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- 12/05/12--13:04: _Resources for under...
- 12/06/12--12:53: _After big U.S. Supr...
- 12/05/12--13:04: _FACT CHECK: Facing ...
- 12/08/12--12:16: _Last-minute mega-do...
- 12/07/12--12:38: _A move to cut depen...
- 12/10/12--03:00: _OPINION: the need f...
- 12/10/12--08:34: _FEMA program financ...
- 12/11/12--13:32: _Global power will s...
- 12/12/12--10:12: _GOP gov's group rai...
- 12/13/12--11:17: _ALEC's decades of '...
- 12/13/12--03:00: _'School to prison p...
- 12/13/12--11:09: _'Fiscal cliff' ads ...
- 12/14/12--11:38: _Feds tighten scruti...
- 12/17/12--03:00: _OPINION: don't rais...
- 12/18/12--13:34: _After Sandy Hook sh...
- 12/18/12--10:44: _Tennessee county to...
- 12/19/12--14:47: _Fiscal cliff politi...
- 12/20/12--03:00: _'They were not thin...
- 12/20/12--13:42: _Politico's Dave Lev...
- 12/20/12--14:44: _Surveillance camera...
- 12/05/12--13:04: Resources for understanding the fiscal cliff
- 12/05/12--13:04: FACT CHECK: Facing facts on fiscal cliff
- The scheduled tax increases, if allowed to take effect, would net an additional $536 billion in fiscal year 2013, according to the nonpartisan Tax Policy Center, raising more than $5 trillion in 10 years. Nearly 90 percent of Americans would pay more in taxes, TPC says, with the average increase being nearly $3,500.
- The automatic spending cuts scheduled to take effect would cut $1.2 trillion over 10 years, split roughly in half between domestic and military spending.
- Obama’s plan calls for increasing revenue by $1.6 trillion over 10 years. Republican congressional leaders have not proposed a counter offer for revenues, but during the so-called “grand bargain” negotiations in the summer of 2011, Boehner reportedly had agreed to $800 billion worth of increased revenue.
- As a percentage of the nation’s economy, the federal government now spends 22.7 percent and collects in revenue 15.7 percent — a large gap that has persisted for years and has contributed to four straight years of $1 trillion deficits.
- A bipartisan fiscal commission created by Obama has proposed capping revenues at 21 percent by the year 2022, and getting spending below 22 percent.
- The Bush-era tax cuts enacted in 2001 and 2003 and extended for two years at the end of 2010 are set to expire. Cost: $254 billion.
- Temporary tax breaks that were part of Obama’s stimulus law and extended at the end of 2010 will expire. Cost: $27 billion.
- Congress has yet to act on short-term tax breaks, mostly for businesses, that are routinely extended but have yet to be approved. Cost: $75 billion.
- A temporary payroll tax cut enacted for 2011 was extended through 2012, but is now set to expire at the end of this year. Cost: $115 billion.
- Tax increases contained in the Affordable Care Act on upper-income taxpayers will go into effect: a 3.8 percent tax on unearned income, 0.9 percent increase in Medicare payroll taxes and a higher income threshold for deducting medical expenses. Cost: $24 billion.
- The Alternative Minimum Tax, which was designed to make sure wealthy Americans pay a minimum tax, was never indexed to inflation on a permanent basis. As a result, Congress must fix this problem — as it has every year since 2001 — or 28 million more taxpayers will pay higher taxes. Cost: $40 billion.
- The estate tax: The current $5.1 million per-person exclusion from the federal estate tax is scheduled to fall to $1 million, and the top tax rate is scheduled to rise to 55 percent in 2013. That would raise an estimated $31 billion in 2013.
- Capital gains and dividends: The tax rate is 15 percent on long-term capital gains (assets held at least one year) and qualified dividends for taxpayers in the top four tax brackets (currently ranging from 25 percent to 35 percent). The capital gains rate is scheduled to increase to 20 percent for those taxpayers, while dividends would return to being taxed at regular income tax rates. Estimated impact: $8 billion.
- Allow the Bush tax cuts to expire for couples making over $250,000. Specifically, that would increase the top tax rate from 35 to 39.6 percent. That’s expected to generate $442 billion over 10 years. (page 219)
- Reduce the value of itemized deductions and other tax preferences to 28 percent for families with incomes over $250,000. That is expected to generate $584 billion over 10 years. (page 220)
- Increase capital gains tax rates from 15 percent to 20 percent, raising $36 billion over 10 years.
- Increase taxes on dividends from 15 percent to 39.6 percent. That’s expected to raise $206 billion over 10 years.
