

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Christopher Rivera, Brooklynn Prince, and Valeria Cotto

The Poverty on Disney’s Doorstep The Florida Project is a film about life as a poor kid. It doesn’t erase the innocence of childhood—or the harshness of poverty. By Kalena Thomhave

m a r c s c h m i d t / t h e f lo r i da p r o j e c t

F

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he opening credits of The Florida Project introduce us to a cotton-candy world, soundtracked to “Celebration”

by Kool & the Gang—fitting for a summertime setting of Orlando, Florida, home of Walt Disney World, the ideal vacation destination for nearly every American child. Reinforcing the cheeriness, the colors of this film from director Sean Baker (who previously made Tangerine) are heavily

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saturated—shades of pink and lavender and blue—just like the buildings along Route 192, where Moonee (Brooklynn Prince), the six-year-old who carries the movie, stays with her mom at the Magic Castle Inn and Suites, a short hitchhike away from Disney’s own Magic Kingdom.

Moonee and her mother, Halley (Bria Vinaite), live in a world quite different from “the happiest place on earth”—though Moonee’s

summer is characterized by magical adventures of her own creation, with her friends Scooty (Christopher Rivera) and Jancey (Valeria Cotto).

Moonee doesn’t know she’s homeless—she has a motel bed to sleep in, after all. And Moonee likely doesn’t understand the depths of her poverty, though she probably knows that Disney World is someplace that, close though it may be, is incredibly far away—because

of money. (“You know I like pepperoni,” Moonee complains while eating cheese pizza. “Pepperoni costs money,” says her mom.)

And Moonee doesn’t question the donation trucks, driven by starryeyed nonprofit employees, that come by the motel; she just grabs what she wants.

The juxtaposition of poverty right outside the consumerist wonderland that is Disney World permeates the entire movie, whether we’re watching Moonee and her friends walk by massive gift shops with names like “Disney Gifts Outlet,” or a shot of a nearby street sign reading “Seven Dwarfs Lane.” But the irony, likely the catalyst of the film’s vision

Winter 2018 The American Prospect 101

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in the first place, never feels tired.

If Baker doesn’t seem to be trying too hard to underline this dichotomy, it’s because he’s not: There’s a palpable dark reality behind fictional Moonee’s situation. On the road to Disney World, just outside the theme park, the landscape is dotted with low-cost motels that serve as protohomeless shelters for the thousands of families that can’t afford the high rent of a resort town like Orlando.

And the recent hurricanes affecting the Caribbean have only exacerbated the problem. Due to Hurricane Maria, approximately 170,000 Puerto Rican evacuees have made their way to Florida. FEMA has placed some of these refugees in approximately 1,500 units of temporary motel housing. Thousands of evacuees are still expected to apply.

As with any good fiction story, whatever the background or plot or setting, the human emotions in The Florida Project are real. The poverty is real, too, the result of tangible policy decisions.

In interviews, Baker has described preparing for the film by researching the real plight of the families living in motels in Central Florida, and “taking trips [to Orlando], meeting children who were 6-7 years old and spent their entire lives in the motels.” One nonprofit that the team worked with to connect with such families, the Community Hope Center, is shown in the film. By infusing the storyline with Orlando’s reality, not “poverty porn,” the movie makes the stories of poor people not only approachable and vivid, but true and worth telling. Baker succeeds so well in this quasi–cinéma vérité approach to childhood poverty that it’s somewhat jarring to see photos of the child actors in tiny ball gowns and suits at the movie’s premiere.

Though poverty is consistently on display, The Florida Project at its heart is about childhood—the recklessness and innocence. How summer embodies everything that childhood can be—freedom and ice cream.

Moonee likes to eat maple syrup out of the container. She plays with an electric fan, talking in front of it to make a robot’s voice. She has spitting

contests and then becomes best friends with a girl she spits on. She takes a friend on a safari to see the cows in nearby fields.

Moonee’s mother is in many ways a child, too, reveling in—or joining in—Moonee’s pursuits instead of disciplining her.

While fictitious monsters prowl Disney World, real ones lurk around the motel. Pedophiles, for whom poor children could be an easy target. Brutal fights in the parking lot. What a mother will do to provide for her child, no matter how disturbing (turning a trick in her motel room)—while at the same time attempting to shield her from it by hiding her in the bath, the music turned up high. The children can’t fully understand all this, but of course they have seen glimpses of the despair that can’t be disentangled from poverty. “I can always tell when adults are about to cry,” Moonee announces at one point, though she’s not watching her mother, she’s watching an upset tourist couple who mistakenly booked the dumpy Magic Castle Inn instead of a resort near the Magic Kingdom. As children will, Moonee and her friends point out the villains who are closer to the Disney version—“There’s alligators in there,” one kid says, pointing at a swamp. (“If I had a pet alligator,” says Moonee, “I would name it Anne.”)

Along with the dragons, there are heroes, too. Like Bobby (Willem Dafoe), the manager of the motel, who keeps a careful eye on the kids, even though their capers occasionally threaten the normal operations of a motel business. Managing a motel is not easy or well-paid work, and it’s not in his job description to protect the kids and families that live in his motels, though he often does just that.

What is in his job description is that, at times, he may have to evict them.

He also reminds them of the power that tourists have in a place like Orlando. The kids will probably annoy other long-term “guests,” but as Bobby says, “You can’t fuck with tourists.” In a service economy like that of Orlando, most people’s wages are only possible due to the leisure activities of others—so yeah, you can’t fuck with tourists. Though service work is generally unreliable with inconsistent

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and seasonal scheduling, not to mention poorly paid, even that wouldn’t exist without the tourist.

Baker has said that the film is ultimately about the housing crisis, malignly exacerbated by the Great Recession. According to the National Low Income Housing Coalition, the Orlando metro area has the nation’s third-lowest availability of affordable rental housing for households with extremely low incomes—18 units per 100 renter households. The coalition also estimates that to afford a two-bedroom home in Orlando, a household must pull in $40,080 annually—the equivalent of 2.4 fulltime jobs at the minimum wage.

