In speaking of rebuilding the public sector we are dealing not only with the Republican small government and corporate rule----we are dealing with the partner of the wealthy----the church. I do not want to repeat my Opus Dei Catholic conservatism today, but I want to encourage folks to look at the severity of religious conservatism as control is taken by autocratic corporate rule. THIS IS TO WHERE THE PUBLIC SECTOR GOES BEYOND WHAT THESE CORPORATE NON-PROFITS TAKE.
THE PUBLIC VOICE TOTALLY DISAPPEARS WHEN AUTOCRATIC CORPORATE RULE TAKES HOLD.
Baltimore City has been in this hold for decades or longer so in rebuilding the public sector we remove Johns Hopkins and the churches from our government services. This does not eliminate religious contribution----it places it in the position of augmenting what an existing public sector does. We are not trying to end global markets---we are placing domestic economy as the driver of jobs and commerce with global markets simply augmenting the economy. Clinton neo-liberals and Bush neo-cons have swung the pendulum all the way to the right-----and we need to swing back in order to maintain WE THE PEOPLE AND THE US CONSTITUTION. Think about the developing nations and their governments----they are tied to an autocratic ruler who embraces on religion over another and there are lots of power struggles between religious factions. The US is supposed to be Christian and yet
WE ARE NOT LISTENING TO JESUS WHEN HE SAID ----'GET THE MONEYLENDERS OUT OF THE TEMPLE'.
It is the neo-conservatism that drives the corporate rule and wealth and it is the neo-conservatism that moves religion into control of the 'masses'. Clinton neo-liberals and Bush neo-cons are both wealth and corporate power.
Please glance at this one article on religion as I move back to the problems of dismantling the public sector and especially how that created the fraud and corruption throughout our business and government. Again, I ask ----how can a religious leader partner with entities everyone knows is criminal and corrupt all knowing how badly it will harm the American people. This is not only the religious right---the Clinton neo-liberals are right of center-----right there with wealth and corporate power. This is not warm and fuzzy love thy neighbor and do good deeds----this is Christian armies and warriors and the wealthy controlling the church leadership Medieval stuff and the rich take religion to this ultra-conservative status just to advance the social domination of the wealthy.
IF YOU ARE WILLING TO SUSPEND CONSTITUTIONAL SEPARATION OF CHURCH AND STATE----THEN YOU ARE BRINGING ON THE SUSPENSION OF CONSTITUTIONAL RIGHTS TO RELIGIOUS FREEDOM.
Is Brownback Bringing Opus Dei Into The Senate?
- Bob Geiger
High-ranking members of US military part of ‘Knights of Malta,’ ‘Opus Dei,’ reporter claims
Stephen C. Webster
21 Jan 2011 at 12:28 ET
Veteran investigative reporter Seymour Hersh has broken some massive stories in his day, but uncovering secret societies within the highest echelons of America’s military would probably be the biggest of his career.
Well, get ready for the media storm, because that’s essentially what Hersh told an audience in Doha, Qatar recently, according to a report published earlier this week by Foreign Policy.
Speaking at a campus operated by Georgetown University’s School of Foreign Service, Hersh said he was working on a new book that details “how eight or nine neoconservative, radicals if you will, overthrew the American government.”
“It’s not only that the neocons took it over but how easily they did it — how Congress disappeared, how the press became part of it, how the public acquiesced,” he continued, according to the published quotes.
Hersh also lamented President Obama’s continuance of the Bush administration’s worst abuses.
“Just when we needed an angry black man, we didn’t get one,” he reportedly said.
The Foreign Policy report added that in 2003, those “in the Cheney shop” were not concerned about the havoc the invasion of Iraq was destined to cause.
“[The] attitude was, ‘What’s this? What are they all worried about, the politicians and the press, they’re all worried about some looting?” Hersh was quoted as saying. “Don’t they get it? We’re gonna change moseques into cathedrals. And when we get all the oil, nobody’s gonna give a damn.’ That’s the attitude. We’re gonna change mosques into cathedrals. That’s an attitude that pervades, I’m here to say, a large percentage of the Joint Special Operations Command [JSOC].”
He further claimed that Gen. Stanley McChrystal, Vice Admiral William McRaven and others in the JSOC were members of the “Knights of Malta” and “Opus Dei,” two little known Catholic orders.
“They do see what they’re doing — and this is not an atypical attitude among some military — it’s a crusade, literally,” Hersh reportedly continued. “They see themselves as the protectors of the Christians. They’re protecting them from the Muslims [as in] the 13th century. And this is their function.”
He added that members of these societies have developed a secret set of insignias that represent “the whole notion that this is a culture war” between religions.
It was President George W. Bush who first invoked images of a holy war in the Middle East, when he suggested soon after Sept. 11, 2001 that the US was on a “crusade” in the region.
The “Knights of Malta” were a Catholic order founded in 1085 as a group of monks who cared for the wounded. It evolved into a military order that safeguarded Christian pilgrims from Muslims during the nine “Crusades,” where Europe’s Christian states laid siege to Muslims for control of Jerusalem.
“Opus Dei,” popularly depicted in the Hollywood film “The DaVinci Code,” was founded in 1928 and officially accepted as part of the Catholic church in 1947. The group’s website claimed their principle calling was to bring about a “Christian renewal” around the world.
Doubts, denials and a distinctive trend
Raw Story reached out to Hersh and The New Yorker to confirm the accuracy of his quotes, placing this report on hold until they responded. Both declined to make any further statement, neither confirming nor denying the quotes.
However, one source close to Hersh who spoke to Raw Story off the record, suggested that Foreign Policy‘s report was indeed correct.
Raw Story followed-up on the quotes due to a widely-reported false claim attributed to Hersh in May 2009, where he’d allegedly said former Vice President Dick Cheney ordered the assassination of former Pakistani Prime Minister Benazir Bhutto.
The report, which appeared to have originated in Pakistan, was picked up by The Wall Street Journal and the conservative-leaning American Spectator, but both removed the links after Raw Story published a denial from Hersh. A link to Raw Story’s original report was unavailable due to a database malfunction.
Hersh, a Pulitzer-winning author and reporter, has previously reported that the JSOC was set up by former Vice President Cheney as something of an “executive assassination squad” that operated outside of congressional authority.
Gen. Stanley McChrystal, who resigned after Rolling Stone reporter Michael Hastings quoted him mocking the US civilian command, led JSOC before taking command of America’s war effort in Afghanistan.
In an email to the military’s Stars and Stripes publication, McChrystal’s spokesman, David Bolger, panned Hersh’s claim.
“The allegations recently made by Seymour Hersh relating to General McChrystal’s involvement with an organization called The Knights of Malta are completely false and without basis in fact,” he reportedly wrote. “General McChrystal is not and has never been a member of that organization.”
The religious indoctrination of US soldiers has been in headlines in recent weeks as soldiers who “failed” the “spiritual fitness” portion of the “comprehensive soldier fitness” test claimed they were forced to attend Christian ceremonies and become “born again” by professing love for the Christian deity.
Similarly, GQ magazine uncovered last year a series of top-secret military briefings prepared by former Secretary of Defense Donald Rumsfeld that included passages from the Bible.
Trijicon Inc., a defense contractor, was also discovered last January to have been for years placing scriptural references on gun sights used by the US military in Iraq and Afghanistan.
Their actions revealed Trijicon was forced to provide the Pentagon with kits to remove the codes.
When Bill Clinton took the Democratic Party to Wall Street and wealth he not only took the voice of 80% of the Democratic base of labor and justice-----he captured the term progressive and left leaning politics. Clinton neo-liberalism is right of center politics---it is not progressive or left. So, the fact that cities like Chicago, NY, and LA were taken by massive corporate fraud and corruption is tied to the installation of Clinton neo-liberalism and small government dismantling of the public sector. At the same time, we have city governments like Baltimore that are completely neo-conservative in every way being labelled Democratic for goodness sake----and the pols are even being allowed to be called progressive.
THESE CORPORATE PLANTATIONS ARE NOT DEMOCRATIC FOLKS----DEMOCRATS PROTECT LABOR AND JUSTICE----REPUBLICANS PROTECT WEALTH AND CORPORATE POWER.
This article tells the history of Johns Hopkins and its Baltimore Development Corporation taking control of all the city's government and revenues to install a Master Plan of gentrification----moving the poor and working class out--and the affluent and corporations in to downtown and city center. The process of starving communities and deliberately leaving citizens unemployed and without support is not Democratic. These neo-conservatives used Democratic labels to policy to make people think this gentrification was fair and balanced----and then they lied, cheated, and stole when all the government structures were captured.
Quasi-governmental agencies are not needed to advance a gentrification of a crumbling neighborhood. They are needed to hide how money is moving and who is getting what.
IF A POLITICIAN IS NOT SHOUTING TO GET RID OF QUASI-GOVERNMENTAL STATUS FOR INSTITUTIONS----THEN GET RID OF HIM/HER. MARTIN O'MALLEY CREATED MORE GOVERNMENT BY APPOINTED COMMISSIONS THAN ANY POL AND HE DID SO UNDER THE DIRECTION OF JOHNS HOPKINS IN BALTIMORE AS DID SCHAEFER AND SCHMOKE.