- Raising taxes on upper-income earners would “destroy nearly 700,000 jobs in our country.” We looked at this when Boehner said it recently. It’s based on a report from the accounting firm Ernst & Young that assumed revenue from the taxes would be used “to finance a higher level of government spending,” even though Obama would use the added revenue to reduce the deficit.
- Among wealthy taxpayers who would be hit with an increase under Obama’s proposal, Boehner said, “more than half of them are small-business owners.” According to a 2011 report from the Treasury Department’s Office of Tax Analysis, more than 90 percent of small-business owners wouldn’t be affected by Obama’s proposal. But upper-income taxpayers do account for 57 percent of the income of small-business owners, which is what Boehner’s spokesman says he meant to say.
- “Social Security does not add one penny to our debt.” We fact-checked that claim when Democratic Sen. Richard Durbin said it on ABC’s “This Week” on Nov. 25. It’s false. The federal government for the first time in its history had to borrow money in 2010 to cover Social Security benefits to retired and disabled workers — a trend that worsened in 2011 and will not change at any point in the future unless changes are made.
- 12/08/12--12:16: Last-minute mega-donations fueled super PAC attacks
- 12/07/12--12:38: A move to cut dependence on bomb grade uranium in medical isotopes
- 12/10/12--03:00: OPINION: the need for tougher regulation
- 12/10/12--08:34: FEMA program finances dubious counter-terror toys
- 12/11/12--13:32: Global power will shift by 2030
- “Income distribution in the US is considerably more unequal than in other advanced countries and is becoming more so. Although incomes of the top 1 percent have soared, median household incomes have declined since 1999. Social mobility is lower and relative poverty rates are higher in the US than in most other advanced countries.”
- “The US education advantage relative to the rest of the world has been cut in half in the past 30 years.”
- By 2030, nearly half of the world’s population will live in areas experiencing water shortages.
- Around 50 countries are now in “the awkward stage” of transition from autocracy to democracy, marked by a “proven track record of instability.”
- Afghanistan and Pakistan face “youth bulges” comparable to many African nations. Many experts doubt that Pakistan can “turn the corner” by opening new trade ties with India and establishing a better government; instead it may become more Islamicized or unravel altogether.
- India is in better shape – its economic advantage over Pakistan will grow from 8-to-1 to perhaps 16-to-1 -- but the country will be weakened by “inequality, lack of infrastructure, and education deficiencies.”
- In the next five years, China’s populace will likely reach an economic threshold that the NIC says often triggers democratization – a per capita purchasing power parity of $15,000.
- The involvement of women in governance will lag behind their educational gains, even though studies show “participation of women in parliament or senior government positions correlates stronger with lower corruption.”
- Somalia, Uganda, Nigeria, Niger and Chad will all experience higher risks of state failure.
- “Many of our interlocutors saw a Palestine emerging from Arab-Israeli exhaustion and an unwillingness of Israelis and Palestinians to engage in endless conflict.”
- 12/12/12--10:12: GOP gov's group raises $100 million in mostly losing effort
- 12/13/12--11:17: ALEC's decades of 'right-to-work' effort pay off in Michigan
- 12/13/12--03:00: 'School to prison pipeline' hit on Capitol Hill
- 12/13/12--11:09: 'Fiscal cliff' ads target candidates in 2014
- 12/14/12--11:38: Feds tighten scrutiny of health records
- 12/17/12--03:00: OPINION: don't raise the Medicare eligibility age
- 12/18/12--13:34: After Sandy Hook shootings, NRA campaign clout still formidable
- 12/18/12--10:44: Tennessee county to overhaul juvenile system
- 12/19/12--14:47: Fiscal cliff politics: Dems target GOP House members
- 12/20/12--03:00: 'They were not thinking of him as a human being'
- 12/20/12--13:42: Politico's Dave Levinthal joins Center for Public Integrity
- 12/20/12--14:44: Surveillance cameras were still in boxes at Benghazi mission
If Congress and President Obama fail to reach an agreement by Dec. 31, a series of automatic tax increases and spending cuts will occurr. How did we get here, what are some possible solutions and what will happen if a deal is not met? The links below are resources for understanding the situation.
WHAT IS THE FISCAL CLIFF?
The New York Times: The ‘Fiscal Cliff,’ Explained
Demonocracy: Fiscal Cliff Explained in 3D infographics
WHY DO THEY CALL IT A 'CLIFF'?
Simon Johnson: America's Fiscal Cliff Dwellers
WHAT COULD THIS COST ME?
Paycheckcity.com: Will your paycheck fall off the fiscal cliff?
WHO ARE THE PEOPLE BEHIND IT?
