Our title sounds alarmist and exaggerated, doesn’t it? But the uniformity of method, the rush to violence by police from New York to Oakland, from Portland to Atlanta to Los Angeles, tell us otherwise.
The Occupy movement told us something we were unsure of, after nearly half a century — that Americans would take to the streets. In 1968 it was primarily the Vietnam War. Today the self-declared 99% are angry at a distorted society that has bestowed too much on too few and left them with dim prospects.
But when they take to the streets, and mayors find reason to shut down the right of “the people peaceably to assemble” guaranteed by the 1st Amendment, the police quickly resort to violence reminiscent of the “police riots” at the Democratic National Convention of 1968 in Chicago. Evidence of physical provocation by Occupiers are few, non-violence being key to winning public support, but the police in several cities went straight to tear gas, pepper spray and beatings.
So in New York early in the occupation, police attacked protesters and onlookers with pepper spray as seen in the video above, in which we hear women screaming from the burn of the chemical agent.
In another New York incident police used truncheons (now given the gentler name “batons” by the media) to savagely beat the crowd captured on film here. In neither case is there evidence of provocation that justified a violent response.
Ultimately New York City Mayor Bloomberg shut down Zuccotti Park telling us hygiene had suddenly become the problem it had not been for two months. Hundreds of NYPD officers in riot gear swept through the park in early morning hours, rousting campers from sleeping bags and removing and depriving protesters of the tents and gear that had become essential with the change in weather. Police sequestered credentialed reporters two blocks distant where they could not see the action. Bloomberg said this violation of a free press was to “protect the members of the press”. If that truly was the reason, it didn’t sound that way when later in a speech he would say, “I have my own army in the N.Y.P.D.”
In Oakland, an Iraq vet suffered a skull fracture and brain function damage when hit by a police projectile thought to be a tear gas canister. Police classify tear gas and other crowd control aids as “non-lethal”, but rubber bullets and cans fired from launchers are dangerous at close range and can indeed be lethal. A second Oakland Occupier’s spleen was lacerated by a police beating such as seen in this this film clip.
At the University of California, Davis, a campus police officer walked in front of a row of student protesters sitting on the ground with locked arms, thoroughly dousing them with pepper spray, caught in this film:
In Portland, the photo below shows police hitting a young woman directly in the face with pepper spray…
Portland
…with much the same seen in Seattle…
Seattle …where an 84-year-old woman was a victim of the chemical agent. Pepper spray is derived from the most potent in the spectrum of chili peppers (capsaicin) and causes searing pain and temporary blindness. One student reported that the burn lasted through the night — face, hands — preventing sleep — and into the next day.
In none of these instances caught on film was there any instance of provocation that merited so violent an attack.
In a massive assault, 1,400 police officers, some in riot gear, stormed the Los Angeles Occupier encampment arresting over 200.
“60 Minutes” on November 20th ran a segment on the increasing use by police of Tasers, the brand name for stun guns that shoot into the target’s body a pair of darts at the end of wires, thus closing a circuit for an agonizing electrical shock. The segment shows the unhesitatingly rapid resort to using the weapon on a motorist who is only asking what she had done that called for putting her hands on her car. The weapon has led to heart attacks and death, which, of course, the manufacturer disputes as coincidental. Police, undeterred by its violence toward fellow citizens, seem to gravitate to its use because it is an easy shortcut to bringing a civilian to heel.
american sanctimony
These scenes, uploaded to video sites such as YouTube, show the world that the Mecca of free speech that we fashion the United States to be looks false.
The opposing view was more concerned that the protests were noisy, had inconvenienced civilian activity and might cause property damage. Occupiers were labeled unwashed “hippies” — “lice-infested, shiftless human filth” according to one offended commentator on a right wing website — a view helped along by the media’s focus on the bizarre sort that street demonstrations inevitably attract. The objective is to persuade that element of society which values order above all to classify protesters as rabble rather than the jobless young people burdened by student debt who formed the core of the 99% movement. That’s the standard self-preservation tactic adopted by those who hold power to keep the public in its place in order to preserve the status quo.
will protests survive?