While Baker may have intended to focus on the effects of the recession, the film illustrates other policy failures, too, particularly the consequences of welfare reform. Probably in her early to mid-20s, Halley has worked stints as a stripper, but as she says, “she refused to do things in the back” for money, so she loses her job. When Halley explains to her caseworker why she’s out of work, the caseworker tells her, “Well, that’s gonna affect your TANF.” TANF, or Temporary Assistance for Needy Families, is what people typically mean when they think of cash welfare. Halley would have been on TANF to help her raise her child.

TANF was created by 1996’s welfare reform, the bipartisan effort that upended the welfare system. Its main feature is work requirements; most parents on TANF (it is only open to parents with minor children) must work or participate in other “work activities.” As a result, less than a quarter of families in poverty today receive TANF benefits, down from almost 70 percent of poor families before TANF was enacted.

Before welfare was reformed, mothers received assistance through Aid to Families with Dependent Children (formerly called Aid to Dependent Children). AFDC was focused on providing benefits to mothers so that they wouldn’t have to work. Enacted in the Social Security Act of 1935, the stated purpose of the program was this:

[Mothers’ aid programs, like ADC/AFDC] are not primarily aids to mothers but defense measures for children. They are designed to release from the wage-earning role the person whose natural function is to give her children the physical and affectionate guardianship necessary not alone to keep them from falling into social misfortune, but more affirmatively to rear them into citizens capable of contributing to society.

The evolution from the assistance described above to the meager welfare benefits given today is well documented. When cash welfare was enacted in 1935, black mothers were largely excluded from the program, which was initially intended for white widows. But soon, instead of widows, it was mostly single mothers who utilized the program. And as black Americans saw greater access to welfare, so too were discussions and debates surrounding poverty and welfare increasingly racialized. Think of Ronald Reagan’s mythical “welfare queen,” a strategy that depicted the poor who received government assistance as lazy and dependent. The decades of debate culminated in the ending of AFDC and the emergence of TANF, through the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, signed into law

by President Clinton.

Unlike the assistance that AFDC provided, TANF coerces parents into working—a product of a neoliberal era where an individual’s value is conflated with their market value. There is little regard for an individual’s needs, wants, or obstacles; they must work, no matter how small the wage or how difficult the hours.

And so, when Halley loses her job, she loses her cash assistance, a

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program originally intended to ensure that mothers can stay home and raise their children. Without it, she has to go to great lengths to provide for Moonee, catalyzing the movie’s emotional climax.

(Including acronyms in the film like TANF and DCF [Department of Children and Families], without describing what they stand for, shows not only how policy infects everyday lives, but also how policy is experienced, especially by the poor, as an unintelligible, immutable reality. Like the film’s characters, the film’s audience may not know exactly what these acronyms mean, their history, or their ultimate effects.)

As the summer continues, Halley goes to increasingly greater lengths to provide for Moonee, eventually demonstrating how mothers in poverty may be criminalized for doing whatever they can to provide for themselves and their children. As much as Moonee tries to create her own happiness, the real world bursts in, inspiring Moonee and Jancey to take one final adventure: When they cannot escape the devastation of their reality, they run to where happiness has already been constructed, and promised.

Director Sean Baker on set with Willem Dafoe, who plays Bobby, the motel manager and one of the film’s good guys

The title of the film comes from Walt Disney’s original dream of a city of the future: EPCOT (The Experimental Prototype Community of Tomorrow), nicknamed his “Florida Project.” According to Disney, EPCOT would be a “solution to the problems of our cities.”

In Disney’s imagineered Florida Project, “There would be no slum areas because we won’t let them develop.” Everyone would have a job—in fact, be required to have a job. Disney said that his community “will always be a showcase to the world for the ingenuity and imagination of American free enterprise.” The EPCOT community, of course, was never realized, and instead, Disney’s monument is an Orlando of theme parks and adjacent poverty. The task of showcasing some consequences of American free enterprise has been passed on to the motels of Route 192, where kids like The Florida Project’s Moonee live and play.

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Up Against Big Tech The old challenges of concentrated economic and political power now confront us in new forms. By K. Sabeel Rahman b

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ong the darlings of the digital revolution, Google, Facebook, and Amazon now face growing concern about the power they have acquired over politics, culture, and the economy. With Google and Facebook, the immediate issue in the past year has been their role in spreading fake news. With Amazon, it’s been the online retailing giant’s seemingly relentless march into every consumer market. Three new books suggest that these concerns about Big Tech are indicative of a larger battle over new forms of concentrated corporate power and their implications for inequality and democracy.

In Move Fast and Break Things, Jonathan Taplin provides a bleak picture of a 21st-century culture industry cannibalized by informational platforms. A music and movie producer, Taplin has worked with such luminaries as Bob Dylan and The Band, George Harrison, and Martin Scorsese. The central insight of his book is that internet platforms like YouTube/ Google and Facebook risk destroying the economic basis of creative work.

As Taplin reports, revenue for artists and cultural producers from direct sales and rentals has plummeted. People are still reading, listening, and watching as much, if not more, than they ever have. But since they access content through platforms like Facebook and Google, the platforms absorb billions of dollars of ad revenue. The differences are stark; 100,000 plays of a song on Spotify earns an artist a mere $500, hardly enough to base a career as a professional musician on. YouTube, Taplin estimates, now accounts for 52 percent of streaming market share for music, but only pays 13 percent of streaming music revenues that media companies pay. Taplin’s central concern is that the economics of information platforms means that culture and knowledge producers can no longer afford to produce. Taplin points to

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similar trends in other media spaces: advertising and subscription revenues have collapsed for newspapers, and newsrooms have shrunk accordingly.

A journalist and former fellow at New America, Franklin Foer complements and expands Taplin’s account.