You should have seen the farewell to Schaefer when he died----he was made hero of a city and as this article shows---he was the most corrupt and fraudulent guy in town.....Schaefer moved forward the Master Plan designed by Johns Hopkins and he never did anything that was not written policy by Hopkins. Neither did Schmoke, O'Malley, Dixon, and now Rawlings-Blake and each passing decade the fraud and corruption grew especially as Clinton used Executive Order to install the Federalism Act......LOOK! NO OVERSIGHT AND ACCOUNTABILITY FROM THE FEDERAL GOVERNMENT----GO CRAZY CITIES AND STATES!
Small government is not about saving government revenue to lower taxes for everyone----it is always about allowing a few to gain power and get very rich-----THEY DO IT ALL THE TIME-----
Since the 1930s the party has promoted a center-left, social-liberal platform, supporting a mixed economy and social justice. The party's philosophy of modern American liberalism advocates social and economic equality, along with the welfare state.] It pursues a mixed economy by providing government intervention and regulation in the economy. These interventions, such as universal health care, labor unions, social programs, equal opportunity, consumer protection, and environmental protection, form the party's economic policy basis.
Toxic Government by Democrats: Baltimore
April 8, 2013 by John Perazzo
Editor’s note: The following is the second in a series of articles that will expose the misery of life in America’s poorest cities, all of which have one thing in common: they are controlled exclusively by Democrats. Each article presented by FrontPage will reveal how the production of mass urban poverty is much more than just a failure of leadership, but a means of political survival for the Left.
The city of Baltimore, Maryland, which in the 1950s was an employment mecca for a number of thriving industries, has been governed exclusively by Democratic mayors and city councils since 1967. William Donald Schaefer, who served as Baltimore’s mayor from 1971-87, helped set the stage for economic decline in his city by championing an ever-expanding public sector coupled with extensive government regulation of private business enterprises. Moreover, he relied heavily on federal grants and city bonds to finance a host of development projects throughout Baltimore. As the City Journal reports: “[W]hen those monies proved insufficient, [Schaefer] … created his own city bank to seed development: the Loan and Guarantee Fund. The fund financed itself by selling city property and then leasing it back to itself, and by selling bonds that would stick future taxpayers with much of the bill.”
Rampant with corruption, Schaefer’s administration virtually made an art form of cronyism. Once, for instance, the mayor’s finance director, Charles Benton, successfully steered $5.6 million in public money to a repair project on an apartment building owned by a Schaefer political supporter. On another occasion, Benton directed more than $4 million in taxpayer funds to the refurbishing of a hotel owned by a longtime friend of the mayor. Every penny of that money was wasted, however, as the hotel went bankrupt shortly after Schaefer’s mayoral tenure ended.
In 1986 the Brookings Institution reported that “only projects that had been endorsed by [Schaefer] were funded, and only the neighborhoods that were most loyal to City Hall got community grants.” In dozens of cases, Schaefer’s administration took federal funds that had been earmarked for poor people and diverted them to other, more politically expedient, uses. As the Baltimore City Paper reveals: “Fifteen million dollars from a program to provide rent subsidies to low-income families was used to build housing for the elderly (a reliable voting bloc). Another $15 million earmarked for disadvantaged schoolchildren was spent on other items, including the salaries of [politically influential] school bureaucrats.”
In the 1970s, Schaefer’s deputy public works director was incarcerated for rigging bids on city contracts. And in the ’80s, the federal government shut down the city’s Urban Development Action Grants program due to its many abuses.
In 1987 Schaefer was succeeded as mayor by Kurt Schmoke, who continued his predecessor’s policy of extracting as much taxpayer money as possible from Annapolis and Washington, respectively. By 2001, such state and federal subsidies accounted for an incredible 40% of Baltimore’s operating budget.
Thanks to Schmoke’s close ties to Clinton administration officials, the federal gravy train, bearing large cargoes of cash to fund city programs, made frequent stops in Baltimore. One such program (bankrolled by a $100 million federal grant) was the establishment of an Empowerment Zone that failed miserably to achieve its stated goal of spurring job creation. That boondoggle, however, did not hurt Schmoke at all politically. Rather, the influx of (wasted) federal funds helped convince Baltimore voters to re-elect him in 1991, and again in 1995.
Like Schaefer before him, Mayor Schmoke was no stranger to corruption. In the mid-1990s, for instance, federal officials were alerted to the fact that Schmoke’s housing authority had squandered—via no-bid contracts, massive cost overruns, and blatant cronyism—some $25.6 million in HUD funds that were intended for housing repairs.
Even as the nation flourished economically in the 1990s, Baltimore’s economy lost at least 58,000 jobs. The city’s unemployment rate was twice that of the rest of Maryland. Part of the problem was the fact that Baltimore’s property taxes were the highest in the state, causing many of the city’s leading private-sector firms to relocate in the more business-friendly suburbs.
While Baltimore’s industry and finance were in steep decline, crime was on the rise—thanks, in large measure, to Schmoke’s ineffective, soft-on-drugs policing strategy. By the end of the 1990s, the murder rate in Baltimore was six times higher than in New York (where a variety of proactive policing practices had reduced violent crime dramatically). Three-fourths of Baltimore’s homicides were drug-related—symptoms of an ongoing, brutal drug-turf war that was engulfing many nonwhite neighborhoods. Police, meanwhile, were frustrated by the fact that the drug dealers whom they arrested were routinely released a short time later, free to resume their criminal activities on the streets.
Yet another Democrat, Martin O’Malley, won Baltimore’s 1999 mayoral race by campaigning on a law-and-order platform, but ultimately he was unable to fulfill his crime-reduction pledges. In 2005, criminal-justice statistics for Baltimore indicated that 17.6 violent crimes were committed for every 1,000 residents—a figure almost 80% higher than America’s big-city average. Baltimore’s murder rate, meanwhile, was nearly three times higher than the big-city average—just as it had been when O’Malley first took office in 2000. Robberies and aggravated assaults (including shootings) had dropped slightly since 2000, but were still more than twice as prevalent as in other large American cities.
Baltimore’s economy also lagged under O’Malley. Between 2001 and 2004, the city lost nearly 5% of all its jobs, including a quarter of its manufacturing jobs, 15% of its banking and finance jobs, and 5% of its retail jobs.
In 2007 O’Malley was succeeded as mayor by Sheila Dixon, who resigned three years later when convicted of embezzlement and perjury charges. Replacing Dixon was city council president Stephanie Rawlings-Blake. By the start of 2013, Baltimore’s population stood at 619,000—a 35% dropoff from its peak of 950,000 six decades earlier, when it had been an economically and socially healthy city.
Baltimore’s experience has played itself out in many U.S. cities: Democratic tax-and-spend policies, coupled with toothless and ineffective approaches to crime, destroy the quality of life and leave people no choice but to uproot themselves and move away.
When Hopkins took the government to quasi-governmental status it broke down the public sector in city hall, public works, and public services. All of the city agencies have worked with a skeleton crew with crony hiring in a city starved for jobs. You get hired according to your ability to SEE NO EVIL, SPEAK NO EVIL, AND HEAR NO EVIL-----NO SNITCHING.
Reagan/Clinton neo-liberals created a Federal structure that mirrored corporate downsizing----the entire middle-management that provided oversight, accountability to regulations, quality control for products and services was discarded and the same happened at state and local levels of government as well. This was not the decision of a mayor----this was Johns Hopkins and the developers who wanted free reign in moving money and to do so they created the conditions for corruption as a pay-to-play for doing all this billions of dollars in fraud.
A government must have procedures for daily oversight----there must be checks and balances----data created must be proven accurate on a daily basis and there must be a supervisor----a manager -----whose task it is to make sure all employees are trained and held accountable every day. THAT IS HOW ALL BUSINESSES AND OPERATIONS IN A RULE OF LAW NATION WORK FOLKS. This does not have to be authoritarian----it becomes second nature to follow these steps----training allows time for people to develop the routine ------so this is not something people should fear.
IT IS SIMPLY HOW A REGULATED, RULE OF LAW GOVERNMENT WORKS. IT'S HOW WE HAVE DATA THAT CAN BE BELIEVED----IT IS HOW WE FOLLOW THE GOVERNMENT REVENUE AND ACCOUNT FOR ALL OF IT. THIS IS HOW EVERY COMMUNITY IN BALTIMORE CITY HAS WHAT REVENUE SOURCES IT NEEDS.
If the citizens of Baltimore, as with cities across the nation, do not demand oversight and accountability and the public sector middle-level positions that are required to make sure of this----global corporate rule will have all revenue sucked from our system as has happened these few decades---with people in communities simply being told what they are to do after paying more and more taxes. It is ridiculous to have audits when the daily data created is not monitored and/or records that would allow for a truthful audit do not exist. We are paying all of this money for an audit that offers no chance of being anywhere near accurate.
This is not a bunch of low-level employees stealing as they like to portray----the mayor is told by Johns Hopkins and Baltimore Development to move money and allows pay-to-play to advance their goals.