The status quo may be with us for good. Glenn Greenwald, writing at Salon offers this troubling assessment:
Despite all the rights of free speech and assembly flamboyantly guaranteed by the U.S. Constitution, the reality is that punishing the exercise of those rights with police force and state violence has been the reflexive response in America for quite some time…
The intent and effect of such abuse is that it renders those guaranteed freedoms meaningless. If a population becomes bullied or intimidated out of exercising rights offered on paper, those rights effectively cease to exist. Every time the citizenry watches peaceful protesters getting pepper-sprayed — or hears that an Occupy protester suffered brain damage and almost died after being shot in the skull with a rubber bullet — many become increasingly fearful of participating in this citizen movement, and also become fearful in general of exercising their rights in a way that is bothersome or threatening to those in power. That’s a natural response, and it’s exactly what the climate of fear imposed by all abusive police state actions is intended to achieve: to coerce citizens to “decide” on their own to be passive and compliant — to refrain from exercising their rights — out of fear of what will happen if they don’t.
The genius of this approach is how insidious its effects are: because the rights continue to be offered on paper, the citizenry continues to believe it is free. … As Rosa Luxemburg so perfectly put it: “Those who do not move, do not notice their chains.” Someone who sits at home and never protests or effectively challenges power factions will not realize that their rights of speech and assembly have been effectively eroded because they never seek to exercise those rights; it’s only when we see steadfast, courageous resistance from the likes of these UC-Davis students is this erosion of rights manifest.
David Frum, a conservative and former Bush speech writer, has more faith in the American people to rebel. He says in this New York Magazine article, an indictment of what the Republican party has become, that “If the social order comes to seem unjust to large numbers of people, what happens next will make Occupy Wall Street look like a street fair”.
Will the police fan the flames or subdue all change?
<|181||They want to be in the 1% (many already are)>Will Congress Mend Its Ways Now? Not a Chance Dec. 9: Fearful that a bill to ban insider trading by members of Congress was making progress, with a committee vote scheduled for next week, House Leader Eric Cantor ordered a halt to allow “additional time to study this issue”, said the scolded committee. Expect to see the 6-year old initiative disappear. After all, how else can Congress get rich?
Congress could see its approval rating drop still lower than the 9% score in an October Rasmussen poll after a “60 Minutes” report revealed a pattern of stock trading by members that benefited from knowledge of pending legislation. The airing was based on the findings of Peter Schweizer, a research fellow at the Hoover Institution, who learned that there are no restrictions enjoining members of Congress from trading on insider information. That prompted him to look into the financial transactions of a mere dozen members of Congress, yet he found examples of suspect trades in even that small sampling — trades that he says “would send the rest of us to prison.”
“The people that make the rules are the political class in Washington and they’ve conveniently written them in such a way that they don’t apply to themselves”, Schweizer said in the “60 Minutes” interview.
Senator John Kerry, on the health subcommittee of the Senate Finance Committee, was in a position to know in advance about prospects for the prescription drug feature of the 2003 Medicare act, a bonanza for pharmaceutical companies. Schweizer found 111 Big Pharma trades in Kerry’s and his wife’s account. Gains on these investments were reported as from $500,000 to $2 million (Congress members require themselves only to cite dollar ranges rather than precise numbers).
Schweizer then found that Kerry’s wife had in 2007 unloaded holdings of drug company Amgen worth between $500,000 and $1 million just a week or so before the government announced it would discontinue Medicare reimbursement for certain anemia drugs. Shares in Amgen then fell 15%.
While House minority leader, John Boehner invested tens of thousands of dollars in the stocks of health care companies during the 2009 debates on the health care bill, companies whose stock price would show gains if a public option were defeated, which it was. “There are laws and there are rules of the House, and they should be followed,” a Boehner spokesperson tells Newsweek. “The speaker does not make those trades himself. He has a financial adviser in Ohio”. Evidently that was meant as proof that there is no communication between them.
Spencer Bachus of Alabama was briefed as a member of the House Financial Services Committee by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke in the summer of 2008 that the economy was about to collapse. On September 19th he bought into an index fund that shorts the market — that is, bets the market will drop — and nearly doubled his money.
He did it again in early 2009 when briefed on the details of TARP, the bank bailout, this time buying a fund that would rise.
Not so much trading on insider information as being treated favorably as an insider, Nancy Pelosi and husband Paul were let in on between $1 million and $5 million of Visa’s initial public offering, access normally reserved for the best clients of the underwriting investment banks. There are legions of buyers for IPOs of solid companies. They will bid up the prices in order to get in on the action, and the favored few who get the original shares usually flip their stocks into the broad market within days. The Visa price rose from the initial offering price of $44 a share to $65 in just 48 hours.