Like Taplin, Foer highlights how Google and Facebook engineer their platforms, leveraging user-created content without carrying the burden or cost of producing the content themselves. For example, by optimizing algorithms for its news feed, Facebook tries to maximize attention from users in the effort to keep them hooked on the platform. As the new curators and gatekeepers to information, Facebook and Google can even change voter behavior, potentially enough to swing elections. Meanwhile, through their control of vast amounts of data about both consumers and other firms that use their platforms, Google and Facebook are in an incomparable position to track the marketplace as a whole as well as the behavior of individuals.

For both Foer and Taplin, part of the danger of these tech platforms is cultural. Both fear the loss of cultural creativity and quality in a controlled, manipulated, and homogenized internet ecosystem. That anxiety is not entirely justified since the internet platforms have also supported new forms of cultural expression. But the bigger issue that Foer and Taplin are right to foreground concerns the structure of cultural and informational production. In the very process of making it easy to produce, share, and access information, Amazon and Google have driven down the payoff from producing knowledge and undermined the incentives to invest in it. At the same time, these firms have effectively centralized control over the dissemination of culture and information, giving them outsized power and influence, marked by Amazon’s dominance over publishers, Google’s dominance of streaming media on

Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy

by Jonathan Taplin

Little, Brown

World Without Mind: The Existential Threat of Big Tech

by Franklin Foer

Penguin

YouTube, and Facebook’s dominance of news and written online content.

Part of the challenge is that the companies themselves are blind to the consequences of the destructive power they have accumulated. Both Taplin and Foer discuss the countercultural roots of Silicon Valley, rooted in faith in self-organizing social harmony, innovation, and markets.

In their concern about the effects of concentrated economic power, Taplin and Foer draw on a long tradition of antimonopoly thought. Over a century ago, the emergence of monopolies in the telegraph and railroad industries and the rise of financial titans like J.P. Morgan raised new challenges to communities and local businesses.

Goods couldn’t go to market without the railroads, information couldn’t flow without the telegraph, and businesses couldn’t develop without access to finance. But because these infrastructural services were in private hands, the companies could exploit their position to make exorbitant profits—and with their vast wealth, the leading industrialists and financiers could lean on lawmakers for favorable treatment to boot.

For early 20th-century reformers, economic liberty and dynamism seemed to require a radical shift in public policy. While traditional views of liberty sought to restrain state power, these reformers saw the new forms of concentrated economic power as being in need of checks and balances. Without limits on private power, the economy could not thrive, and neither could democracy.

The problem of private power

The Captured Economy: How the Powerful enrich themselves, Slow Down Growth, and Increase Inequality

by Brink Lindsey and Steven Teles

Oxford University Press

and its repercussions for economic inequality and vitality extend beyond the tech platform, as Brink Lindsey and Steven Teles argue in their book, The Captured Economy. Lindsey is vice president of the Niskanen Center, while Teles is a political scientist at Johns Hopkins. They suggest that the basic dynamic described by Taplin and Foer—where dominant tech firms extract returns beyond the fair market value of their products—is replicated throughout the economy. Inequality, on this argument, is not chiefly the result of technological change or

m a n u e l b a lc e c e n e ta / a p i m a g e s

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superstar salaries for the exceptionally talented. Instead, dominant firms and interest groups obtain excessive returns—“rents,” in the language of economics—without investing in broad-based innovation or growth. As an alternative to the current positions on the right and left, Lindsey and Teles offer what they call a “liberaltarian” approach to public policy that focuses on curbing rent-seeking, limiting government in some ways and strengthening it in others.

In their chapter on land use, for example, Lindsey and Teles rightly highlight how the housing affordability crisis in cities like San Francisco and New York severely limits economic vitality. High housing costs make it difficult for people to move to those job-creating centers, while the costs also absorb a high proportion of the income of the workers who do live there. Those costs, in return, result partly from zoning restrictions that limit new construction. Housing affordability requires, on this

Facebook ads linked to Russian efforts to influence the 2016 election are displayed at a hearing of the House Intelligence Committee on November 1.

analysis, changes to zoning laws and expanded investment in housing supply and construction.

Lindsey and Teles are right to point out that extractive strategies for securing private wealth undermine economic growth. But at times they risk painting with too broad a brush, for if rent-seeking is everywhere, how do we prioritize which types of rent extraction are most troubling and in need of elimination or reform? The book occasionally focuses on relatively minor aspects of the problem. Occupational licensing, the subject of a chapter in the book, is no doubt a form of rent-seeking, yet how much of our larger inequality crisis results from onerous licensing requirements for occupational groups such as eyebrow threaders?

At the same time, the most troubling forms of private rent extraction sometimes don’t get the attention in The Captured Economy that they deserve. Government-sponsored mortgage providers such as Freddie

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Mac and Fannie Mae did help inflate the pre-2008 mortgage crisis. But private fraud, predatory lending, and sketchy securitization practices among private actors were also central in driving the subprime bubble.

Indeed, in their discussion of the internet era, Lindsey and Teles highlight how intellectual property can act as a form of rent-seeking, but largely miss the dangers of private platform power that Taplin and Foer highlight, saying little about how Google, Facebook, or Amazon themselves have siphoned off the returns that might otherwise flow to producers.

So what can we do about this

unequal, exploitative, imbalanced economy? Foer notes that media have always been profit-making, but during the 20th century, journalists developed professional schools, norms, and ethics as a way to limit the purely commercial aspects of the industry.

Perhaps a similar shift in professional norms might change how tech

Winter 2018 The American Prospect 105

platforms and market-dominant firms conduct themselves, as they are forced to acknowledge their public responsibilities. While this is a plausible direction for some efforts, a more structural solution seems necessary, particularly given the scale of rent-seeking extraction that Lindsey and Teles describe beyond the tech platforms.

Lindsey and Teles rightly argue that rent extraction abounds where democratic politics fails, particularly where organized interest groups operate in the shadows. Democratic accountability requires not just transparency, but also more investment in countervailing civil society organizations. Lindsey and Teles highlight, for example, the growth of public-interest legal efforts to protect the environment in the 1960s as a key turning point, creating countervailing pressure against polluter interests.