Baltimore to pay $416,000 for audits of 3 city agencies
By Luke Broadwater The Baltimore Sun
Baltimore conducts fewer audits than similar-size cities San Francisco, Las Vegas and Washington, D.C. Baltimore's Board of Estimates on Wednesday is set to approve $416,000 for performance and financial audits of three key city agencies.
Mayor Stephanie Rawlings-Blake's administration will pay Hamilton Enterprises LLC to audit the Department of Transportation; SB & Co. LLC to audit the Department of Recreation and Parks; and city auditors, who report to Comptroller Joan Pratt, to audit the mayor's Department of Finance.
Pratt's Department of Audits typically conducts as many as 20 audits a year, but its website has not been updated in nearly two years.
That's more annual audits than Baltimore's surrounding counties and some similar-sized cities, such as Oklahoma City and Tucson, but a smaller number than others, such as San Francisco, Las Vegas and Washington, D.C.
Baltimore council members, frustrated that some departments hadn't undergone agency-wide performance and financial audits in decades, took the issue to the voters in 2012.
Voters approved a charter amendment requiring that the city's 13 key agencies undergo such audits every four years. The first agencies to receive the performance and financial reviews will be finance, recreation and parks, police, public works and transportation, according to the mayor's office.
Agencies will have the choice of being audited by the comptroller's office or one of four outside firms. The audits must be completed by the end of 2016.
The Department of Recreation and Parks last year received a critical review from city auditors, who found the agency kept erroneous financial statements, confused revenue and expenses, and lacked procedures on how employees should handle cash.
The agency "did not initially provide accurate financial statements," according to city auditor Robert L. McCarty. The agency could not figure out why its records did not match city accounting and payroll numbers, he said, and later "developed separate financial statements."
City officials have pledged to enact financial improvements at the agency.
I read an article about the big government Democrats in Baltimore that moved all kinds of Federal, state, and local revenue to the city under the guise of development with the statistics showing a decline in jobs, quality of life, and businesses. This was a conservative article trying to make what was use of public money then moved to the rich sound like government largesse by Democrats. During the tenures of politicians from Schaefer, Schmoke, O'Malley, Dixon, and now Rawling-Blake all of the government largesse was directed to growing Johns Hopkins into a global corporation and building a downtown economy that has required more corporate subsidy then the citizens of Maryland and Baltimore will ever be able to support ----
IT IS UNSUSTAINABLE-----AND IT IS SADDLED TO THE CITIZENS OF BALTIMORE BECAUSE JOHNS HOPKINS WAS ALLOWED COMPLETE CONTROL OF GOVERNMENT REVENUE AND POLICY.
Southern states were the largest receivers of Federal social subsidy and all of that money was moved into the hands of the rich-----it did not go to subsidized the poor. NONE OF THAT WAS DEMOCRATIC-----and yet, Baltimore was right there receiving all those funds and diverting it all away.
THIS HAPPENS BECAUSE OF SMALL GOVERNMENT AND DEREGULATION THAT ALLOWS NO OVERSIGHT AND ACCOUNTABILITY.
Labor unions and government contractors allowed all of this fraud and corruption while they profited and/or to get jobs----but these last few decades all of that government money is simply being sucked to the rich and corporate profit-----THIS IS WHY INJUSTICE FOR ONE BECOMES INJUSTICE FOR ALL AND RULE OF LAW MUST HAVE A PUBLIC SECTOR TO ACT AS ENFORCEMENT.
Corporate Welfare Grows to $154 Billion even in Midst of Major Government Cuts
Editor’s Note: Even as the federal government executes major cutbacks, it’s giving huge subsidies in the form of tax breaks to industry, a fact legislators rarely acknowledge. The Boston Globe recently published a thorough and eye-popping report detailing the nature and extent of these breaks. We think it’s a must-read.
By Pete Marovich
First published in the Boston Globe
WASHINGTON — Lobbying for special tax treatment produced a spectacular return for Whirlpool Corp., courtesy of Congress and those who pay the bills, the American taxpayers.
By investing just $1.8 million over two years in payments for Washington lobbyists, Whirlpool secured the renewal of lucrative energy tax credits for making high-efficiency appliances that it estimates will be worth a combined $120 million for 2012 and 2013. Such breaks have helped the company keep its total tax expenses below zero in recent years.
The return on that lobbying investment: about 6,700 percent.
These are the sort of returns that have attracted growing swarms of corporate tax lobbyists to the Capitol over the last decade — the sorts of payoffs typically reserved for gamblers and gold miners. Even as Congress says it is digging for every penny of savings, lobbyists are anything but sequestered; they are ratcheting up their efforts to protect and even increase their clients’ tax breaks.
‘It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country,’ Said Senator Tom Coburn of Oklahoma.
The Senate approved tax benefits for Whirlpool and a host of other corporations early on New Year’s Day, a couple of hours after the ball dropped over Times Square and champagne corks began popping. A smorgasbord of 43 business and energy tax breaks, collectively worth $67 billion this year, was packed into the emergency tax legislation that avoided the so-called “fiscal cliff.’’
In the days that followed, the tax handouts for business were barely mentioned as President Obama and members of Congress hailed the broader effects of the dramatic legislation, which prevented income tax increases on the middle class and raised top marginal tax rates for the wealthy.
Yet the generous breaks awarded to narrow sectors of the American business community are just as symptomatic of Washington dysfunction as the serial budget crises that have gripped the capital since 2011. Leaders of both parties have repeatedly declared their intention to make the corporate income tax code fairer by lowering rates and ending special breaks, while intense lobbying, ideological divides, and unending political fights on Capitol Hill block most progress.
The result: sweeping bipartisan tax reform of the sort negotiated in 1986 by Republican President Ronald Reagan and Democratic House Speaker Thomas P. “Tip’’ O’Neill Jr. is rated a long shot once again this year. In fact, the most visible signs of cross-party cooperation on corporate taxes are among regional groups of lawmakers who team up, out of parochial interest, to maintain special treatment for businesses in their home states.
In the absence of meaningful change, corporations like Whirlpool continue to pursue the exponential returns available from tax lobbying. The number of companies disclosing lobbying activity on tax issues rose 56 percent to 1,868 in 2012, up from 1,200 in 1998, according to data collected by the nonpartisan Center for Responsive Politics.
Whirlpool had plenty of company on New Year’s, including multinational corporations with offshore investment earnings, Hollywood companies that shoot films in the United States, railroads that invest in track maintenance, sellers of energy produced by windmills and solar panels, and producers of electric motorcycles.
Their special treatment is a fraction of a broader constellation of what the federal Joint Committee on Taxation estimates will be $154 billion in special corporate tax breaks in 2013, contained in 135 individual provisions of the tax code.
Watchdogs and tax analysts denounce these favors as a hidden form of spending that amounts to corporate welfare. In essence, these “tax expenditures’’ are no different than mailing subsidy checks directly to companies to pad their bottom lines.
Congress reduced the number of tax breaks in 1986 as part of the broader reform package. The breaks steadily crept back, particularly in the last decade, as lawmakers heeded requests from advocacy groups and business lobbyists to lower taxes as a way of subsidizing particular industries.
“There’s a justification and rationale for virtually every one of these. They have their intellectual advocates, and they have their political advocates, and that’s how they get in the law,’’ said Lawrence F. O’Brien III, an influential lobbyist and a top campaign fund-raiser for Senate Democrats who represents financial industry clients and other interests.
Whirlpool has a powerful Michigan delegation behind it, including key committee chairmen of tax-writing and energy committees in the House. In response to questions from the Globe, the company said its special tax breaks led it to save “hundreds’’ of American jobs from the effects of the recession.
“Energy tax credits required that Whirlpool Corporation make significant investments in tooling and manufacturing to build highly energy-efficient products,’’ Jeff Noel, Whirlpool’s corporate vice president of communication, said in an e-mail. “If you look at our 101-year history, we have definitely paid our fair share of US federal income taxes.’’
But its federal income taxes have been minimal in recent years, thanks in large part to tax credits and deferrals, according to public filings. Its total income taxes — including foreign, federal, and state — were negative-$436 million in 2011, negative-$64 million in 2010, and negative-$61 million in 2009. It carries forward federal credits as “deferred tax assets’’ that it can use to lower future tax bills.
The renewed tax breaks granted by Congress in January, which were retroactive to the beginning of 2012, will not be recorded until Whirlpool pays its 2013 taxes. Because of the absence of that tax credit, and because of greater earnings and changes in foreign taxes, the company estimated its total 2012 tax expenses will be $133 million.
Whirlpool did not provide a specific number of jobs retained. The benefits were not sufficient to protect Whirlpool’s employees at a refrigerator manufacturing plant in Arkansas. Last summer, the company laid off more than 800 hourly workers, closed the factory, and moved manufacturing of those refrigerators to Mexico. It was part of an overall reduction of 5,000 in its workforce announced in 2011 in North America and Europe.
Congress “made a big mistake,’’ by authorizing hundreds of millions of dollars in tax credits for Whirlpool based on arguments that the company would retain domestic jobs, said Howard Carruth, a machine maintenance worker and union official who began work at the plant in 1969 and lost his job last year when the plant closed.