An indignant Ms Pelosi answered “60 Minutes”‘s Steve Kroft’s question about her accepting a favorable stock deal with “Well we didn’t. It’s not true and that’s that”. Kroft said that the Pelosis had benefited from eight such IPOs.
Ms Pelosi’s spokesman said the allegation of favored treatment was a “preposterous idea” hatched by “a right-wing hack”, as if her actions are only suspect because they were uncovered by a researcher from the conservative Hoover Institute. He said that several other members of Congress benefited from the sweetheart deal, which tells us that the practice is more widepsread than Schweizer’s limited study revealed.
Peter Boyer at The Daily Beast tells us that Roll Call, a newspaper that covers Capitol Hill, in a “study of congressional financial disclosures revealed that the net worth of members of Congress had grown by 25 percent since 2008, during a period in which the average American household has lost as much as 20 percent of its net worth”.
Conservative himself, Schweizer has given up on the lot of them. His book is titled “Throw Them All Out” with a Capitol building symbolically turned upside-down. Schweizer points out that there are no rules, that the Senate’s ethics manual has a full chapter on the proper use of Senate stationery and mail, but says nothing about insider trading.
Within days, Massachusetts Senator Scott Brown introduced legislation named Stop Trading on Congressional Knowledge, or STOCK Act, stating that “members of Congress should live under the same laws as everyone else. If they trade on inside knowledge to line their own pockets, they should be punished”. It seems to be a recycling of the bill introduced in 2004 by Congress members Brian Baird and Louise Slaughter, given that it has the same STOCK name. So whatever happened to that bill — HR 1148? Baird, on “60 Minutes” said, “We didn’t get anywhere. It just flat died”.
Update: Why No Prosecutions?
Dec 6: ProPublica today asks the same and adds “Ex-Justice Official Says it’s Just too Hard”. And as we said, the banks have deeper pockets than the government. Judge Blocks Settlement: Nov. 28: A federal judge has blocked the SEC’s settlement with Citigroup (below in this article) saying that if the bank does not admit its wrongdoing, he has no basis for deciding if the settlement is fair. The Occupy Wall Streeters around the country may have been a bit fuzzy as to exactly what they want but they are savvy enough to recognize that the bankers who brought us the Great Crash have gone scot free while the 99% are paying the price. After triggering the worst recession since the Great Depression by selling mortgages that could never be repaid and bundling them into putrescent securities peddled around an unsuspecting world, why hasn’t a single bank executive even been indicted?
The inescapable conclusion is that the Obama Administration, early on stocked with advisers from the Wall Street fraternity, told the Justice Department to go easy and just appear to be taking action. Asked recently about why no indictments, we have Treasury Secretary Timothy Geithner saying “you should stay tuned for that”. Really? For how long? It’s already been three years.
Mortgage Fraud
Instead we now have the Administration pressing for a settlement with the attorneys general of all fifty states to prevent them from pursuing claims against banks for fraud and abuse in the origination of mortgages. The settlement would deliver relief to borrowers, to be sure, To see patterns of fraud by financial institutions, click this graphic from The New York Times although not by all that much. It would have the banks reduce the balances on a million or so loans by just $17 to $20 billion in the aggregate. Even then the banks would be issued some sort of “credits” as an award for their magnanimity.
Fortunately, the deal is likely to come undone. Three attorneys general have balked. First Eric Schneiderman of New York said ‘no’, then Kamala Harris of California, and now the Vice President’s son, Beau Biden of Delaware. Besides objecting to terms that would partially inhibit the states from taking further action, these officials say the settlement is too cheap. That’s the pattern with this administration — letting the banks off the hook for money, not enough of that to make it hurt, and without a single criminal case for the admitted fraud that is the reason for extracting a settlement.
As for one of the root causes of the Crash, Countrywide Financial is not a bank, but as the nation’s largest mortgage lender, its aggressive sales force pushed hundreds of billions of dollars of subprime mortgages into the system at a rate averaging about 200,000 loans a month. A year ago October, accused of fraud and insider trading, its CEO Angelo Mozilo agreed with the SEC to pay a $67.5 million fine. But $20 million of that would come from a corporate liability insurance policy and what’s $67.5 million if your net worth is estimated at $600 million? Here at last was a case aimed at an individual, but, as usual, money buys a stay out of jail card. Also, in what has become standard SEC practice, Mozilo was not required to admit any wrongdoing.