We also need ways of limiting concentrated economic power directly.

Taplin and Foer both evoke the legacy of antitrust and public utility regulation from the early 20th century, and Lindsey and Teles see some potential in the Federal Trade Commission. In the Progressive era, concerns about the private governance of shared infrastructure led to the creation of modern regulatory institutions, starting with efforts to ensure fair pricing and nondiscrimination on the railroads. Many cities converted shared infrastructure such as water and transport systems into public utilities. These ideas animated the New Deal’s regulations on finance and limits on corporate concentration, which helped set the stage for decades of broad-based economic growth.

While covering many different industries and contexts, the 20thcentury policy changes shared some common principles. They saw concentrated private power as a threat to both economic vitality and democracy, and they sought to curb that power through a variety of techniques, including the breakup of big firms and tight regulatory oversight to protect against fraud, predatory pricing, and discrimination in access. The policies were seen not just as limits on private power, but as catalysts for economic innovation.

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As Taplin and Foer both argue, the 21st-century economy now faces a similar challenge. Tech giants such as Google, Facebook, and Amazon provide the infrastructure of our knowledge economy. Their decisions have vast repercussions for economic opportunity and fairness, inequality, and the functioning of our democracy.

What we need is a similar effort to develop “rules of the road� to prevent the new forms of concentrated private power from stifling innovation and distorting the democratic process.

First, we might regulate these platforms as public utilities, limiting how they employ their data, mandating protections against fraud, and requiring nondiscriminatory treatment of businesses and users on the platforms.

Foer suggests something along these lines, proposing a Data Protection Authority that, like the FTC, would oversee tech platforms. Taplin suggests the FTC should directly regulate Google as a public utility.

Second, we might conclude that the dominant tech firms are too large to govern themselves responsibly and should be broken up into smaller firms. Amazon, for example, is now a conglomerate spanning many different industries from books to groceries, while Google merges search, advertising, and many other information-based services. Expanded antitrust enforcement against concentration would help promote competition and dynamism, addressing some of the rent-seeking problems that Lindsey and Teles identify.

Creating new rules of the road to prevent abuses of market power would complement political efforts to limit the political power of concentrated wealth. The antitrust movement of a century ago was not just the work of lawyers and policymakers; it was also the product of widespread bottom-up political organizing. Today, reforming our economy again requires that kind of bottom-up effort. As all three of these books suggest, our culture, economy, and politics are all at stake.

K. Sabeel Rahman is an assistant professor of law at Brooklyn Law School, and a fellow at the Roosevelt Institute.

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Is Manufacturing’s Future All Used Up? Though the efforts to revive our much shrunken industrial sector may seem quixotic, manufacturing still matters to the nation’s economy— and its psyche. By Harold Meyerson b

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f all the titans of our new Gilded Age, the only one to attain the status of culture hero was—and still is—Steve Jobs. This wasn’t simply a function of his personal magnetism, though he certainly outshone such apparently amiable schlubs as Bill Gates and Mark Zuckerberg, and the cipher that is Jeff Bezos. It was also because, unlike his fellow creators of cyberspace, Jobs produced the tactile, palpable portals into cyberspace. He made things—handheld objects that changed people’s lives.

And yet, few of his fans think of Jobs as a manufacturer. Certainly, his biographer, Water Isaacson, doesn’t.

In his lengthy 2011 biography of Jobs, there’s only one glancing reference to the massive Chinese factories where iPhones and other Apple products are assembled—a stray remark that Jobs once made to President Obama, saying that “Apple had 700,000 factory workers employed in China.”

If those 700,000 were employed directly by Apple, of course, then Apple would be the world’s largest manufacturer. Instead, Apple conceals its factories—and responsibility for the working conditions there— behind two Chinese walls. First, it subcontracts its production work to Foxconn, a Taiwan-based company.

Second, as Joshua Freeman notes in Behemoth, his fascinating history of factories from 18th-century Lancashire to 21st-century Guangdong, the massive factories of Foxconn City in Southern China are off-limits to journalists and other prying eyes. It was only the wave of worker suicides there in 2010 (many committed by workers hurling themselves from the roofs of their dormitories, which Foxconn sought to counter by installing nets beneath the roofs) that brought, however briefly, this immense complex of factories to public notice.

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Isaacson didn’t consider any of this worthy of mention in his account of Jobs’s life. He recounts the iPhone’s developmental odyssey, from a Jobs brainstorm, surmounting all manner of design and tech hurdles, to the consumer’s hand, omitting only the stuff about the manufacturing.

The decision to offshore, the amassing of half a million or more Chinese workers, their workdays, their housing, their lives—these just weren’t part of the Jobs story, of the chronicle of our bright tech future. These were stories of an industrial era that had long been receding in history’s rearview mirror, at least in the West, and certainly in the United States. Manufacturing didn’t matter—even though one of the things that set Jobs apart from his tech-titan peers was that he created products that were not merely wonderful, but tangible.

It would be an exaggeration, if only slight, to say that it took Donald Trump’s election to make America’s opinion-making elites (of which Isaacson is a member in good standing) realize the cost of their indifference to American manufacturing’s decline. Even without Trump, at least some of those elites now recognize, however belatedly, that the role such industrial erosion has played in the shrinkage of the nation’s middle class has been causal.

In November, the McKinsey Global Institute tallied up the damage that had been apparent to so many Rust Belt residents for decades. Fully twothirds of the decline in labor’s share of the gross domestic product, Mc­K insey calculated, was the result of the declining level of American manufacturing. As for any new investment in manufacturing—well, in 1980, wrote McKinsey, the average U.S. factory was 16 years old, while in 2017, it was 25 years old.

Making It: Why Manufacturing Still Matters

By Louis Uchitelle

The New Press

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None of this came as news to Louis Uchitelle, who began documenting the winnowing of American manufacturing in the 1980s, when he covered the economics and labor beat for The New York Times. He’s still at it, authoring a cri de coeur this year that makes the case for manufacturing’s resurrection.