The Washington Post: ‘Fiscal cliff’ debate: Who are the key players?
Business Insider: Who Is Grover Norquist And What Is His Pledge?
HOW WILL THIS AFFECT SPENDING?
The Center for Public Integrity: Major fight looms over defense spending
The secretive nonprofit known for its efforts to dismantle Montana’s campaign finance laws has had a rough go of it lately.
In November, American Tradition Partnership failed to sink Democrat Steve Bullock’s bid for governor despite plastering the state with issues of a fake newspaper, one of which displayed the Democrat’s photo alongside pictures of sex offenders.
Bullock beat Republican Rick Hill in a race punctuated by debates over the future of Montana’s stringent campaign finance laws. Bullock ran on his record of defending the state’s spending limits as attorney general, when he faced off with ATP in court.
Bullock’s victory was not the only setback for the organization.
Though the nonprofit and its lawyer, Jim Bopp, won a high-profile U.S. Supreme Court decision in June that knocked down Montana’s century-old ban on corporate and union spending on elections, ATP’s other court challenges to Montana’s disclosure rules and contribution limits have stalled.
ATP’s high-profile lawsuits have also exposed it to a wave of scrutiny regarding its funding and tactics.
In court proceedings, the state’s lawyers obtained the group’s bank records and early donors.
The group, founded in 2008 to lob mailers into Montana and Colorado legislative races attacking environmentalists and moderate Republicans, has also come to represent the questionable tactics used by nonprofit groups to cover the tracks of donors and funnel unlimited money into elections, say reform advocates.
“This is cloak-and-dagger stuff,” said Edwin Bender of the National Institute on Money in State Politics.
A 501(c)(4) social welfare organization “may engage in political campaign activities” according to the IRS, as long as those activities “do not constitute the organization’s primary activity.”
According to Bender, law firms across the country have established an endless stream of (c)(4) groups “with innocuous sounding names that really exist to inject money into political campaigns.”
The law firms that establish these nonprofits, he says, “hide behind attorney-client privilege” to deflect questions about the political operations of (c)(4) groups.
Last month, the Center for Public Integrity revealed that the bulk of ATP’s early funding came from a network of obscure nonprofit (c)(4) groups established by a Denver law firm called Hackstaff Law — where current Colorado Secretary of State Scott Gessler was once a partner.
Gessler’s old firm also was involved in the establishment of ATP, representing it in a challenge to campaign finance limits in Longmont, Colo., in 2009, and is listed as its registered agent in Colorado.
Because nonprofit 501(c)(4) groups like ATP do not have to disclose donors to the public, they have become conduits for donors who wish to impact elections but would prefer to remain anonymous.
ATP operative Christian LeFer defended the use of (c)(4)s to conceal the identities of its donors in an email to the Center, citing fear of violence from radical environmental groups.
“There is no reason to provide unhinged political activists with ready-made enemies lists so they can target their opponents with threats of violence, economic retaliation and harassment.”
One nonprofit group, Coloradans for Economic Growth, made two donations totaling $500,000 to ATP in 2008. Another, called New Leadership Colorado, gave $45,000 to ATP. Both groups listed Hackstaff lawyers as their contacts, and have the Denver law firm as their sole address.
In 2010, another mysterious nonprofit called Spur Education Fund was also established through Hackstaff Law, and soon became ATP’s primary donor, sending $110,000 to the group via several wire transfers.
The three nonprofits appear to be inactive, and have been described as temporary conduits for anonymous donations to support other political committees and causes.
Tax experts say an individual or a law firm can create an unlimited number of nonprofit groups, which can then be dissolved before the IRS gets around to examining whether they played by the rules governing (c)(4) groups.
“They’re like mushrooms after the rain,” said Marcus Owens, the former director of the IRS Exempt Organizations Division. “They pop up, and after a day in the sunlight, they’re gone.”
The groups have no website and no spokesperson, and list only the phone number and email for Hackstaff’s Denver office.
“My client has instructed me not to reveal that information,” said Hackstaff attorney Mario Nicolais, when the Center inquired about the nonprofit groups’ contact information and leadership.
Nonprofit ninja tactics
In addition to their contributions to ATP, Coloradans for Economic Growth and New Leadership Colorado spent millions in a failed 2008 ballot effort to establish an anti-union “right-to-work” law in Colorado.
Such laws allow employees at union shops to remain covered by a union contract but opt out of their union dues payments, and have drained union membership in 23 states.
The $500,000 gift from Coloradans for Economic Growth to ATP in 2008 was actually on its way to another nonprofit group — the nation’s largest advocate for anti-union causes. In a matter of days, the half-million dollars went through bank accounts at three nonprofits.