Soft Touch for Citi
Like Goldman Sachs before it, Citigroup put together and sold to customers a package of malodorous mortgages in a “collateralized debt obligation” (CDO) — and then shorted it. That is, knowing what they had sold to customers resembled something your dog leaves on your neighbor’s lawn, as one trader is quoted in the SEC settlement, Citi bet $1 billion in mortgages would fail and found unknowing investors to take the other side of the bet. In Goldman’s case, an outsider, hedge fund owner John Paulson, was allowed to pick the cannot-fail-to-fail mortgages which Goldman then sold short. In Citi’s case, the bank itself exercised “significant influence” in the choice of contents of half of the deal. Not that it makes much difference. It’s fraud either way.
“As a result, about 15 hedge funds, investment managers and other firms that invested in the deal lost hundreds of millions of dollars, while Citigroup made $160 million in fees and trading profits”, reported The Wall Street Journal. Yet the SEC is content to settle with Citigroup for $285 million — which looks to us like a net cost of only $125 million against those fees and profits. This is a bank that last quarter reported a profit of $3.8 billion. Compared to that the settlement brings the “rounding error” cliché to mind.
Again, Citigroup settled “without admitting or denying” any guilt, in the language of the SEC agreement. Both the amount and this exculpatory language has rankled U.S. District Court Judge Jed S. Rakoff, who has held up the deal, so perhaps there is hope. He asks why he should authorize a settlement “in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing”. And once again, no executives or traders were singled out for permitting or committing the fraud. “The CDOs, apparently, were contrived by no one and sold by no one”, as Richard Cohen observed in The Washington Post.
Rakoff also wanted to know why the fine portion of the Citi settlement was “less than one-fifth of the $535 million penalty assessed” against Goldman Sachs for the same fraudulent act. The SEC decided to go easy on Citi because “Citigroup did not predict or profit from the subprime crisis, the collapse of housing prices, or the collapse of the CDO market”, said one of the bank’s lawyers. Did you get that? It’s not as much of a crime if one doesn’t make as much money.
promising never to do it again…until they do
Whenever the SEC catches a bank in a swindle, it extracts a promise from the bank never to do it again. Fraud is illegal absent such promises, so it’s a very curious practice. It suggests that the SEC merely scolds these malefactors much like one scolds a child, rather than treating them like the crooks they are.
So when Bank of America in 2005 was caught allowing traders to buy and sell mutual funds at the previous day’s closing price — profiting from the new day’s change in price — the bank only paid a fine and promised not to do it again. No trader and no one from management who green-lighted the practice went to jail. And, of course, the bank settled neither admitting nor denying what they had done.
Yet in 2007-8 Bank of America crossed the line again, telling investors the $4.5 billion of auction-rate securities they were selling were as solid as money market funds. Came the Crash, the securities nose-dived and investors couldn’t unload them. Again a fine, again a promise.
That’s just one bank. The New York Times has posted this graphic of repeated violations by 26 banks and financial institutions.
The SEC can only file civil suits. It is for the Justice Department to develop criminal cases. But Justice does nothing partly because it is reluctant to spend its budget fighting the bottomless depths of the pockets of the big banks. So we now have banks too big to follow the law. They simply pay off the government in amounts that barely nick their balance sheets and no one goes to jail. It’s like telling bank robbers no harm done if they would just be so kind as to return the money.
Politicians are forever telling us that most jobs are created by small businesses. It’s a notion that holds great appeal for Americans. We like to think of doughty entrepreneurs who go their own way, create where there was nothing before, and grow their fledgling enterprises into tomorrow’s supercorps.
That sometimes happens — Jobs and Wozniak planting Apple in a garage, Dell building computers in his dorm room, Brin and Page writing code for a blindingly fast search engine in theirs. But those exceptional stories help to create what is otherwise a myth. The fact is that most small businesses are just that — small — and destined to remain so.
There were 6 million businesses with employees in 2007, the year analyzed by a University of Chicago study which found that 90% of them accounted for only 20% of all jobs by virtue of having less than 20 workers. A 2008 survey found that 61% had less than 4. The researchers found that between 2003 and 2008, only 3% of the small business universe added more than 10 jobs; 80% added none.