In Making It, Uchitelle not only dissects the mournful numbers of manufacturing’s decline, but also presents a nostalgic, if telegraphic, memoir of two cities that once hosted thriving manufacturing cultures— New York (where he grew up) and St. Louis (where he frequently visited his grandparents) in the 1940s and 1950s.

He reports on the hollowing-out of St. Louis, as its factories moved to lessunionized regions, and the decline of clothing manufacturing in New York (where his father was a middleman, buying and selling cloth) as the plants went south and, eventually, overseas.

In the past couple of years, analyses of deindustrialization (such as the work of the Economic Innovation Group) have focused on the devastation wrought by factory closures in disproportionately white small cities and towns across the once-industrial Midwest. Uchitelle focuses on an earlier economic catastrophe, whose consequences are still very much with us: the plant closures in major Eastern and Midwestern cities that shortcircuited the economic advancement of working-class African Americans.

Citing numbers from sociologist William Julius Wilson’s seminal study of inner-city decay, When Work Disappears, Uchitelle notes that between 1967 and 1987, Philadelphia lost 64 percent of its manufacturing jobs; Chicago, 60 percent; New York, 58 percent; and Detroit, 51 percent.

Many of the jobs lost were unionized, with good pay and benefits, offering a path to economic stability for working-class blacks. No comparable working-class path exists today.

Nor is it only black and white non-college graduates who’ve lost this once-common opportunity for economic advancement. Deindustrialization has also locked many of the millions of Latino immigrants who’ve come here since 1980 into low-paying service-sector jobs. In the

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1970s, when California had more automobile factories than any state but Michigan, and when huge Los Angeles aircraft factories were the state’s largest employers, their workforces were becoming increasingly Latino, and Latinos headed the United Auto Worker locals at several of those plants. But the auto plants were all shuttered by the mid-1980s, and aerospace production was decimated by the end of the Cold War, just as millions of immigrants were streaming into California. The traditional mode of upward mobility for workingclass immigrants—factory work—contracted catastrophically in the last two decades of the century, and has continued to dwindle since (California has lost an additional 585,000 manufacturing jobs since the turn of the century, according to a Century Foundation study). That California has a higher rate of poverty, when the cost of living is factored in, than any other state is in large part the result of its deindustrialization—though the levels of poverty are more commonly blamed on “low-skilled” immigrants.

Uchitelle makes a persuasive case that the “skills gap” that so many businesses blame for their failure to expand is actually one part myth and one part a supply-side problem of their own making. Most corporations that once trained their new hires have sloughed off that responsibility, while school districts that once offered vocational education no longer do. (Cincinnati’s five vocational high schools, Uchitelle notes, were all shuttered years ago.) He also rises to the defense of manual labor—describing the myriad skills he witnessed, in the years before, during, and after his time on the labor beat, while observing workers on factory floors. The expert cutters he saw as a child, when his father took him along on his visits to Manhattan’s high-end clothing plants, loom large in his memory.

Perhaps it’s because these memories

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of mid–20th century Eastern and Midwestern cities and their vibrant working classes are so deeply felt that Uchitelle’s proposals for boosting manufacturing seem at times intended to resurrect a now largely vanished urban manufacturing world.

The government, he writes, must enact laws that require manufacturing’s share of the GDP to rise from its current 12.5 percent to something closer to the norm for OECD nations— somewhere between 17 percent and 19 percent. Such laws, he writes, would correspondingly grow the share of manufacturing workers well above its current 8.5 percent (it hit an all-time low of 8.47 percent this past summer).

Such a changeover, Uchitelle acknowledges, would require the enactment of steep tariffs, of domestic content standards far stricter than any now on the books, and perhaps a trade war with China and other nations. It would require treating manufacturing as we’ve treated agriculture since the 1930s. “The political

When Los Angeles Had Decently Paid Workers: Vultee Aviation plant in World War II. In later years, the factory worked on NASA’s Apollo and Space Shuttle projects, eventually closing in 1999.

maneuvering involved in authorizing the annual farm subsidy once drew headlines and controversy, but now rarely does.” (Of course, that’s partly because the handful of agribusiness giants can lobby behind closed doors.)

“We accept that farming is a federally subsidized market activity,” he continues. “Manufacturing must proceed along a similar path.”

But Uchitelle is far too good a reporter to think that it will. “My fear,” he writes, is “that we will acquiesce to manufacturing’s shrunken role in the American economy.” The number of manufacturing workers able to raise a row if the sector continues to shrivel has fallen well below the critical mass required to mandate greater investment in industry. “Too many horses,” he concludes, “are gone from the barn.”

The problem isn’t simply one of numbers. (Though the numbers matter: Multiply the 8.5 percent of the workforce that’s employed in manufacturing by the 8.8 percent of manufacturing workers who are union

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members—those most likely to lobby for more investment in manufacturing—and you come up with just 0.74 percent of the workforce). It’s also one of ideology, of the American refusal to understand how much of manufacturing is already publicly subsidized. Adding all the purchases of U.S.-made products by the federal, state, and local governments to the subsidies and tax abatements that state and local governments deploy to induce manufacturers to set up shop or stay put in their localities, Uchitelle calculates that roughly 20 percent of American manufacturing is already paid for by our tax dollars. States and cities have industrial policies that they’re willing to shell out for, though the American economy experiences no gains when a factory relocates from East Paducah to West Paducah. In other nations, it’s the national government that subsidizes industry, which is one major reason why China has industrialized so quickly and massively. Unfortunately, ours is a system in which it’s considered fine for West Paducah to spend to attract industry from East Paducah, but not fine for the United States to spend to promote domestic industrial investment rather than see it move to Asia.