It eventually landed in the Virginia bank account of the National Right to Work Committee, which sent $360,000 in grants to Montana’s Right to Work committee in the past three years — an organization that, until recently, was headed by LeFer.
The nonprofits managed by Hackstaff to fund ATP and other groups have since faded from public view. In a letter to the Center, the IRS reported there is “no record of the tax-exempt status” for the organizations.
The IRS also has no record of the groups’ yearly tax returns. If no such filings are made for three consecutive years, their exempt status can be revoked. In 2010, the IRS revoked the tax-exempt status for a group called New Leadership USA, which is based at Hackstaff Law.
The IRS has no record of ATP’s tax reports since 2008.
“If the IRS has cause to believe that ATP’s filings were inaccurate in any meaningful way, they have the authority and duty to contact the organization and seek answers to any questions they may have,” wrote ATP’s LeFer in an email.
LeFer hosts an online video seminar called “Starting a Nonprofit Organization in 5 Easy Steps,” which offers “nonprofit ninja tactics” for establishing a nonprofit “in five days or less.”
In its 2008 application for exempt status, ATP also appears to have misled the IRS by claiming a $300,000 donation from Colorado furniture tycoon Jacob Jabs was at risk if its status as a nonprofit wasn’t expedited. Jabs denies giving the money, and newly released bank records for the group appear to confirm his denial.
However, Jabs was aligned with anti-union efforts by Coloradans for Economic Growth, a group that made a $300,000 donation to ATP in 2008.
When ATP applied for tax-exempt status in 2008, it stated that it would not “spend any money attempting to influence the selection, nomination, election or appointment” of political candidates.
The group is arguing in court that its spending on mailers and other activities around elections serves an “educational” purpose, and therefore is not political campaign activity and does not need to be reported to state election officials.
Evidence of coordination?
Internal documents for ATP, obtained by the Montana Commission on Political Practices and reported on by the investigative news show Frontline on PBS in October, seem to support charges that ATP has coordinated with several candidate campaigns since 2008.
One of those making such claims is Debra Bonogofsky, a Republican who has run unsuccessfully for Montana’s state House of Representatives three times.
During her 2008 run, Bonogofsky was puzzled by a call from former state legislator John Sinrud, one of ATP’s founders, offering to lend a hand.
“They wanted to know if they could help with my campaign,” said Bonogofsky. “I didn’t know what they meant by that.”
Bonogofsky found out two years later, when she faced Republican Dan Kennedy in a 2010 primary contest for the state’s 57th District house seat. And this time, ATP did not call to offer her help.
Instead, ATP sent out a letter warning voters that Bonogofsky, a moderate Republican, was part of a movement by “radical environmentalists and their anti-business allies” to take control of Montana.
Kennedy knocked off Bonogofsky in the primary, and Bonogofsky filed a complaint with the state’s election commission, alleging that ATP and her opponent had coordinated illegally.
“These groups are convoluted and intertwined and are clearly meant to confuse and deceive Montana voters and circumvent Montana law,” her August 2010 complaint read.
Last month a judge released ATP’s bank records, giving more evidence of coordination between Kennedy and ATP. A $557 check from Kennedy’s campaign was made out to a company called “Direct Mail,” and deposited into the Wells Fargo bank account of ATP.
In November, Kennedy told the Associated Press that he made the payment to a printing house called Direct Mail and Communications to send fliers for his campaign — not to ATP.
The print house is owned and operated by Allison LeFer, the wife of ATP’s Christian LeFer.
Mr. LeFer told the Center his wife’s business is a separate operation from ATP. He told the investigative reporting group ProPublica that they have “scrupulously endeavored” to avoid illegal coordination with candidates.
Allison LeFer told the Center she is not involved in ATP, and referred questions to her husband.
When a Montana judge released the organization’s bank records in early November, they revealed that Ms. LeFer has actually been deeply involved in ATP’s day-to-day operations as a signer on many of the organization’s checks.
While ATP was dealt a loss in the governor’s race, it maintained a presence in other important, if smaller, contests in the state. One was the race for state school superintendent, in which incumbent Democrat Denise Juneau has a narrow edge over Republican Sandy Welch in a race that is headed for a recount.
ATP sent mailers calling Juneau a “#1 Radical Environmentalist” who is “against developing coal resources.”
The race has implications for future land and resource development in the state. The superintendent of schools occupies one of five positions on the state’s land board alongside the governor, attorney general, secretary of state and state auditor. The five-member board votes on decisions about land leasing to private developers and mining companies in the state.