Think of the local businesses in your communities — main street retailers, home improvement contractors, doctors’ offices, real estate agents, plumbers — and you will see why. Most businesses are started by people whose primary urge is to be independent, people who don’t have a burning desire (or much possibility) of growing.
And the marketplace will see to it that most do not. While the small business sector may create most jobs, it also accounts for most job loss. A survey by Case Western Reserve University discovered that more jobs were lost in years 2 through 5 by small businesses than were added, with bankruptcies tilting the scale.
Yet despite this stark reality, in the battle over extending the Bush tax cuts at the end of last year, when politicians droned on about how the increase from 35% to 39.6% for the over-$250,000 income households would be a small business “job killer”, they were spouting nonsense — a myth used relentlessly to hide the truth.
We’re not here arguing for that tax increase — that’s another subject. We are instead making the point that (a) the data above makes it clear that few small business owners take home $250,000 and (b) even if they did, the money saved by keeping the tax rate from rising 4.6% didn’t even save them enough to hire a single employee at the minimum wage.
Job-Killing regulations
The other myth endlessly repeated by politicians is that the uncertainty of impending regulations from the government is keeping small businesses from hiring. Trouble is, there is no evidence for this. The lobby for small businesses, the National Federation of Independent Business, focuses heavily on regulation, yet that same organization, which has surveyed small businesses for nearly four decades, reports the primary concern today is not regulations, it is low demand. McClatchy Newspapers, too, canvassed small business owners to determine what was holding them back and reported that not a single one complained about regulations. The problem is that people aren’t buying.
Federal level regulations seldom reach down all the way to small businesses. House Speaker John Boehner’s blog from a few days ago says they do but inadvertently makes the opposite case. Headlined “Small Business Job Creator Backs GOP Bill to Stop ‘Swarm of Major New Regulations’”, he has sought out the non-representative case of a ready-mix concrete outfit that would be affected not by petty regulations directed at him, but by cost increases that would be incurred upstream at cement plants ordered by the E.P.A. to curtail emissions of “ozone, mercury, arsenic, chromium, sulfur dioxide, [and] nitrogen oxide”. Take your pick: cheaper concrete or pollution, but his example hardly pertains to small business in general.
More representative are the comments from a year earlier of this young restaurant owner from Ohio.
It’s the state and local regulations that affect small business most. Just think of all the “onerous and usually pointless” licensing rules, cited in the Wall Street Journal, that are imposed on so many professions, including “tourist guides, funeral attendants, home-entertainment installers, florists and makeup artists” and which prevent people from even applying for jobs. They are blocked by training requirements — sometimes hundreds of hours (700 hours in Alabama to become a manicurist!) — that throw up “needless barriers around occupations perfectly suited for those entering the workforce, mid-career switchers, and pink-slip recipients”.
Rather than spearhead sweeping tax reform, President Obama obsesses over returning the top tax bracket from 35% to 39.6% and has now proposed the “Buffett Rule” to see to it that millionaires pay in taxes at least what Warren
Buffett’s secretary pays — a populist gimmick aimed at only 3 in 1,000 households (and absurdly leaving those earning, say, $800,000 or $900,000 off the hook).
For their part, rather than get busy reforming the dreadful tax code, Republicans in Congress run interference for the wealthy who fund their campaigns and protest “class warfare”. Wealthy Mitt Romney calls it that. Michele Bachmann says President Barack Obama’s desire to raise taxes on the top income group shows he “is committed to class warfare”. Eric Cantor, says the “mobs” in New York’s Zuccotti Park, who demonstrate against the riches of the top 1%, have led to “the pitting of Americans against Americans”.
Their premise is that the wealthy already pay more than their fair share of taxes. The conservative magazine The Weekly Standard says so, claiming that the top 10% of earners pay nearly 70% of the taxes. An editorial in Rupert Murdoch’s New York Post says the richest 1% contribute a whopping 32% of all taxes. And 40% of all income taxes, says The Economist. The share of all taxes paid by the top 1% has doubled, according to The National Review.
the statistics not mentioned
All true, but they want you to stop right there and think no further because otherwise you will come upon the obvious. Why do the wealthiest pay so much of the taxes? Because they take in a colossal and ever-increasing share of the nation’s money. So much so that the high ratios cited above are in spite of the lowest tax rates (a couple of Reagan years excepted) in anyone’s lifetime.