In recent years, despite the ideo-

logical obstacles, several initiatives have come forth to mobilize government purchasing power to promote domestic manufacturing (which is a more effective and plausible way to revive manufacturing than tariffs and GDP targets). Perhaps the most notable is Jobs to Move America—a program that allows transit districts to favor domestic manufacturers when purchasing trains and buses. Founded and directed by Madeline Janis (who, as the longtime head of the Los Angeles Alliance for a New Economy, first crafted and promoted the living-wage and local-hiring ordinances that have spread to more than 100 cities and counties), the program effectively enabled the transit districts of Los Angeles and Chicago, with help from the Obama administration’s Department of Transportation, to fund new, local rail factories.

If more cities and states were to

Fully twothirds of the decline in labor’s share of the GDP, McKinsey concludes, is the result of deindustrialization.

follow L.A.’s and Chicago’s examples, if the federal government were to insist on more domestic content in its purchases and invest more in infrastructure and such growth sectors as green energy, could the long-term decline in manufacturing actually be reversed?

McKinsey estimates that such promanufacturing policies as greater worker training and more efficientenergy use, as well as growing global markets, could increase the number of workers in the sector by roughly two million by 2025. McKinsey thereby takes issue with the analysts who predict a wave of robots will further decimate industrial employment.

But the crisis of manufacturing jobs isn’t just quantitative; it’s qualitative, too. As the rate of unionization in manufacturing has fallen from 22 percent in 1990 to 8.8 percent today, the pay and benefits manufacturing workers have been able to claim have diminished as well. In the 1960s and 1970s, when well over one-third of factory workers were unionized, their wages and benefits came to roughly 75 percent of their employers’ gross income. Today, their share has shrunk to less than 55 percent.

In the seven states of the industrial Midwest, according to a report from the Century Foundation, the share of unionized manufacturing workers has declined from 28.4 percent in 1992 to 14.5 percent today, and the advantage in weekly wages that these workers have enjoyed over non-manufacturing workers has declined accordingly during that time, from $220 to $170.

While it’s true that manufacturing’s share of GDP and the overall workforce has declined in every industrialized Western nation in recent decades, the decline in the two nations most dominated by finance during that time—the United Kingdom and the United States—has been the most precipitous. In 2015, for instance, investment in manufacturing plants and equipment in the U.S. and the U.K. came to just 2.8 percent and 2.1 percent, respectively, of these nations’ GDP, while in Germany it came to 3.9 percent and in Sweden, 4.7 percent.

Indeed, that Germany has successfully retained its manufacturing sector isn’t simply due to the excellence of its

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products. It’s also because Germany has, by Anglo-American standards, an underdeveloped financial sector—no real equivalent of Wall Street or the City. Instead, Germany has hundreds of local savings banks whose investments and loans, restricted by law to residents and institutions in their localities, have helped fund the Mittelstand—the nation’s fabled small- and medium-size manufacturers. To bolster this sector, Germany’s Fraunhofer Society has a staff of 22,000 devoted to helping these manufacturers find partners, train workers in new technology and production techniques, and develop new markets. The Fraunhofer’s semi-equivalent in the United States, the Manufacturing Extension Partnership, has a staff of just 1,300, in a nation with a population four times the size of Germany’s. By law, all sizable German companies are also required to split their boards between management and worker directors.

For all these reasons—notwithstanding the largely unsuccessful efforts of U.S. bankers and public officials to persuade the Germans to downsize their industrial sector and place greater emphasis on profit growth in the years between German unification and the crash of 2008—Germany still retains a vibrant middle class.

Is re-growing manufacturing one way the United States can restore its own middle class? Certainly, the multiplier effect of manufacturing—its capacity to generate jobs in other sectors—is greater than that of those other sectors. The lion’s share of research and development also occurs within manufacturing. Whether what’s good for the nation as a whole is also good for its individual citizens, however, is largely a matter of distribution—and that relies on enhancing worker power.

At least some manufacturing is also good for workers’ psyches. Deindustrialization is almost invariably accompanied—and justified—by the devaluation, often tacit but always obvious, of manual labor, of the skills that so impressed the young Lou Uchitelle. That devaluation is one of the roots of the rage that swirls through our politics today. Yet one more reason why manufacturing matters.

Winter 2018 The American Prospect 109

Examining inequality 50 years after

the Kerner Report

No Big-Game Hunting at Justice How federal prosecutors let major white-collar criminals off the hook and stick shareholders with the costs of corporate crime By Ronald Goldfarb b

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AVAILABLE

FEBRUARY 2018

Reflecting on America’s urban climate today and setting forth evidence-based policies concerning employment, health care, education, housing, neighborhood development, and criminal justice based on what has been proven to work—and not work.

Featuring contributions by: Oscar Perry Abello, Elijah Anderson, Jared Bernstein, Henry G. Cisneros, Linda DarlingHammond, E. J. Dionne, Jr., Marian Wright Edelman, Jeff Faux, Michael P. Jeffries, Celinda Lake, Diane Ravitch, Laurie Robinson, Joseph Stiglitz, Gary Younge, Julian E. Zelizer, and more.

Wherever books & ebooks are sold

110 WWW.Prospect.org Winter 2018

www.temple.edu/tempress

n 1939, the Indiana University sociologist Edwin Sutherland coined the term “white-collar crime,” economic offenses by respectable people, a category of wrongdoing that went relatively unpunished in the early laissez-­faire years of our businessoriented country. By the mid-20th century, corporate excesses led to regulatory legislation, but prosecuting corporate crime was not a priority.

Some notable critics—Supreme Court Justice Louis Brandeis, the SEC ’s enforcement chief Stanley Sporkin, federal prosecutor and later trial judge Jed Rakoff—were exceptions. Federal Judge Henry Friendly warned, “In our complex society, the accountant’s certificate and the lawyer’s opinion can be instruments for pecuniary laws more potent than the chisel and the crowbar.”

But white-collar crime, particularly misconduct by business corporations, continues to be treated more with empathy, employing economic sanctions rather than the harsher personal prosecutions that are used in crimes by individuals. How did our law enforcement establishment reach the point where we imprison someone for smoking marijuana or stealing relatively small amounts of money, but not executives, professionals, and organizations that commit acts that injure vast numbers of victims?