“They really hurt the economy around here,’’ he said. “I blame the corporate greed.’’
The closing also transformed Carruth from loyal to embittered customer: “We bought Whirlpool for our own house, for family and friends. If one of those goes out in my house right now, it will not be replaced by Whirlpool.’’
Many companies would probably pay much higher taxes — including Whirlpool — if Congress eliminated special breaks and lowered the income tax rate to 25 percent from the current 35 percent.
An extra benefit of winning government subsidies through the tax code: Recipients remain immune from spending cuts like the automatic “sequester’’ imposed on March 1.
Called the “tax extenders,’’ 43 credits, deferrals, and exceptions for general business and energy firms were lumped into the fiscal cliff legislation. The returns on lobbying investments companies realized when the Senate passed its fiscal cliff bill helps explain why Washington tax lobbyists remain in demand:
- Multinational companies and banks, including General Electric, Citigroup, and Ford Motor Co., with investment earnings from overseas accounts won tax breaks collectively worth $11 billion — a return on their two-year lobbying investment of at least 8,200 percent, according to a Globe analysis of lobbying reports.
- Hollywood production companies received a $430 million tax benefit for filming within the United States. As a result, companies like Walt Disney Co., Viacom, Sony, and Time Warner — with the help of the Motion Picture Association of America, chaired by former Connecticut senator Christopher J. Dodd — realized a return on their lobbying investment of about 860 percent.
- Railroads lobbied on a broad array of issues, a portion of which yielded $331 million for two years’ worth of track maintenance tax credits. Return on investment: at least 260 percent.
- Even at the low end of the economic scale the returns can be large. Two West Coast companies that manufacture electric motorcycles — Brammo Inc. of Oregon, and Zero Motorcycle Inc. of California — reported combined lobbying expenditures of $200,000 in 2011 and 2012. They won tax subsidies payable to the consumers who buy their products worth an estimated $7 million. The electric motorcycle market stands to receive a return on that investment of up to 3,500 percent.
“There are definitely provisions in the extenders that people scratch their heads at, but if your goal is to build a replacement for the pure oil economy, this is the kind of industry you want to make an investment on,’’ he said.
Measuring the rewards for lobbying on individual tax provisions is by nature imprecise, especially for large corporations that weigh in on dozens of issues. Companies file blanket disclosure reports that do not break down their lobbying expenditures by individual issue.
Publicly traded companies like Whirlpool with narrower lobbying agendas, and who publish their annual tax credit benefits in shareholder disclosure reports, are easier to track.
In addition to seeking tax breaks, corporate lobbyists also seek to protect favorable elements that are already baked into US tax policy. Private equity firms, for instance, fight each year to defend the tax treatment of “carried interest’’ payments for investment managers. Those payments are treated as a capital gain by the Internal Revenue Service, and thus taxed at a much lower rate, 20 percent in 2013, than the top income-tax rate of 39.6 percent.
The best-known example of a millionaire benefiting from “carried interest’’ tax treatment was Mitt Romney, the 2012 Republican presidential nominee, who reduced his individual tax rate to below 15 percent by applying the provision to his extensive Bain Capital profits.
The publicity surrounding Romney’s tax returns fueled an onslaught by critics. The private equity industry’s trade group and the nation’s largest firms spent close to $28 million on lobbying in 2011 and 2012, according to public records. So far, they have won — a benefit that the Obama administration has estimated is worth at least $1 billion over two years. The return on investment for maintaining the status quo on the carried-interest tax rate over two years was at least 3,500 percent.
The returns show how cheap it is, relatively speaking, to buy political influence.
“It’s an end run around policy, and that makes it very efficient,’’ said Raquel Meyer Alexander, a professor at Washington and Lee University in Virginia who has examined the investment returns on lobbying. “Firms that sit on the sidelines are going to lose out. Everyone else has lawyered up, lobbied up.’’
Critics lament that fiscal combat between Republicans and Democrats is preventing serious reform of the business tax code.
“What we’re doing is running a Soviet-style, five-year industrial plan for those industries that are clever enough in their lobbying to ask all of us to subsidize their business profits,’’ said Edward D. Kleinbard, a former chief of staff at the Joint Committee on Taxation and now a law professor at the University of Southern California.
“These are perfect examples of Congress putting its thumb on the scale of the free market,’’ he said. “I’ll be damned if I know why I should be subsidizing Whirlpool.’’
Congress has the opportunity every two years to stop doling out a good portion of these favors. A peculiarity of many special tax breaks is that Congress places “sunset’’ provisions on them.
Some observers say passing temporary tax breaks gives lawmakers an ongoing source of campaign funds — from companies that are constantly trying to curry favor to get their tax credits renewed. Others say it’s because making these tax rates permanent would require a 10-year accounting method — a step that would show how much each provision is truly costing taxpayers.
Whatever the reason, Congress has made many of them quasi-permanent, by simply extending them again and again.
“It’s the same cowardice that Congress has on everything. They don’t want to be truthful about what they are doing,’’ said Senator Tom Coburn, an Oklahoma Republican and persistent critic of government waste and special deals in the tax code.
Coburn voted against the raft of “extenders’’ when they were previewed and approved by the Senate Finance Committee at a hearing in August 2012. He offered amendments to strip individual tax breaks out of the package — including the high-efficiency appliance tax credit for Whirlpool and GE — but they were shot down by the majority Democrats on the committee, led by chairman Max Baucus, of Montana.
“It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country,’’ Coburn said in an interview. “We’re benefiting the politicians because they get credit for it. And we are benefiting those who can afford to have greater access than somebody else.’’
Whirlpool pursues its Capitol Hill agenda from an office suite it shares on the seventh floor of a building on Pennsylvania Avenue that is loaded with similar lobbying shops and sits just a few blocks from the Capitol. Across the street, lines of tourists wait to view the original Declaration of Independence and the Constitution at the National Archives.
Whirlpool and other appliance manufacturers won tax breaks for producing high-efficiency washing machines, dishwashers, and refrigerators in 2005, as part of a sweeping package of energy incentives approved by the Republican-controlled Congress.
But that victory was just the beginning of a prolonged effort. Whirlpool and other appliance manufacturers must perpetually work to win renewal of their credits every two years or so. In recent years, the company has spent around $1 million annually on lobbying, up from just $110,000 in 2005.
The fiscal cliff legislation represented the third time the appliance tax credits were included in a tax extenders bill.
Defending the credits has become easier, said a person who has participated in Whirlpool’s lobbying efforts. The extenders, this person explained, is an interlocking package of deals, each with a particular senator or representative demanding its inclusion.
“Some of it is the inherent stickiness of something that is already in the tax code,’’ said the person, who was not authorized to speak about Whirlpool’s efforts and requested anonymity. “If they open Pandora’s box and start taking things out, it’s politically very difficult.’’
The paradoxical posture of senators of both parties was on full display at the hearing last summer of the Senate Finance Committee to consider the most recent package of tax extenders. Some members lamented the system of doling out tax breaks, pledging to reform the corporate code, even as they defended individual items in the legislation and voted to approve it.
The senators said they wanted to provide stability and predictability for businesses that had come to rely on the temporary provisions to stay afloat and retain workers.
They did make an effort to trim the package: Some 20 provisions were left on the cutting room floor, according to data cited in committee. The panel ultimately approved the bill with a bipartisan, 19-to-5 majority.
Senator Debbie Stabenow, a Democrat from Michigan, went to bat for Whirlpool and other companies who she said are creating next-generation appliances that save water and electricity.
“We have one of those major world headquarters in Michigan — and it’s amazing what they are doing,’’ she said. “Right now, we are exporting product, not jobs,’’ she added, without mentioning Whirlpool’s Arkansas plant closure last year.
Former senator John F. Kerry, another member of the committee, said certain industry sectors need temporary tax subsidies. Oil and gas companies, Kerry explained, benefit from permanent tax breaks in the law, while the wind, solar, and other alternative energy interests are forced to come to Congress “hat in hand’’ every two years.
Coming “hat in hand’’ in this context means deploying teams of lobbyists, mostly former Capitol Hill aides. They left their government jobs with an understanding of the tax code and, working in the private sector, are able to leverage their political connections to gain access to congressional leaders and staff.
Among the busiest and most influential of these tax-lobbying teams is Capitol Tax Partners, a firm headed by Lindsay Hooper, and his partner, Jonathan Talisman. Hooper served as a tax counsel to a senior Republican on the Senate Finance Committee in the 1980s. Talisman held the post of assistant treasury secretary for tax policy during the Clinton administration. They did not respond to requests for comment.
Capitol Tax Partners lobbied on behalf of 48 companies in 2012, according to its mandatory disclosure reports. That client roster includes a bunch of companies that won tax breaks in the fiscal cliff bill: Whirlpool (energy-efficiency tax credits), State Street Bank (tax treatment of offshore investment income), and the Motion Picture Association of America (tax breaks for domestic film production), to name a few.
In Whirlpool’s case, Capitol Tax Partners and other boutique tax lobbyists helped the company win access to key lawmakers, said the person who has participated in the company’s lobbying efforts.