The top 10% of earners now haul in 50% of total income, reports Timothy Noah at The New Republic. They own 2/3rds of the nation’s wealth. Higher up the wealth scale, the concentration grows far more extreme: Catherine Rampell at The New York Times says the top 1% of Americans earn 1/5th of all income and control 1/3rd of all wealth. That’s “a share not seen since 1929”, says Time magazine, voicing the view that “the rich are increasingly absenting themselves from the country’s troubles”.
That leaves the bottom 90% in control of just 26.9 percent of the national wealth. The average household wealth of the top 1% — home equity and investments — was near $14 million in 2009. The average for the rest —the 99% — was $62,900.
A report published earlier this year by by the Economic Policy Institute, titled “Taxes on the wealthy have gone down dramatically”, makes clear that the tax code itself has helped create this enormous imbalance of wealth. The average tax rate for that top 1% declined about 20% from 1979 to 2007 whereas the average American saw only an 8% drop over that same period. The Bush tax cuts — especially the reduction of taxes on capital gains and dividends to only 15% — were a windfall to the wealthy that resulted in 65% of all income growth in the U.S. going to the richest 1% of the population in just the years between 2002 and 2007.
the war cry is that lower earners should pay more
This data makes overwhelmingly clear the huge income and wealth disparity that has developed in the U.S. and that is now giving rise to civil unrest. Which leaves one wondering why Republicans would risk alienating the growing mass of disaffected voters by so rigidly adhering to their defense of the wealthiest Americans. Instead, their tactic is to change the subject with a counterattack to distract taxpayers from learning how rigged the system is. Michele Bachman, Rick Perry, even the more circumspect Jon Huntsman — all want us to know that 47% of Americans pay no income taxes. They’re saying that the lower income groups are the ones that should pay more taxes, not the wealthy, echoing Indiana Senator Dan Coats’ contention that “everyone needs to have some skin in the game”.
This has stirred up “we are the 53%” groups who “pay for those of you who whine”. That sort, swayed by demagoguery, is not interested in facts, namely, for the same reason that the wealthy pay a high percentage of all taxes because they gather in so much of the money, the 47% pays none because they take home so little. And the number has risen to 47% because of the recession and joblessness. It was 30% before the crash.
We covered this 47% bumper sticker in this article in which we pointed out how much in other taxes the low earners pay, especially payroll (i.e., Social Security) tax, a regressive tax that stops at $106,800, beyond which no tax is paid no matter how much one earns. (We thought it might be fair to invert this scheme for a time in “Let’s Turn the Payroll Tax Upside Down”).
The Earned Income Tax Credit (EITC) is the reason many end up paying no income taxes because this program — credited with lifting 7.2 million out of poverty — returns fixed percentages of their income to those who earn so little that payroll taxes are unaffordable. Unlike old-style welfare, it encourages work because only those who work are eligible. The EITC was begun under President Ford, expanded twice by Reagan, and again by the first President Bush.
Are Republican candidates unaware that Reagan called it the “best anti-poverty, the best pro-family, the best job creation measure to come out of Congress” when they argue for cutting back this program so that even the poorest pay taxes? For such people this skin in the game is more like a pound of flesh, and that is certainly class warfare.
We have been reporting that the Obama administration has secretly decided to approve Keystone XL, the pipeline that would transport Canadian oil across 1,711 miles of six Great Plains states to refineries in Texas. The President’s announcement that the decision has been postponed tells us that approval by him will be a certainty. Why else would the decision be delayed until after the 2012 election? Mr. Obama is clearly avoiding alienating the environmentalists that form part of his base until after he is re-elected. At that he doesn’t need them anymore.
And, of course, if his opponent is elected, approval is an equal certainty. Republicans are, as a matter of policy, dismissive of environmental concerns, witness the long list of riders to bills in Congress that seek to roll back the Clean Air Act and throttle the Environmental Protection Agency.
The symptoms of covert approval of the oil pipeline had been seeping to the surface, most recently in a New York Times report that the Canadian company that seeks to build the pipeline is suing those who are denying access to their land with threats of use of eminent domain to gain easements through their property. Let that sink in: a Canadian company clearly acting on assurances from our government that it can seize rights to American property through eminent domain.