ATP's efforts, however, were not enough to tip control of the Land Board to Republicans in 2012. Nor did ATP keep Montanans from overwhelmingly endorsing a non-binding referendum in response to the 2010 Citizens United U.S. Supreme Court decision that allowed corporations and unions to raise and spend unlimited sums on political campaigns.
Almost three-fourths of voters in both Montana and Colorado approved initiatives rebuking the high court’s ruling on unlimited political speech by corporations.
“The electorate has been sensitized by an election that saw more money than ever,” said Bender. “That a lot of it was undisclosed only further enraged people.”
The U.S. faces the possibility of another recession — the third in 11 years — if President Obama and Congress cannot find a way to avoid the so-called fiscal cliff. The one-two combination of massive tax increases and spending cuts scheduled to take effect, beginning Jan. 1, would push the unemployment rate back above 9 percent, according to the Congressional Budget Office.
There’s a growing consensus in Washington that some combination of spending cuts and increased revenues is needed to reduce annual deficits and slow the federal debt — without going over the fiscal cliff. The disagreement is over the details, particularly over how and how much to increase tax revenues and where to cut spending.
Some Republicans, including House Speaker John Boehner, say the president’s tax proposals would “destroy nearly 700,000 jobs,” which is an exaggeration. Many Democrats would prefer not to cut entitlement programs as part of the negotiations, even though the three largest entitlement programs — Medicare, Medicaid and Social Security — would consume 55 percent of all federal spending by 2022, compared with 43 percent in 2011, according to the CBO.
We take no position on what Congress should do. But we can offer some factual context to help understand the scope of what the CBO calls the nation’s “fundamental budgetary challenges.”
Some facts to consider:
The Analysis below provides details on these and other facts.
The fiscal cliff was created by a series of actions by Congress, beginning with the approval of the Bush-era tax cuts in 2001 and 2003.
The Bush tax cuts were extended by the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010. But the 2010 tax legislation did more than that. It also extended some of the tax breaks in President Obama’s 2009 stimulus bill and temporarily reduced the Social Security payroll taxes.
A year later, Congress passed the Budget Control Act of 2011, which Obama signed into law. That law imposed spending caps on discretionary spending through 2021 that are supposed to save $917 billion over 10 years, according to an August 2011 analysis by the nonpartisan Congressional Budget Office.
The law also created a special bipartisan congressional committee charged with reducing the deficit by at least $1.5 trillion over 10 years. But the so-called super committee failed to agree on a deficit-reduction plan and, under the Budget Control Act, $1.2 trillion in automatic budget cuts over 10 years are now scheduled to take effect, beginning in January. At the same time, the temporary tax cuts approved under both Bush and Obama are due to expire.
Tax Increases Looming
In an Oct. 1 report on the fiscal cliff, the nonpartisan Tax Policy Center estimates that the scheduled tax increases, if allowed to take effect, would net an additional $536 billion in fiscal 2013. How significant is that? Federal revenues were about $2.45 trillion in the fiscal year that ended Sept. 30 — meaning the scheduled tax increases alone would raise revenues by about 22 percent.
In its report, TPC lists six reasons why taxes are scheduled to increase by so much:
If all that happened, taxes would increase an average of $3,466 per household, according to the TPC. Middle-income households — those earning nearly $40,000 to about $64,500 a year — would see an average increase of $1,984.
Congressional leaders say they are confident that they will negotiate a deal that will avoid some if not most of these tax increases from taking effect.
What is likely to happen?
Congress is widely expected to “patch” the AMT. In its report on the fiscal cliff, the TPC ranked the AMT tax the least likely to increase among nine categories of pending tax increases. In urging Congress to pass an AMT “patch,” the IRS said 28 million taxpayers, “many of them middle-class families,” would pay more in taxes if Congress fails to act.
On the other hand, the tax increases contained in the Affordable Care Act are expected to take effect next year now that Obama has won reelection. Those taxes would fall most heavily on upper-income taxpayers. TPC says taxpayers earning more than $108,266 would see an average increase of $1,141 a year.
There is less certainty about the other scheduled tax increases — particularly the Bush-era tax cuts, which reduced tax liability on earned income, capital gains and dividends, and the estate tax.
Under current law, the marginal individual income tax rates would all snap back to pre-2001 levels. As the TPC explains, the 10 percent tax bracket will disappear, making the lowest bracket 15 percent, and the “25 percent, 28 percent, 33 percent, and 35 percent rates will revert to 28 percent, 31 percent, 36 percent, and 39.6 percent respectively.”
Allowing the Bush-era tax cuts to expire for individuals earning less than $200,000 and married couples earning less than $250,000 would cost those taxpayers $171 billion, or nearly a third of the total $536 billion “cliff,” according to the TPC.