“There is a certain amount of door-opening and phone-call-answering quality of some of these firms that can be useful to make sure that you are getting your message to the right person at the right point in time,’’ the person said. “But on the substantive issues, these were done by the energy-efficiency advocacy groups and the companies themselves.’’
After the Senate Finance Committee approved the tax extenders package last summer, it remained uncertain when it would materialize on the Senate floor for a final vote. Insiders kept their eyes peeled as the rancorous debate over the fiscal cliff — whether taxes would rise on the middle class wealthy — drowned out any voices discussing corporate tax reform.
Nothing was certain, until majority Democrats rolled out their bill on New Year’s Eve. With tax increases for the rich included, it would raise $27 billion in new revenue in 2013. The Obama administration trumped that figure as helping to reduce the deficit.
But in reality, any gain from taxing the rich was easily eclipsed by waves of tax cuts in the bill — including the $67 billion in the corporate tax breaks that had been resurrected at the last minute and voted on early on Jan. 1.
“They finally do it, and the extenders were bigger than the tax increases on the rich,’’ said Robert McIntyre, director of the advocacy group Citizens for Tax Justice. “Wow. What was this fight about?’’
Here is an article from 1991----just a Clinton was coming to office. Reagan began the assault on oversight and accountability with deregulation of major industries----Clinton took on the financial and higher education industries and across the board Federal agency reduction-----and as this article shows----this is where the unemployment soared----imagine, not only US corporations going overseas-----but all these government jobs and downsized US corporations still operating domestically. It was HUGE. All the while Clinton neo-liberals and Bush neo-cons were selling this as making corporations efficient and creating better work conditions for expanding and creating new jobs. Even with Bush and Obama Republican voters are still buying deregulation as good for business without seeing that global corporations taking all of the market-share from small businesses mean a consolidated industry left without oversight creates this criminal and corrupt environment that no one wants. PLEASE STOP SUPPORTING THESE FAILED DOWNSIZING POLICIES---WHETHER FOR CORPORATIONS OR GOVERNMENT----When we allow global corporate pols sell us that debt created from massive corporate fraud must be paid off with government cuts to more agencies of oversight to create more fraud -----WE ARE ASLEEP AT THE WHEEL. BALTIMORE'S POLS TO THE MARYLAND ASSEMBLY MADE DEREGULATION THE PRIORITY AS FRAUD AND CORRUPTION SOARS. WE MUST HAVE STRONG PUBLIC SECTOR OVERSIGHT AND ACCOUNTABILITY TO STOP THIS! JOHNS HOPKINS DRIVES DEREGULATION AND COMPLETE PRIVATIZATION OF THE PUBLIC SECTOR.
This is a long article but please glance through----you see back in 1991 everyone knew deregulation and debt was killing the American economy and then Clinton neo-liberals spent the next two decades---with Bush super-sizing the problem-----and it killed the public sector with all oversight and accountability allowing tens of trillions of dollars in corporate fraud.
The high cost of deregulation: Joblessness, bankruptcy, debt The future was supposed to be rosy for deregulated airlines, trucking and S&Ls. Results have been disastrous.
Donald L. Barlett and James B. Steele, INQUIRER STAFF WRITERS Posted: Thursday, October 24, 1991, 3:00 AM
Editor's note: The following story ran Oct. 24, 1991, on Day Five of the nine-day "America: What went wrong?" series published in the Inquirer.
* * *
Since deregulation of the trucking industry in 1980, more than 100 once- thriving trucking companies have gone out of business. More than 150,000 workers at those companies lost their jobs.
Since deregulation of the airlines in 1978, a dozen airline companies have merged or gone out of business. More than 50,000 of their employees lost their jobs.
AMERICA: WHAT WENT WRONG?DAY 1
Since deregulation of the savings and loan industry in 1982, about 650 S&Ls have folded, with at least 400 more in serious trouble. The bailout will leave taxpayers stuck with a half-trillion-dollar tab.
Now, the people who rewrote the government rule book to deregulate airlines, trucking and savings and loans are about to rewrite the rules on banks.
They call it banking reform.
President Bush spelled out the plans in a speech on Feb. 5: "Regulatory reform is long overdue. Our banking reform proposals . . . address the reality of the modern financial marketplace by creating a U.S. financial system that protects taxpayers, serves consumers and strengthens our economy. "
Sound familiar? It should.
The arguments for deregulating banks are much the same as those that were made in the 1970s and '80s for the other industries:
Removing government restrictions on the private sector would let free and open competition rule the marketplace. Getting rid of regulations would spur the growth of new companies. Existing companies would become more efficient or perish. Competition would create jobs, drive down prices and benefit consumers and businesses alike.
That's the theory.
The gritty reality, as imposed on the daily lives of the men and women most directly affected, is a little different.
For Christopher E. Neimann of Fort Smith, Ark., deregulation meant the loss of health insurance as he was battling cancer.
Neimann, who worked for a trucking company, was diagnosed with a rare bone cancer in November 1987. He went on medical leave two months later.
In August 1988, his company, Smith's Transfer Corp., entered bankruptcy, a victim of deregulation's rate wars. Its checks began bouncing, including ones paying for Neimann's treatments at the M.D. Anderson Cancer Center in Houston.
On April 11, 1989, the hospital sent Neimann a stern letter asking him to pay his bill, which totaled $30,128.
When the bedridden, gravely ill Neimann couldn't make payments, the hospital began pressuring his wife, Billie.
"The hospital called me one night and told me they were going to dip into the estate," she said. "And he wasn't dead. He was still alive. I knew he was going to die. And they knew he was going to die.
"I just cried and I said, 'I beg your pardon. Could I ask you what estate are you talking about? ' And they said, 'Well, his estate. ' And I said, 'Ma'am, at 31 years old, you don't have an estate. You don't have anything to go into an estate. At this age, we're just starting out. ' I said, 'You can dip all you want. Dip right in and get some of the bills, too. Because there won't be anything left. ' "
After a battle of a year and a half, Neimann died on June 6, 1989, aged 31, leaving behind a young wife and an infant daughter.
The calls from M.D. Anderson's collection department continued.
"They kept calling and told me that I was still liable," said his wife, who has since remarried. "I was so upset that eventually I talked to my lawyer and he told me to give them his name. I don't know what's happened, but lately they haven't called. "
For Leslie Wagner of Flower Mound, Texas, deregulation meant seven years of relentlessly shrinking paychecks - and, ultimately, no paycheck.
At 23, she went to work as a flight attendant for Braniff International Airlines. That was in 1969, when the Dallas-based carrier was the nation's eighth largest airline.
By 1982, her base salary was $19,300 a year. That year, the fourth year of airline deregulation, Braniff asked workers to accept wage cuts and other concessions.
Even after employees agreed to reductions, Braniff still could not pay its bills and the airline was forced to seek protection in U.S. Bankruptcy Court in May 1982. The action grounded Braniff and put 9,000 employees, including Leslie Wagner, out of work.
Two years later, a scaled-down Braniff Inc., under new owners, emerged from Bankruptcy Court and resumed service. Former employees were offered jobs, but at reduced pay. When Wagner returned to work in 1985, her new base pay was $15,600 a year - 19 percent less than she earned in 1982.
By 1989, with Braniff still in financial trouble, employees were asked to take another pay cut. Wagner's base pay went down again - to $14,400.
On Sept. 28, 1989, Braniff was forced into Bankruptcy Court for the second time in seven years. Its assets were auctioned off to pay creditors, and the airline's remaining 4,800 employees were let go.
After absorbing a pay cut of 25 percent during the years when the cost of living rose 28 percent, Leslie Wagner was out of work.
The company resumed limited service in July 1991, but Wagner was not recalled. It didn't matter. Braniff was back in Bankruptcy Court a month later, for the third time in a decade.
For Joyce D. Heyl of Sioux Falls, S. D., deregulation also meant the loss of a job.
Heyl worked 19 years in the accounting department of an interstate trucking company, American Freight System Inc., until it went out of business in August 1988.
"When you work for a company a long time and you like your job, you always think it's going to be there and then suddenly one day it's not," she said. ''I loved my job. I was very upset when the company went down. "
Her standard of living went down with it.
"I'm 59 years old and I thought to go back into the job market with a lot of young people was something I wouldn't be able to do," she said.
To supplement the family income she works part time at various jobs. At American Freight, she earned $410 a week, or $21,320 a year. Now she's lucky if she earns half that.
For Barbara Joy Whitehouse of Salt Lake City, deregulation meant a devastating financial blow, on top of a personal one.
Her husband was killed in a 1986 Montana highway accident while driving a truck for a company called P-I-E Nationwide Inc. After his death, Barbara Whitehouse, 54, began receiving $299 a week under Montana's workers' compensation law, which makes payments to spouses of workers killed on the job.
Because P-I-E was a large company and appeared to have considerable assets, Montana authorities permitted it to pay claimants directly, rather than contribute to the state's workers' compensation fund, which disburses benefits in most cases.
That was a mistake. P-I-E was not as solid as Montana officials thought. Deregulation was helping drive it, like many other interstate trucking companies, out of business. After huge losses, P-I-E filed for bankruptcy in October 1990 and is now being liquidated.