Law students learn in our firstyear law course on corporate law that a corporation is a legal fiction. But as the Pulitzer Prize–winning financial journalist Jesse Eisinger demonstrates in his book The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives, the fiction we learned in law school is not always the one applied by courts and lawyers. Acts are not the consequence of some “fiction”; people commit acts. However, in criminal cases, too often corporate executives, along with their lawyers

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and accountants, avoid prosecution even when the proven offenses of their companies are extraordinary—abuses resulting in financial, pharmaceutical, automobile, and tobacco class actions, for example. In these cases, the corporations often pay huge fines, but their non-fictional, real-life agents rarely suffer criminal sanctions for their roles in the misconduct.

This distorted application of the legal separation of corporate officials and their fictional corporations for criminal-law purposes is perversely waived in non-criminal cases. Two profoundly notorious recent Supreme Court cases provided corporate officials with the rights of real people. In the Citizens United case, corporations were permitted to make huge political donations on the basis of individuals’ First Amendment free-speech protection. In the Hobby Lobby case, organizations again were treated as individuals exercising their personal constitutional freedom of religion rights. Yet tortured interpretations of the legal corporate fiction have regularly provided corporate officials and their professional colleagues with immunity from criminal responsibility. Taken to the extreme, few corporations were ever fined to death (put out of business) as individuals have been executed for their extreme offenses.

University of Virginia law professor Brandon Garrett suggested in his 2012 book, Too Big to Jail: How Prosecutors Compromise with Corporations, that there is likely a cultural reason why corporate officials rarely receive criminal sanctions for their misbehavior. Might prosecutors subconsciously pull their punches for a professional world they may later inhabit? “[P]rosecutors fail to effectively punish the most serious corporate crimes,” he wrote. They “are supposed to prioritize holding real people accountable, not corporate persons.” In The Chickenshit Club,

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ken fujii / houston chronicle via ap images

The Rare Exception: In 2006, former Enron CEO Jeff Skilling, center left, was sentenced to serve 24 years and four months in prison, the harshest punishment by far in Enron’s scandalous collapse.

Eisinger expands that theme of coziness between prosecutors and powerful business executives.

As U.S. District Judge Jed S. Rakoff has pointed out in The New York Review of Books, plea deals by prosecutors govern in 97 percent of federal cases, resulting in corporate executives being treated better than other offenders, even though their misconduct hurts not only individual victims, but also shareholders, society, and the economy. The rare case—Martha Stewart, Bernie Madoff, Enron—generated much publicity, suggesting, incorrectly, that corporate wrongdoing has predictable deterrent consequences to individual wrongdoers.

Eisinger indicts the Justice Department for failing to prosecute whitecollar criminals. CEOs have received relative immunity, he argues, and Wall Street executives particularly are rarely held personally responsible for pervasive, profoundly consequential wrongdoings. Corporate

The Chickenshit Club: Why the Justice Department Fails to Prosecute Executives

By Jesse Eisinger

Simon and Schuster

defendants have the resources most individuals do not have to go to litigation war with the government by empowering expensive lawyers, experts, lobbyists, and media employees to act on their behalf.

Eisinger cites depressing instances of the Justice Department being overwhelmed by powerful law firms armed with their client’s resources ($700 million in one case he mentions). In the obstruction of justice case against Enron, its accounting firm, Arthur Andersen, spent $50 million on its legal defense. A key employee pleaded guilty, but the company’s conviction was overturned because of disputed statutory language. The company was destroyed in the process, Garrett wrote in his book.

Eisinger’s collection of major investigations of financial misconduct— their heroes and villains—explains the adage “Give white-collar defense attorneys time, and they can muddy any investigation.” While Bernie

Madoff’s banker, J.P. Morgan, paid almost $2 billion in fines, Madoff’s investors lost $20 billion. In the investigation of Lehman Brothers for alleged accounting fraud and misleading markets that led to the 2008 subprime-credit crisis, a large law firm was paid to examine and investigate (130 lawyers for 14 months, ending in a 2,200-page report), but ultimately none of the several government agencies involved “brought civil or criminal charges against the company or any Lehman executive.”

Eisinger’s story of Judge Rakoff’s actions in the Bank of America–­ Merrill Lynch merger and the accompanying government bailout explains how a determined judge can make a serious difference in puncturing a charade of law enforcement. Presented with a proposed deal that had been blessed by the government and the parties, Rakoff was abashed that the deal defrauded shareholders and absolved executives. He refused to

Winter 2018 The American Prospect 111

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sign off on it. A much-improved resolution followed.

The provocative title of Eisinger’s book comes from a speech that then–U.S. attorney in New York City James Comey gave to his staff. If you haven’t lost a case, Comey told his hotshot lawyers, you are a member of the Chickenshit Club and you need to ask yourself if you are subconsciously staying away from tough cases for fear of losing, when seeking justice should be your exclusive standard. Comey’s rule has not been followed in recent years, Eisinger points out in exemplary stories (including an instance where Comey himself failed to meet his own test), demonstrating how top lawyers, accountants, and corporate executives often have avoided personal responsibility for corporate frauds.

In Eisinger’s view, “[t]oday’s Department of Justice has lost its will and indeed the ability to go after the highest-ranking corporate wrongdoers … from pharmaceuticals, to technology, and large industrial operations, to retail giants.” Even the Justice Department of liberal darling President Obama “took little concrete action on the prosecution of white-collar crime.” For fear of driving corporations out of business, the emphasis has shifted to “settlements over charges”—deferred prosecution agreements (DPA s), they are called.

Tough, aggressive litigation in complex cases has often been replaced by those negotiated settlements. The first DPA in 1994 became a model for requiring corporate actions to police themselves, rather than prosecuting any individuals for their misconduct.

Currently, the Department of Justice prefers using DPA s requiring corporations to correct their past misconduct and submit to being monitored, rather than prosecuting and imprisoning individuals for their corporate misbehavior.