If Congress does extend the Bush tax cuts for those taxpayers, as the president has proposed, then the total average tax increase for middle-income taxpayers would drop from $1,984 to $1,096, according to the Tax Policy Center. The AMT “patch” would reduce the potential tax hike for those same taxpayers another $104 a year on average — dropping the average tax increase for middle-income taxpayers to less than $1,000 by virtue of those two actions.
The Bush-era tax cuts for the upper-income taxpayers appear to be at a greater risk of expiring — unless the parties can negotiate an agreement to raise revenue elsewhere to keep the lower tax rates in place. TPC estimates that the income tax changes would raise $44 billion from individual taxpayers who earn $200,000 and couples earning $250,000.
In addition to the individual income tax changes, other major changes slated to take place that will affect the wealthy include these:
There’s uncertainty for low- and middle-income taxpayers, too.
As we mentioned earlier, the 2010 tax legislation cut the employee portion of the Social Security payroll tax. The rate fell from 6.2 percent to 4.2 percent in 2011 and 2012.
Treasury Secretary Timothy Geithner testified before the election that he did not support extending the payroll tax cut again. The New York Times quoted him as saying: “This has to be a temporary tax cut. I don’t see any reason to consider supporting its extension.” Now, however, the administration is negotiating to “include an extension of the payroll tax cut or an equivalent policy aimed at working-class families,” the Times reported on Nov. 29.
The expiration of the payroll tax cut would mean that middle-income taxpayers would see an average tax increase of $672 per year, according to the TPC.
In addition to the expiration of the payroll tax cut, there were a host of tax credits in the president’s 2009 stimulus legislation that were extended in 2010 and are now due to expire. Obama expanded the earned income tax credit, increased the value of the child tax credit for low-income families, and expanded and increased the college tuition credit.
The Tax Policy Center says the credits benefit about 152 million taxpayers, and more than half of them earn less than $50,000 a year. For example, a taxpayer earning $20,113 or less would pay an average of $209 more in taxes if the credits expire, the TPC analysis shows (Table 6). That’s about half of what that taxpayer’s total increased tax liability would be — $412 — if all of the fiscal cliff tax changes went into effect as scheduled.
Closing the Gap
There is a growing consensus in Washington that there needs to be a combination of increased revenues and spending cuts to close the big gap that has developed in recent years between revenues and outlays.
As a percentage of the nation’s economy, the gap between what Washington spends (22.7 percent) and collects in revenues (15.7 percent) narrowed slightly in the last fiscal year. But the federal government is still a long way from the times when revenues more closely matched spending — as you can see from the chart below. We created the chart using historical budget data from the federal Office of Management and Budget, updated with Treasury Department figures for the fiscal year ending Sept. 30, 2012.
Since fiscal year 1946, a post-World War II federal government has run surpluses in 12 of 68 years — most recently for a period of four straight years, beginning in 1998 under President Bill Clinton.
The government’s checkbook benefited in the Clinton years from the effects of a large tax increase pushed by the Democratic president in 1993, his first year in office. That tax increase fell most heavily on those making more than $200,000 — which is why the tax rates under Clinton are cited frequently (but not entirely accurately) by Obama in his push to allow the marginal individual tax rates to rise in the top two brackets. (We’ll get to Obama’s plan later.)
Clinton’s fiscal 1994 budget also contained limits on spending, particularly in the military following the collapse of the Soviet Union at the end of 1991. When the House passed that budget, the New York Times reported that there was roughly a 1-for-1 ratio between spending reductions and tax increases over a five-year period.
The surpluses evaporated as the nation went through two wars and two recessions— the first triggered by the dot-com bust, which began in mid-2000. Deficit spending returned in fiscal 2002 and worsened after the second recession. The federal government has now posted four straight years of $1 trillion deficits.
In March, the Congressional Budget Office projected that under the president’s proposed budget for 2013, spending would equal 23.4 percent of GDP while revenues would be 17.2 percent. The deficit, CBO said, would equal 6.1 percent of the economy that year and average 3.2 percent over the 10-year period ending in 2022. But the CBO currently projects that a continuation of current policies — including the Bush-era tax cuts and an AMT “patch” — would push the deficit to 6.5 percent of GDP in 2013, with spending and revenues equal to 22.8 percent and 16.3 percent, respectively.
In an op-ed piece, Warren Buffett, the chairman and chief executive of Berkshire Hathaway, wrote that the government should aim to raise revenues to 18.5 percent of GDP while keeping spending to around 21 percent. Acknowledging that this wouldn’t eliminate deficits, he wrote that “this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.”
