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Review: Free Lunch

Sep
11
2008

Few of the books I’ve read lately have been quite as staggering as Free Lunch, from former New York Times investigative reporter David Cay Johnston who, heroically, made his career writing about – brace yourselves – the U.S. tax code. Free Lunch is a fabulous book by a veteran investigative reporter giving you his life’s work–a look at how corporations and wealthy Americans have profited, again and again, at the expense of you and me.

Johnston’s best known for his exhaustive investigations at the Times into how corporations and very very rich individuals subvert U.S. tax law so that they pay less to the government, while the rest of us pay more. But in this book – written after he’s free of the “responsibility” of being a Times reporter – he gets almost biblical in calling out the cheats, crooks and murderers.


“Free Lunch”

And when I say murderers, I’m not fooling. In that case, Johnston is talking about John Snow, President George W. Bush’s former Treasury Department secretary – the one who did such a great job regulating the sub-prime mortgage market back around the turn of the century that the potential for a credit and housing collapse in the latter part of this decade was avoided…Oh, wait. Nevermind.

Snow was CEO of CSX Corp. the railroad which, Johnston shows, sucked entirely off the public teat, and systematically and knowingly reduced the amount it spent on train and passenger safety – and also subverted the safety inspectors who were supposed to enforce the law – to the point that train crashes and railraod passenger deaths dramatically increased. Even worse, when CSX was successfully sued by the wife of a Miami cop who died in a crash, somehow the company managed to get Amtrak – the government-supported train service – to pay the penalities demanded by the court, not the CSX’s CEO or the shareholders. Yup, you and me paid for it. That of course didn’t stop Snow from raking tens of millions off CSX over his tenure, even as the stock price fell.

My usual bailiwick, health care is not spared Johnston’s wrathful scrutiny. I was amused last year when Bob Gumbiner who made tens of millions converting FHP International Corp., from a non-profit HMO to a for-profit sent me his book proclaiming that a single-payer socialized system was the answer for America. Johnston reminds us how Gumbiner essentially defrauded the state of California out of about $200 million (in 1986 dollars!) when he bought FHP on the cheap. Same with Wellpoint CEO Len Schaeffer, who’s initial attempts to pay nothing when Wellpoint/Blue Cross converted from non-profit to profit-making insurance company were eventually at least partially blocked.

It’s good to know that in the course of Schaeffer, Gumbiner and others like United HealthGroup CEO and options cheat Bill McGuire becoming gazillionaires, the health care system became cheaper and all the problems with access got fixed….Oh wait. Nevermind.

But it’s not just large corporations that feel Johnston’s wrath. He goes after the welfare queens who run sports teams (George Steinbrenner, George W. Bush) and the politicians who tax the poor and middle class to pay them huge subsidies. In fact organized sports in the U.S. makes a profit for their owners that is less than the amount of public subsidies they receives for stadium construction and other “incentive” tax breaks. That’s right – we’re all paying for the billions those owners make, often in the name of urban renewal or economic redevelopment.

Johnston presents a long line of industries and individuals who have lobbied to change the rules that benefit the rich at the expense of everyone else. You think Warren Buffet is some cuddly grandfather who gets a free pass cause he’s a Democrat who’s giving it all away to charity? Not in Johnston’s world. Johnston shows how lobbyists for electric utilities Buffet owned systematically went after municipalities in Iowa and prevented them from competing with him in the power business. Buffett didn’t stop the municipally-owned power utilities in the free market; he stopped them by paying off politicians.

This is part of Johnston’s look at de-regulated electricity “markets” – the kind brought to you by Enron and its “kept” politicians which were systematically rigged against consumers. It was news to me but he shows that there’s theoretical and actual proof that municipally-owned plants are cheaper (and more reliable) sources of electricity. Something, by the way, that the residents of Sacramento, Palo Alto and Los Angeles know and that those in San Francisco would like to find out … which is why PG&E’s ads against the public power initiative on the ballot in my home town have started two full months before the election.

That pattern is repeated over and over again in the book. Under the cover of obfuscation and with the co-operation of an emasculated corporate-dominated media, politicians at the state and federal level take campaign contributions to do the bidding of wealthy men and corporations who, in return, do anything they can to suck more from the public teat and to avoid paying their fair share. The final tally: The richest 400 families in America, making over $100 million annually, pay a lower proportion of their income in tax than the rest of us.

Johnston ends the book laying out the income data. And although we know it, it’s staggering. All of the gains in the last thirty years have gone to the top 10% income bracket. Everyone else has seen their incomes go down in real terms and of course their share of the nation’s wealth plummet. But wait there’s more (a catch phrase Johnston likes!). The bottom half of the top 10% are standing still and it’s only the top 5% who have gained, and most of that gain is in the top 1% and most of that gain is in the top 0.1%.

After 35 years of “free marketeers” running their own version of corporate welfare, we are a nation that has an income distribution that looks like Mexico, Russia or Brazil. Or like France before 1789.

Revolution anyone?

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