After the bankruptcy filing, the company ran out of cash and Whitehouse's biweekly checks stopped. P-I-E's last check to her, on Oct. 10, 1990, bounced.
Whitehouse has filed a claim with the Bankruptcy Court for $466,440 - the amount due her under Montana law if she lived to be 84 and didn't remarry.
But Whitehouse will see little, if any, of that money. Hers is one of more than 7,000 unsecured claims against P-I-E - meaning she'll collect, at best, a few cents on each dollar owed.
"P-I-E knew they owed me $299 per week for life and should have put aside a safe fund to meet this debt," Whitehouse wrote to the Bankruptcy Court.
"They didn't, so now the court wants me to go at the bottom of the list to see if they can offer me what's left after the big guys get their fair share. I am as important as any big company. . . . This is wrong. My husband dies, the law says they pay me for life and now I have nothing. "
And finally, for you, the American taxpayer and consumer, deregulation has meant fewer airlines and higher air fares, more unsafe trucks on the highways, and your tax money diverted to pay for the S&L debacle.
That last one is going to cost you for years to come.
For this, and all the other costs associated with deregulation, you can thank the people in Washington who wrote the government rule book - the sprawling, often contradictory collection of laws and regulations that provide the framework for the U.S. economy.
It is that rule book, as The Inquirer has reported the last four days, that a succession of Congresses and presidents have skewed to favor special interests, the powerful and influential, at the expense of everyone else.
The results: There are more rich people than ever before. There are more poor people than ever before. And the ranks of those in between are shrinking, their standard of living falling.
One reason is that the ever-changing rules are propelling federal, state and local taxes ever higher while middle-class jobholders are being forced into lower-paying jobs.
So it is with deregulation, which has meant lost jobs or paycuts for employees in the airline and trucking industries, and, ultimately, higher taxes for everyone to rescue the savings and loan industry.
Backers, to be sure, predicted a rosy future for airlines and trucking when those industries were deregulated. Few of the benefits they foresaw have come about.
Advocates of airline deregulation claimed that it would stimulate competition, reduce fares, open up air travel to more Americans.
Instead, air fares went up, not down. Competition became destructive, not productive. The increase in air travelers was lower in the decade after deregulation than in the decade before it. Cities once served by multiple carriers are now served by one or none. And the airline industry is in shambles.
Nonetheless, the people in Washington have a different view. Transportation Secretary Samuel K. Skinner offered this assessment in January:
"Airline deregulation . . . ushered in a decade of competition and consumer savings unsurpassed in the history of the industry. With deregulation having accomplished so much throughout the 1980s, we must stay the course in the coming decade as the industry continues to restructure. Every credible analysis of airline competition in the 1980s has declared deregulation a success. "
Judge for yourself.
Last year was the worst financial year in the history of American aviation as airline losses soared to $3.9 billion.
Pan American, the flagship of U. S. carriers, founded in 1927, is in Bankruptcy Court. Eastern Air Lines, founded in 1927, is in Bankruptcy Court and is being liquidated. Braniff, founded in 1934, is in Bankruptcy Court for the third time. Continental Air Lines, founded in 1937, is in Bankruptcy Court. Midway Airlines, founded in 1979, is in Bankruptcy Court. Trans World Airlines, founded in 1928, can't pay its bills and is on the edge of bankruptcy.
And then there's America West Airlines of Phoenix - once considered deregulation's success story. From a modest regional carrier with three jets and 280 employees in 1983, it grew into a nationwide airline with 92 planes and 12,000 employees. With revenues of $1 billion, it moved onto the list of the nation's top 10 airlines last year.
In June, it moved into Bankruptcy Court.
If all the news from the skies appears bleak, the authors of the government rule book - the people who brought you airline deregulation - have another solution:
They already have invited foreign airlines to invest in the remaining U. S. carriers. And they are thinking about opening the U. S. domestic market to foreign carriers, so that Air Japan, for example, might one day fly between Philadelphia and Pittsburgh.
So it is that the government, which revised the rule book to spur competition among U. S. airlines, is now contemplating encouraging foreign airlines - many of which are subsidized by their governments - to compete against the few remaining U. S. carriers.
In trucking, it's been a similar story. Rather than making the industry stronger, as congressional backers predicted, deregulation triggered price wars and cutthroat discounting that have destroyed many of the largest companies and weakened others.
More trucking companies failed in the 1980s than in the entire 45 previous years that the Interstate Commerce Commission (ICC) regulated the industry.
Part of the reason, of course, was that there were now many more companies, all scrambling for business.
In 1979, the year before deregulation, 186 companies went out of business. Eleven years later, in 1990, the number had soared to 1,581, the most trucking failures ever recorded in a single year. For the decade, a total of 11,496 failed.
Of the 30 largest motor carriers of 1979, only nine are still in business. The others either went bankrupt or were broken up and their pieces acquired by one of the surviving companies.
A decade into deregulation, trucking appears to be following a variation on the airline-industry pattern.
That is, after an initial burst of competition has come a shakeout, with widespread failures that eventually could leave control of the industry in fewer hands. Meanwhile, though, small, mom-and-pop operators continue to come in, keeping the pressure on.
Trucking industry data show that consolidation already is under way.
Before deregulation, the three largest trucking companies accounted for one-third of the operating revenue of the top 25 companies. Now, those three - Roadway Express, Consolidated Freightways and Yellow Freight System Inc. - account for about one-half.
Nevertheless, advocates of trucking deregulation, like their airline counterparts, contend that it has been an unqualified success.
"The trucking industry has saved billions of dollars through more efficient operations allowed and stimulated by deregulation. . . . The benefits to consumers from deregulation exceeded our fondest dreams," Darius W. Gaskins Jr., former chairman of the ICC, told a House committee in 1989.
A 1990 study by the Brookings Institution, a Washington, D.C., think tank, echoed this view: "Surface freight deregulation (trucking and rail) has been extremely beneficial to shippers and to their customers. Total annual benefits from rate and service changes amount to $20 billion. "
While companies that hire truckers have profited from lower rates, there is no evidence that the cost savings have been passed along to consumers.
Neither have workers in the industry benefited - in fact, gains that shippers have realized have come at workers' expense.
Indeed, what has happened to those workers provides a glimpse into the future for employees in other industries, where restructuring and downsizing are leading to pay cuts, layoffs and elimination of benefits.
Consider the pay of flight attendants.
In 1983, according to data compiled by the Association of Flight Attendants, the average annual salary was $28,847. Six years later, in 1989, it had declined to $27,160.
That represented a pay cut of 6 percent at a time when living costs shot up 24 percent.
During those same years, the people who write the government rule book - and who revised the laws that, ultimately, led to lower salaries for airline employees - increased their own salaries 48 percent.
The pay of members of Congress went from $60,662 in 1983 to $89,500 in 1989. The $28,838 increase alone exceeded the full salary of flight attendants. Today, congressional salaries are $125,100 a year.
For truckers, the 1980s were a dismal time, even though government statistics suggest that all is well.
According to the Bureau of Labor Statistics, employment and wages in the trucking industry are up since 1980. Between 1980 and 1990, the number of employees increased 248,000, rising from 1.242 million to 1.490 million.
Average yearly earnings went from $18,400 to $23,400, the government says.
What those figures fail to disclose: During the years when total employment rose, more than 100 of the big, established trucking companies folded. With them went more than 150,000 jobs.
These were the higher-paying trucking jobs - drivers with seniority and company-paid benefits, such as health insurance and pensions. Many of those truckers earned solid, middle-class wages - $30,000 or more in recent years.
Deregulation brought an influx of one-owner shoestring trucking operations, which cut into the business of those established companies. Jobs at these small operations paid less.
So it was that deregulation eliminated two jobs that paid, say, $30,000, and created three jobs that paid $20,000 or less.
Just as misleading are the earnings reported by the government.
In 1990, trucking industry workers earned, on average, $23,400 a year, according to the Bureau of Labor Statistics (BLS).
But the government excludes one major category of truckers from its figures - self-employed drivers. And their earnings generally are lower than those for drivers employed by major companies.
"We don't really have any data on how many there are," said a BLS official. "An individual in business for himself is technically not covered by our study. "
A spokesman for the ICC said that the agency does not know how many owner- operators exist. "I'm not sure we have ever had an accurate count," he said.
The Owner-Operators Independent Drivers Association, the largest trade group representing individual drivers, estimates there are 350,000 to 400,000 owner-operators.
Based on surveys by its magazine, Landline, the association estimates the annual income, after expenses, of owner-operators at $20,000 a year, or $385 a week, according to Sandi Laxson of the drivers' group.
"Deregulation has been a nightmare for our people," said Laxson. "I remember my uncle was a truck driver 20 years ago and, wow, he made a lot of money. He was on the road all the time. But his wife drove a nice car and they had a nice house.
"Now, drivers are struggling to survive."
* * *
The source of the upheaval in the trucking industry is the Motor Carrier Act of 1980, which changed the rules that had governed trucking for half a century.
Responding to criticism that the ICC's rules had frustrated competition and discouraged new companies from entering the business, Congress scaled back the agency's powers, making entry easier and giving truckers more freedom to set rates.