The president’s bipartisan fiscal commission, on the other hand, called for more revenues in a report issued back in December 2010. As part of its “six-part plan to put our nation back on a path to fiscal health, promote economic growth, and protect the most vulnerable among us,” the commission proposed capping revenues at 21 percent by the year 2022, and getting spending below 22 percent and eventually to 21 percent by 2035.
And the CBO issued a report in November saying that there are many options for reducing our deficits. But continuing on the current path, CBO said, was not one of them.
The Opening Proposals
Both Democrats and Republicans have been talking about the need to compromise on the fiscal cliff. But what is their starting position in these negotiations?
Obama laid out his vision in his 2013 budget proposal. Overall, his plan calls for increasing revenues by $1.6 trillion over 10 years. (During the “grand bargain” negotiations between Obama and House Speaker Boehner in the summer of 2011, Boehner had agreed to $800 billion worth of increased revenue.)
There are a number of corporate tax implications in Obama’s plan, but here are the major parts affecting individual taxpayers:
That’s the meat of Obama’s plan, but as he said in a news conference on Nov. 9, “I’m not wedded to every detail of my plan. I’m open to compromise. I’m open to new ideas.”
There has been no consensus plan yet proffered by Republicans, though last year the House passed a bill to extend the Bush tax cuts for everyone for another year.
More recently a number of Republican leaders have floated the idea of capping itemized deductions as a way to raise revenue without raising tax rates.
For example, on ABC’s “This Week” on Nov. 25, Sen. Lindsey Graham said:
Graham, Nov. 25: I’m willing to generate revenue. It’s fair to ask my party to put revenue on the table. We’re below historic averages. I will not raise tax rates to do it. I will cap deductions. If you cap deductions around the $30,000, $40,000 range, you can raise $1 trillion in revenue, and the people who lose their deductions are the upper-income Americans.
During the presidential campaign, GOP nominee Mitt Romney floated a proposal during the second debate to cap itemized deductions at $25,000.
Romney, Oct. 16: And so in terms of bringing down deductions, one way of doing that would be to say everybody gets — I’ll pick a number — $25,000 of deductions and credits. And you can decide which ones to use, your home mortgage interest deduction, charity, child tax credit and so forth.
The Tax Foundation analyzed a $25,000 cap and concluded it would raise about $1.3 trillion over 10 years.
So why do some Republicans prefer caps on itemized deductions to higher tax rates? Mark Duggan, professor of business economics and public policy at the Wharton School of Business at the University of Pennsylvania, said a higher rate “hurts incentive to work.” Second, he said to us in an email, “when you exclude some things from the tax base you introduce distortions. By excluding health insurance, mortgage interest, etc. you subsidize certain goods (health care and housing) but not others. Furthermore the subsidies are bigger for those with high incomes where rates are highest.”
One option not being considered is doing nothing — thus allowing the spending cuts and the tax increases to take effect. What’s the consequence of that? CBO projects that the nation will most likely slide into a recession and the unemployment rate, which was 7.9 percent in October, would rise to 9.1 percent.
But short-term pain would be followed by long-term gain, the CBO says.
CBO, Nov. 8: CBO projects that the significant tax increases and spending cuts that are due to occur in January will probably cause the economy to fall back into a recession next year, but they will make the economy stronger later in the decade and beyond. In contrast, continuing current policies would lead to faster economic growth in the near term but a weaker economy in later years.
On the spending side of the equation, Obama’s position has not budged much from the position he outlined in September 2011 in his President’s Plan for Economic Growth and Deficit Reduction.
The president’s plan boasts of $4 trillion in “savings” from spending over 10 years. To get to that figure, the president included roughly $1 trillion in spending cuts that he had already signed into law in the Budget Control Act; savings from drawing down the wars in Iraq and Afghanistan; and $580 billion in “cuts and reforms” to an array of mandatory programs — everything from agricultural subsidies to federal civilian worker retirement plans. Also included in that figure is $248 billion in reduced spending on Medicare and $73 billion on Medicaid.
There are an awful lot of numbers and scenarios being thrown around by politicians regarding the fiscal cliff. We find that some are false and misleading, while others are accurate, but show an incomplete picture.
For example, Obama several times has stated that if the Bush tax cuts are not extended for families making under $250,000, “A typical middle-class family of four would see its taxes rise by $2,200.” The White House has even launched a campaign asking Americans to, “Tell us what $2,000 means to you and your family.” The White House is also encouraging people to “keep the conversation going online” on Facebook and Twitter using the hashtag #My2K.