The State Department was in charge of the vetting process because the pipeline crosses our border. Evidence that this was already a done deal was earlier revealed in e-mails obtained by Friends of the Earth in a Freedom of Information Act request that show a cozy relationship between State and lobbyists for the pipeline company — party invitations and coaching how to spin their message to the media, for example. The real eye-opener was an e-mail exchange between State Department officials and lobbyists that said TransCanada’s strategy was to drop its request to exceed U.S. pipeline pressure regulations in order to win the go-ahead for the pipeline, but once approved, they would re-apply to exceed U.S. pressure limits — a subterfuge that — wink, wink — says that whatever it takes is fine with the folks at State.
The pipeline would and deliver 700,000 barrels of crude daily from Canada’s Alberta Province for refining in Texas to reduce America’s dependence on oil from unstable and often hostile foreign countries. The tar sands’ 175 billion barrels of recoverable oil could reduce OPEC country imports by an estimated 18% by 2020.
What’s more, the Keystone XL pipeline would provide 20,000 jobs, says the pipeline company, Calgary-based TransCanada (more like 6,000 says the State Department).
Those are the positives, and the State Department had its thumb on that side of the scale. They had already shown bias by saying in late August that the pipeline would have “no significant impact” on land and water along its course and that spills would have a minimal effect, amounting only to “several hundred feet or less”. The Environmental Protection Agency has berated State Department for its superficial assessment.
With State in its pocket, TransCanada had even taken the first steps toward construction by clearing a 100-mile corridor through the grasslands of northern Nebraska. That was the claim of a lawsuit filed in Omaha by three conservation groups. “The State Department…is running a corrupt review process by giving TransCanada a green light to begin construction”, said Friends of the Earth president Erich Pica.
What’s the Harm?
Think of all the positives we earlier listed. Reducing OPEC imports, for example.
Not so fast. The New York Times also reported that of the six refiners that have already contracted for three-quarters of the oil, five are foreign. And the one American company, Valero, sells to the world. This oil “is destined for export”. Canada has limited means to deliver to other countries — a mountainous coastline west of Alberta, no west coast refineries. The pipeline is simply to run the oil through this country and out to the world.
Is the pipeline as safe as the State Department says? The intended route would cross some 2,000 rivers and pose a significant threat to the Ogallala, the largest water aquifer in the United States, which supplies 30% of the water used in the U.S. for agriculture — 83% of Nebraska’s agricultural water and 78% of the that state’s public water supply. The pipeline would run 65 miles across Nebraska’s Sand Hills region, a wetlands where groundwater lies less than 10 feet below the surface. Ranchers and farmers are alarmed by the threat to their water.
That is what drew the most intense protests both from outraged Nebraskans and environmentalists who demonstrated at the White House. They cite a Keystone pipe that came on line in 2010 has already had had 16 spills, mostly small, but one at a North Dakota pumping station released over 16,000 gallons.
Game Over
Which brings us to tar sand oil itself. Canada prefers the more comely term “oil sands”, but the first description is a better fit. It is bitumen — highly A tar sands strip mine in Albert, Canada viscous, black and sticky — that native people once used to seal their canoes, which explains why a Rand Corporation study found that oil from tar sands produces from 10% to 30% more carbon dioxide emissions when burned than does standard oil.
That’s only the beginning of the environmental depredation. The National Resources Defense Council (NRDC) says that producing that oil results in triple the emissions of regular oil drilling. That’s because natural gas must be used to produce steam to separate the bitumen from sand, and is needed again to turn the bitumen into synthetic crude. At current production levels, that’s the greenhouse gas equivalent, every day, of 12 million cars, and enough natural gas to heat six million homes — and that’s before the tar sand oil is burned as fuel.
Water used to produce that steam winds up in tailing ponds that so far occupy 50 square kilometers. The toxic water kills unsuspecting migrating birds and leakage — alleged by the NRDC and denied by Canada — contaminates the water table and flows into streams.
What’s more, tar sands are strip-mined. It takes two tons of oily sand to leach one barrel of oil. To get at the sand requires felling the natural carbon reservoir of the northern forests. The doubling to 1.8 million barrels of tar sands production projected by Canada’s environmental ministry over the coming decade leads to cutting down some 740,000 acres of trees.
In the 2008 campaign President Obama promised to support next generation biofuels and reduce carbon emissions 80% by 2050. Twenty American scientists wrote to the Obama administration this summer inveighing against the pipeline and any encouragement to Canada’s exploitation of this dirtiest of oils. As NASA’s James Hansen has said, that would be “game over” for any hope of stemming climate change.