President Jimmy Carter summed up the high hopes when he signed the law in July 1980: "The Motor Carrier Act of 1980 will eliminate the red tape and the senseless overregulation that have hampered the free growth and development of the American trucking industry. "
No one was prepared for what followed.
As promised, the law unleashed new competition - on a scale unforeseen and with an intensity that became destructive.
New trucking companies surged into the industry by the thousands.
But most were one-person operations.
By 1979, the year before deregulation, the ICC had granted operating licenses to 17,000 interstate carriers. By 1990, that number stood at 45,000.
The ICC granted more operating certificates in the 1980s than in the previous 45 years it regulated the industry.
From being an agency that exercised tight control over truck licensing, the ICC essentially rubber-stamped applications.
But while the number of companies more than doubled, there was no corresponding increase in the volume of freight hauled.
Too many trucks were suddenly chasing too little freight.
Total inter-city tonnage increased just 11 percent, from 2.26 billion tons in 1980 to 2.5 billion tons in 1989. Thus, more than twice as many ICC- approved companies were competing for roughly the same amount of freight.
The trucking glut led to desperate rate wars as truckers scrambled to survive. With each round of rate cuts, many longtime companies found themselves awash in red ink.
As losses mounted, companies whose trucks had long been familiar names on American highways began to vanish. Even companies that initially thought they would benefit from deregulation were, in the end, destroyed by it.
When the parent corporation of American Freight System Inc., one of the nation's largest trucking companies, based in Overland Park, Kan., acquired Smith's Transfer Corp. of Staunton, Va., in 1987, it sought to allay concerns of Smith employees about being absorbed by another company.
In an Oct. 2, 1987, letter, American Freight welcomed the Smith workers into the new company, citing numerous fringe benefits - profit-sharing, pension and health and welfare plans - to which they would be entitled.
"Your economic security has been made more certain," the letter said. ''American Freight System is a financially viable carrier with a secure future in the deregulated motor carrier industry. "
Nine months later, American Freight filed for Bankruptcy Court protection.
The action threw 9,300 people out of work, closed 258 trucking terminals across the nation and idled 17,000 trucks and trailers. The company has since been liquidated.
For trucking companies still in business, the outlook is grim. Many that have survived are just getting by. Profit margins have been squeezed. Equipment is neglected or pushed to the limit.
So many carriers are entering and leaving the industry that the Federal Highway Administration has been unable to keep pace with safety inspections of interstate carriers. The inspections are required by the Motor Carrier Safety Act of 1984, which was aimed at reducing trucking accidents.
A January 1991 report of the General Accounting Office noted: Federal Highway Administration "workload data show that the number of carriers entering the marketplace in any one month can exceed the number that underwent safety reviews. "
For those vehicles that the highway agency did inspect, the GAO said, "70 percent . . . received a less-than-satisfactory rating. "
That comes as little surprise to DeWayne Snow.
The owner of Snow's Welding & Truck Repair Inc. in Tyler, Texas, 100 miles east of Dallas, Snow does repair work for both large and small trucking companies.
"It's real tough on them right now," Snow said. "They don't fix anything they don't have to. . . . They'll bargain over everything. They even say to you, 'Can I bring in some used parts? ' "
As companies fought to stay in business after deregulation, they struggled to cut costs. Usually that meant reducing the wages and benefits of workers.
This sometimes was accomplished, curiously enough, through a program intended to broaden ownership - Employee Stock Ownership Plans, or ESOPs.
Created by Congress in 1974, ESOPs have become more and more popular with a wide spectrum of American corporations.
Proponents say that ESOPs give workers a voice in their company's operations and make them feel committed to its success.
In the trucking industry, though, ESOPs were used as a device to persuade employees to accept pay cuts.
In return for wage reductions of up to 15 percent, workers received stock in the company. If the firm prospered, they were told, their stock would appreciate in value and they would earn back what they had given up. That was the theory, anyway.
Contrary to the image of American labor as uncompromising on bread-and-butter issues, trucking industry workers went along - usually overwhelmingly so - with virtually every request of financially strapped employers for wage cuts in exchange for ESOPs.
Since 1980, more than two dozen ESOPs financed by worker wage cuts have been adopted by large trucking companies.
With few exceptions, the companies failed anyway.
* * *
The first major trucking company to adopt an ESOP was Transcon Lines Inc. of Los Angeles, a carrier with terminals in 45 states. The plan, approved at Transcon in 1983, was widely hailed as an example of labor and management cooperation.
A remarkable 88 percent of Transcon's 4,000 employees agreed to reduce their wages by 12 percent for five years in return for 49 percent of the company's stock.
Financial analysts loved the deal.
Said William H. Legg, a transportation analyst with Alex Brown & Sons Inc. of Baltimore: "Without the ESOP, Transcon wouldn't have been able to put enough capital into the company to stay even with the more well-heeled carriers. "
The Transcon example soon spread through trucking, as one carrier after another secured wage cutbacks from workers in return for stock in the company.
In the spring of 1989, amid much fanfare, Transcon distributed 2.5 million shares of stock to its workers, signaling the successful conclusion of the plan.
Calling the ESOP an "unqualified success," Orin Neiman, Transcon's chairman, paid tribute to the workers who now owned almost half of the company's stock.
"The ESOP helped the company through years of fierce price competition and saved Transcon and 4,000 jobs that otherwise would have been lost," Neiman said.
One year later, Transcon was out of business.
With the ICC's approval, the company was sold in the spring of 1990 to a Florida-based real estate company. Three weeks later, Transcon closed its doors and entered federal Bankruptcy Court in Los Angeles. It is now being liquidated.
Virginia Oates, who worked for Transcon in Charlotte, N.C., remembers the last day.
"The company I worked for, Transcon Lines, was involved in a hostile takeover on April 20, 1990," she wrote the ICC. "The takeover transpired at 4:50 p.m., Friday, April 20, 1990, without any advance notice to the employees of Transcon Lines from anyone. All personnel, except the salesmen, were advised to take all their personal things with them as they left that day. "
A Transcon employee for 15 years, Oates - and 4,000 Transcon workers nationwide - were suddenly out of work. The stock they had bought with $50 million of their wages was virtually worthless.
"It is hard for me to believe that the ICC has done their public duty in this case," wrote Oates.
* * *
Trucking deregulation was the product of a broad-based political movement for regulatory reform that gathered steam in the 1970s.
While the perception exists that deregulation was Ronald Reagan's idea, it actually predated his arrival in the White House. In fact, airline and trucking deregulation were pushed through by Jimmy Carter.
The legislative coalition that brought about those changes and the subsequent deregulation of the savings and loan industry in 1982 had broad support in both parties.
Such political opposites as Sen. Jake Garn, the conservative Utah Republican, and Sen. Edward M. Kennedy, the liberal Massachusetts Democrat, were both on the deregulation bandwagon.
And it was Kennedy, more than any other senator, who led the charge for passage of the airline and trucking deregulation bills.
When Carter signed the Motor Carrier Reform Act on July 1, 1980, at a ceremony in the White House Rose Garden, he singled out Kennedy for special attention: "It's particularly gratifying to me to welcome Sen. Kennedy . . . because he's done such a tremendous job . . . in helping the whole nation understand the advantages to be derived from this trucking deregulation bill. "
Using language that sounded very much like the speeches that Reagan administration officials would make later in the 1980s, Kennedy described the Motor Carrier Act as "a significant victory" in the "ongoing battle to . . . reform and reduce needless federal regulation of business. . . . It means less government interference with industry . . . and more freedom for individual firms to conduct their business in the way they think best. It'll mean new opportunities, new jobs. "
Kennedy was half right.
New jobs were created - at low wages.
But many jobs that paid middle-class wages were eliminated.
Ask Charles D. Wright Jr.
For 12 years, Wright was a dock worker at a sprawling truck terminal in Hagerstown, Md., a distribution hub that received and rerouted freight across America.
After completing high school in Hagerstown, Wright went to work at the terminal, on a plain north of the city where he had hunted groundhogs as a boy.
He felt fortunate.
"Trucking was a good job in those days," he said. "The pay was good. It was steady work. "
And Ryder Truck Lines, which owned the terminal, was a good company, he said.
"I was proud to work there," he said. "People would ask you where you worked. I'd tell them, 'Ryder Truck Lines. ' Big smile. "
Ryder was one of the nation's oldest trucking companies. Founded in the 1930s, it was owned by IU International Inc., a Philadelphia-based conglomerate that had diversified into the interstate trucking business.
In addition to Ryder, IU owned another old-line trucking company, Pacific Intermountain Express Inc. (P-I-E), based in the West.
As separate divisions of IU, Ryder and P-I-E long were profitable operations.
Deregulation turned the profits into losses.
To try to stem the losses, IU merged Ryder and P-I-E in 1983, creating Ryder/P-I-E Nationwide. But the red ink still flowed. The trucking operations lost $42.5 million in 1984.
Another change was also beginning. Charles Wright and fellow workers at the Hagerstown terminal watched the company, once a solid, well-run organization, gradually deteriorate into a chaotic operation.