An interesting PBS Frontline episode, wryly titled “Abacus: Small Enough to Jail,” told the story of the one mortgage bank whose leadership was indicted, and acquitted after five

years and $10 million in legal fees.

Abacus was a bank in New York’s Chinatown that catered to the local ethnic population. Some mid-level employees engaged in fraudulent dealings, but Fannie Mae testified that the bank’s foreclosure record was better than most others, that few mortgages failed, and that the owners were not part of the fraudulent loans.

They were not offered a DPA . Cultural bias by prosecutors, not fraud by the owner, the documentary suggested, was at the crux of the case. None of the big banks were indicted.

The idea behind DPA s is that public prosecutions are expensive, time-­ consuming, and uncertain, and they can cause collateral damages that wreak havoc on capital markets by prejudicing creditors and innocent employees and shareholders. Thus, it is considered preferable for companies to be rehabilitated and their cultures and policies reformed than for individual offenders to be imprisoned.

The DPA provides a “middle ground between dropping charges and a draconian sanction,” Eisinger explains.

There have been multimillion-dollar mega-fines, to be sure, from which the public profits indirectly; but that course prejudices the corporate stockholders and creditors, and does not deter the individual wrongdoers.

There have been more than 250 such agreements in the last decade, according to Garrett’s study. In two-thirds of these deferred prosecutions, the company was fined, but no employees were prosecuted. In 25 percent of these cases of deferred prosecutions, monitors were employed. The remaining 75 percent lacked any form of monitoring by courts or their designees, a key requirement if reforms are to be assured. The result is that the shareholders are harmed by the misconduct of their agents who themselves were shielded from consequences for their wrongdoing. There have been “a handful” of cases where high-level officials were convicted, “but not many,” according to Garrett, leaving the wrongdoers in business while the public and shareholders suffered. Eisinger quotes

Negotiated settlements have replaced prosecutions, leading to fines but no prison time —and no incentive to change corporate behavior.

a cynical SEC insider critic who complained that the agency “polices the broken windows on the street level and rarely goes to the penthouse floors.”

Eisinger’s explanation of this current culture shift is fascinating. Transactional lawyers began to replace activist litigators, and the government began “not simply to punish individuals” but rather to attempt to “change corporate culture.” It was easier to obtain corporate pleas than convictions of individuals. The prosecutorial saying was “Big cases, big problems. Little cases, little problems. No cases, no problems.” As a result, deferred prosecutions, while sounding reformist, “became stagemanaged, rather than punitive.” Major fines became a cost of doing business. Prosecutions of top executives decreased, “and most of these covered small-time white-collar crime and criminals.” As “Abacus: Small Enough to Jail” noted about the big banks, “cut a check and it will all go away.”

Eisinger speculates that, possibly, “young prosecutors want their adversaries to imagine them as future partners.” Prosecutors and defense attorneys speak a common language and negotiate for a living. Big law firms’ partners sometimes serve temporarily in high government offices where their clients’ cases may come before their agencies. Even those cases where monitors were appointed (and paid very well) created a further money-­making specialty for the big law firms (which government attorneys aspire to join).

“Executives make more money than ever. Corporate profits are at record highs … injustice threatens American democracy,” Eisinger concludes. He offers persuasive examples, intriguing trial stories, and anecdotes; he names names and suggests that under modern corporate law enforcement, for the most part, the rule of law corrodes, prosecutors have become lazy, and the public suffers as a result.

Ronald Goldfarb is a Washington, D.C., attorney and author. He was a prosecutor in the Robert F. Kennedy Department of Justice.

volume 29, number 1. 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 © 2018 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.

112 WWW.Prospect.org Winter 2018

Waiting for the new The world is waiting. Not with bated breath

but with a growing sense that events are moving towards a crisis, the outcome of which is unclear. No one knows how things will turn.

The professionals, politicians and economists alike, flounder helplessly in the cross-currents, unable to plan in the conflicting directions they are forced to take. Daily, new problems arise to test the goodwill of the most enlightened, while, behind the scenes, the ruthless greed of speculation brings nations to their knees.

Whenever such a situation arises, men* grow fearful, and when in fear they strike out in anger. Thus it is today in many parts of the world. A growing intolerance, of refugees, of foreigners, discolours the democratic process, as living standards fall and security is threatened. Political extremists, waiting in the wings, seize their opportunity, and emerge to lead unthinking youth in imitation of the past.

Nothing can halt this slide towards chaos, as market forces crush the life of men in their unholy grip. Nothing can save this civilization, based as it is on competition and greed. The old order is dying; nay, it is already dead. Commercialization, another name for mammon, has usurped the law and become the state religion around the world.

Were men alone in this maelstrom, pitiful would be their plight, sad indeed

would be their fate. Nowhere could they turn for succour, no one could they ask for aid.

Forces quite beyond their control would drive them remorselessly to war and FINIS would be written large over man’s life on Earth.

However, man is not alone nor ever has been, but, buttressed by his Elder Brothers, he makes his journey under supervision and guidance; not alone, but in the safe company of those who have gone before and know well the way.

Into the center of the storm this group of Elder Brothers is returning. One by one, they take their places in your midst, ready when called upon to offer their advice and help. For centuries have they awaited this opportunity to work directly in the world of men. Now they come, bearing gifts of wisdom and love. Under their leader, the Lord Maitreya, they will turn men away from the brink of self-destruction and open a new chapter in the history of the race. From the ruins of the old, a new civilization will be built by human hands under the inspiration of Maitreya and his group. Fear not, for the end is already known. Humanity will overcome this time of crisis and enter into a new and better relationship with itself, its planet and its Source. Maitreya has come to make all things new. Knowingly or not, the world is waiting for the new. * * *

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This article, published in Share International magazine, was written by a Master of Wisdom.

The Masters, headed by Maitreya, the World Teacher, are highly advanced teachers and advisors of humanity who are planning to work openly in the world very soon. *The words “men” and “man” are used throughout as a general term meaning humankind.

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