<|||They want a huge discount to return foreign profits>
Capitalizing on the government’s need for money and 9% unemployment, U.S. corporations and their lobbyists are pressuring Congress for another deep discount deal to induce them to bring home the estimated $1 trillion in profits waiting offshore. The money is stranded there by this country’s 35% corporate tax rate, the highest of any country of size other than Japan. Corporations don’t want to pay that.
Instead, how about 5.25%? That’s the breathtaking rate the corporations propose — an 85% discount. And there’s actually a bill in the House of Representatives that would give them exactly that. In the Senate, it’s 8.75%.
Corporations say the repatriated money would create jobs. But the opening position of a group of companies arguing for the tax holiday is that there can be no conditions restricting how the money is used. Republicans argue that only permanent tax cuts create jobs, but are curiously all for this huge giveaway, as are many Democrats. These corporations pay for their re-elections.
Repeat performance
We’ve Seen this movie before. The American Jobs Creation Act, signed by George W. Bush in October 2004, declared just such a tax holiday that the multinationals now want repeated. How did that play out?
That bill forbade the money be used for executive compensation, or dividends or stock buybacks. Corporations paid that no attention, did exactly that and, money being fungible, simply claimed that different money stashes had been used.
As for jobs, which was the purpose of the bill in 2004’s anemic job market:
Merck repatriated $15.9 billion in October 2005 and in the following month announced a plan to close plants and reduce its workforce by 7,000 jobs.
Pfizer eliminated 7,000 jobs in 2006 and announced another 10,000 cuts in the following year.
Dell dangled a promise to build a $100 million plant in North Carolina, but later admitted it intended to build the facility anyway and spent $2 billion in a share buyback.
Instead of job creation, a study by the nonpartisan Bureau of Economic Research found that, of the $312 billion that flowed back to the U.S. under the Bush amnesty, 92% of the repatriated money went to shareholders (top management of companies are usually major shareholders) in the form of dividends or purchases of the companies’ own stock. A stock buyback increases the value of each share still outstanding; the unchanged company’s value is divided by fewer shares. The program “did not increase domestic investment, employment or research and development”, says the study.
There are many arguments against declaring yet another tax holiday, beginning with rewarding corporations for moving millions of American jobs overseas which, to an extent, generated those profits. The claim that it would create jobs is even more dishonest than in 2004. Corporations are sitting on a $2 trillion cash hoard inside the U.S., according to the Federal Reserve. They do not need overseas cash to create jobs. The public’s diminished demand for goods and services is what has frozen hiring.
A bigger negative is that the 2004 program induced corporations to use accounting legerdemain to move still more profits overseas ever since (thus reducing taxes here at home) in the hope that they would persuade Congress to declare a tax holiday once again, just as they are lobbying for now.
The real issue is the need for reform of corporate taxes. Few large corporations actually pay the 35% rate. A recent study from Citizens for Tax Justice found that 280 of the biggest companies paid on average about half that — 18.5% — in 2010 according to their regulatory filings. But the nominal 35% rate drives corporations to countries that offer much lower rates or no taxes at all, and to create enormous tax departments (975 on staff at General Electric per this New York Times exposé in March) to seek convoluted ways to circumvent the tax code.
Will this encore repatriation go forward? Corporations easily persuade Congress to do their bidding, but where does President Obama stand? He has spoken repeatedly of corporate tax reform — in all three State of the Union addresses! — yet he has done nothing. (The message has changed from “ending the tax breaks for corporations that ship our jobs overseas” in 2009 to “simplify the system, get rid of the loopholes, level the playing field, and use the savings to lower the corporate tax rate for the first time in 25 years without adding to our deficit” in 2011).
The danger is that, having done nothing, having taken no initiative, Obama will cave in to another dreadful Congressional program that comes to his desk. He should block any amnesty plan for overseas profits that is not linked to overall corporate tax reform — reform that should consider wholly different ways to tax and encourage corporations both to hire Americans and pay taxes here.
This time, the terms of any overseas profit repatriation that is appended to reform should set a higher rate than the ludicrous 5.25% and set an outright ban on corporations either increasing their dividend or buying back any stock for a period of a few years. The statutory penalty for violation? Forfeiture of the special rate and payment of the full 35%, no loopholes or deductions allowed.