"They kept on hiring more management, more supervisors," he said. "When it was Ryder, there were just two supervisors a shift, and some nights only one. And then after deregulation, we had more superintendents and more managers than we ever had before. There was a lot of turnover among those guys. When it was Ryder, the same guys were supervisors for years. "
The Ryder/P-I-E merger didn't work. In 1985, the company lost $86.4 million - the largest one-year loss ever recorded by any trucking company.
In the fall of 1985, to keep afloat, the company proposed an Employee Stock Ownership Plan. In exchange for giving up 15 percent of their wages for the ESOP, employees would receive stock in P-I-E.
A prospectus spelling out the benefits was mailed to employees: "The purpose of the plan is to enable employees . . . to acquire stock ownership in (P-I-E) and thereby to share in the future of (P-I-E) and to provide employees who participate with an opportunity to accumulate capital for their future economic security. "
Over the five-year life of the ESOP, employees would give up about $250 million in wages in exchange for 49 percent of the company's stock.
Victor Anderson, another Hagerstown dock worker, recalled the day the ESOP was proposed: "They took everybody off the dock and brought us down to our break room and said, 'Hey, we've got this ESOP program. We're in financial difficulty and if you all don't decide to get into this - now we can't force you to get into this - but if you don't get into this, we're going to go out of business - next week. ' "
Employees who signed up were sent buttons, proclaiming: "I'M AN OWNER," which they were urged to wear on the docks.
The more workers who supported the ESOP, the lower the company's wage costs, so IU kept up a steady drumbeat of promotions urging workers to ". . . keep those sign-up cards coming in" and to "get to 100 percent (and) top 'er off. "
Fearing that they would lose their jobs, more than 85 percent of P-I-E's 10,500 employees signed up.
Charles Wright reluctantly agreed to go along, although he was convinced it was merely a device to get him to take a wage cut from $500 to $425 a week. In truth, most workers felt they had no choice.
"When you think about it, what are you going to do," asked Anderson. ''Are you going to take a 15 percent cut in pay or are you going to go out and try to get a job when it was hard to find one? So the majority of the people decided to get into the ESOP. . . . You were under a lot of pressure. "
Eighty-five days after the stock plan was adopted, IU sold the company that it had spent months persuading employees to save by forfeiting their wages.
On Dec. 31, 1985, the truck line, now renamed P-I-E Nationwide Inc., was sold to a privately held Chicago investment partnership, Maxitron Inc., which had no experience in the trucking industry.
Many employees were embittered by the sale, coming so soon after they had agreed to 15 percent wage cuts.
Indeed, employees would later file lawsuits seeking to recover the money they had contributed to the ESOP. The lawsuits have since been settled and a fraction of the money returned.
"When they turned around and sold the company right after the ESOP, it left a bad taste in people's mouths," said Anderson. "They led us to believe that the company would not be sold, that it was going to turn around and that sometime our stock would go onto the open market. "
Such was not the case. Under Maxitron, P-I-E continued to slide.
Top management changed with each season. In the 20 months after adoption of the ESOP, P-I-E had four different chief executive officers.
The chaos at the top filtered down through the company.
"It seemed like anything that went wrong was your fault," said Wright, ''and anything that went right was their idea. "
"The equipment was neglected after deregulation," said Anderson. ''Before, they had a regular program to replace so many tractors each year. That way you replaced your fleet every few years.
"But after deregulation . . . they had to do everything to keep their customers. One of the big things that suffered was the equipment.
"One way they could cut expenses was, if the truck needed brakes or tires, to run it one more trip. Or if the clutch was slipping on a tow motor, use it another week before you fixed it. There was a lot of neglect. "
In the spring of 1990, the company changed hands yet again.
The new owner was from Miami Beach and, like Maxitron, had no experience in the trucking industry.
Olympia Holding Corp., as it was called, had the same address, 1250 Ocean Dr., Miami Beach, and many of the same officers of a company that only three weeks earlier had acquired control of another old-line trucking firm, Transcon Lines of Los Angeles.
Olympia's plan, its officers told the ICC, was to merge the troubled lines into one company. After applications were submitted, the ICC tentatively agreed to transfer the operating certificates to the new owners.
If the ICC had been guilty of overregulation in the past, its approval of the Transcon and P-I-E acquisitions showed just how far in the other direction the agency had swung.
The central figure behind Olympia Holding and the Transcon and P-I-E deals was a controversial developer, Leonard A. Pelullo, who has operated from Chester County, Pa., to Miami Beach.
About the time that the ICC approved Pelullo's control of the two trucking companies, he and his businesses were the subject of civil complaints and criminal investigations. Disgruntled investors, banks, the IRS, other government agencies, and federal grand juries were suing or probing Pelullo's business activities, from Philadelphia to Miami, from Newark to Los Angeles.
Some of his difficulties grew out of his unsuccessful attempt to restore a collection of Miami Beach's historic art deco hotels. The real estate venture was undertaken by the Royale Group Ltd., a publicly traded company that Pelullo controlled.
After the Royale Group attracted millions of dollars from investors and banks to restore the hotels, the company collapsed.
While the ICC was considering the transfer of P-I-E's and Transcon's operating certificates to Pelullo's companies, his business empire was reeling, as a summary of the litigation and complaints against him shows:
- His principal company, the Royale Group, and its affiliates were in Bankruptcy Court in Miami.
- A Bankruptcy Court trustee in that case reported to the judge that Pelullo had transferred assets to family-controlled entities, with the apparent intent to "deprive creditors" of assets.
- The Federal Deposit Insurance Corp. (FDIC) had filed a claim in Dade County, Fla., Circuit Court seeking to recover more than $30 million in principal and interest from a loan to a Pelullo company by a failed savings bank.
- The IRS had filed a claim of $697,000 against Royale and seized company documents in an attempt to collect unpaid federal taxes for various Pelullo corporations.
- A federal grand jury in Cincinnati had indicted Pelullo for allegedly bribing an officer of an Ohio savings and loan. A jury later acquitted him of the charge.
- A federal grand jury in Philadelphia was investigating charges that Pelullo had defrauded a savings and loan association in Stockton, Calif., from which the Royale Group had borrowed $13.5 million in 1984.
- A civil complaint filed in New Jersey accused Pelullo of raiding the pension fund of Compton Press Inc., a Morris Plains, N.J., printing company of which he acquired control in 1987, and of siphoning off millions of dollars from the company's retirement plan for his personal use. A federal judge in New Jersey later sent Pelullo to jail for three weeks when he failed to pay back the fund.
Pelullo's Growth Financial Corp. acquired Transcon for $12 on April 1, 1990.
In the next few weeks, liquid and real assets of Transcon were diverted to other Pelullo entities, according to a bankruptcy trustee. The trustee asserted in Bankruptcy Court in Los Angeles in 1990 that Growth Financial appropriated to itself $1.655 million in cash belonging to Transcon.
The trustee said that transfers were only the first of many transactions that would reduce Transcon to a "debt-ridden shell, all in an attempt to move all of Transcon's assets beyond the reach of its creditors. "
What happened to the cash that disappeared from Transcon's accounts remains a mystery, but the trustee contended that perhaps $400,000 was diverted to P- I-E, as were tractors and trailers owned by Transcon.
If they indeed were diverted to P-I-E, none of these assets helped that company either. It just prolonged the inevitable.
Victor Anderson and his fellow workers at the Hagerstown terminal saw it coming.
"It just became so obvious the last month they were going to go down," he said. "When you run out of toilet paper and soap, you know it's the end. "
On Oct. 16, 1990, P-I-E filed for protection from creditors in Bankruptcy Court in Jacksonville, Fla.
Pledging to reorganize and stay in business, the company closed terminals and slashed its workforce.
It was too late. In early December of that year, the bankruptcy reorganization was converted to a liquidation. P-I-E's few remaining assets were to be sold off.
Dec. 17 was the last work day for Charles Wright at the Hagerstown terminal.
After 12 years of steady employment, he was out of a job. To support his wife and two children, he began drawing $215 a week in unemployment compensation.
Along with his wages, Wright lost his health benefits. The Teamsters offered to provide coverage but he'd have to pay the cost. It was an offer he had to pass up.
"When we left, we were told we could pay into the health and welfare program for $432 a month," he said. "But who has $432 a month when you are laid off? How is anybody who's laid off going to afford that? So we don't have any health coverage. "
And what of Leonard Pelullo, the man the ICC approved to take over P-I-E?
In a criminal case involving events that occurred before Pelullo acquired Transcon and P-I-E, he was convicted in July of defrauding a Stockton, Calif., savings and loan and the Royale Group, the company that he controlled, of $2.2 million.
In that case, a U. S. District Court jury in Philadelphia found him guilty on 50 counts of wire fraud and racketeering. Judge Robert F. Kelly sentenced Pelullo to 24 years in prison - jailed him immediately and ordered him to pay a fine of $4.4 million and restitution of $2.2 million.
At the sentencing hearing, Kelly posed a rhetorical question concerning Pelullo's control of a public company - a question the ICC might easily have asked at the time of the P-I-E/Transcon merger:
"Why would any public corporation ask him - let him - ever get control of their assets?"