The White House construction is accurate, but very specific. Note that in the online appeal, Obama is pictured at a table with two parents and their two children. According to a White House fact sheet, a married couple with two children with income between about $50,000 and $85,000 would see a tax increase of $1,000 because of a Child Tax Credit reduction; a tax increase of $890 due to the merging of the 10 percent tax bracket into the 15 percent tax bracket; and a tax increase of $310 because of the expiration of marriage penalty relief that provides a larger standard deduction for married couples. In total, that comes to $2,200.
As this breakdown makes clear, the biggest part of the tax increase comes from the fact that they are married and have two kids. The tax impact is much less for unmarried people without children, or even married people with one or no children.
According to calculations by the Tax Policy Center, those in the middle-income quintile, who earn roughly between $40,000 and $64,000 would see — on average — a $961 tax increase next year if the Bush tax cuts are not extended. (It comes to about $1,100 for those earning between $50,000 and $75,000— which is closer to Obama’s parameters.)
The Tax Policy Center has created a tax calculator with which taxpayers can determine how much various fiscal cliff scenarios may affect them.
Other claims from politicians include:
– by Eugene Kiely, Robert Farley and D’Angelo Gore
Congressional Budget Office. “An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022.” 22 Aug 2012.
“Background: Bush Tax Cuts.” Tax Policy Center. Undated, accessed 29 Nov 2012.
“2010 Tax Act.” Tax Policy Center. Undated, accessed 29 Nov 2012.
U.S. House. “H.R. 4853, Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” 5 Jan 2010.
Williams, Roberton et al. “Toppling off the Fiscal Cliff: Whose Taxes Rise and How Much?” Tax Policy Center. 1 Oct 2012.
Congressional Budget Office. “Monthly Budget Review.” 5 Oct 2012.
Press release. “Payroll Tax Cut Temporarily Extended into 2012.” IRS. 23 Dec 2011.
Taylor, Andrew. “Hill leaders voice confidence in debt deal.” Associated Press. 16 Nov 2012.
Rodibaugh, Jennifer J. “Experts Predict AMT Patch, Temporary Extension of Many Tax/Budget Provisions, No Payroll Tax Cut Extension.” CCH Group. 9 Nov 2012.
Paul Cherecwich Jr., chairman, IRS Oversight Board. Letter to Sen. Max Baucus. 19 Nov 2012.
Lowrey, Annie. “Payroll Tax Cut Is Unlikely to Survive Into Next Year.” New York Times. 30 Sep 2012.
Weisman, Jonathan. “G.O.P. Balks at the White House Plan on Fiscal Crisis.” New York Times. 29 Nov 2012.
“Questions and Answers for the Additional Medicare Tax.” IRS. 4 Aug 2012.
Press release. “In 2012, Many Tax Benefits Increase Due to Inflation Adjustments.” IRS. 20 Oct 2011.
Congressional Budget Office. “An Analysis of the President’s 2013 Budget.” Mar 2012.
Robillard, Kevin. “Report: Max Baucus wants to preserve estate-tax cut.” Politico. 26 Nov 2012.
Tax Policy Center. “Fiscal Cliff Analysis, Step 5 of 9: Stimulus Legislation EITC, CTC, AOTC.” 1 Oct 2012.
The National Commission on Fiscal Responsibility and Reform. “The Moment of Truth.” Dec 2010.
Office of Management and Budget. Historical Tables (Table 1.2—Summary of Receipts, Outlays, and Surpluses or Deficitås (-) as Percentages of GDP: 1930–2017). Accessed 26 Nov 2012.
U.S. Department of Treasury. “Joint Statement of Secretary Geithner and OMB Deputy Director for Management Jeffrey Zients on Budget Results for Fiscal Year 2012.” 12 Oct 2012.
Jackson, Brooks. “Fiscal FactCheck.” FactCheck.org. 15 Jul 2011.
Office of Management and Budget. “Fiscal year 2013 Mid-Session Review: Budget of the U.S. Government. Table S-6 Proposed Budget by Category as a Percent of GDP.” 27 Jul 2012.
Congressional Budget Office. “An Analysis of the President’s 2013 Budget: Table 1. Comparison of Projected Revenues, Outlays, and Deficits under CBO’s March 2012 Baseline and in CBO’s Estimate of the President’s Budget.” Mar 2012.
Congressional Budget Office. “Choice for Deficit Reduction.” Nov 2012.
Billionaire casino owner Sheldon Adelson gave $1 million to a super PAC active in Michigan’s U.S. Senate race during the campaign’s final days, a fact unknown to voters until long after polls closed.
Adelson supplied the bulk of funding for the “Hardworking Americans Committee” with the Oct. 19 donation, Federal Election Commission records show.
The super PAC spent more than $1 million on ads in a futile, last-minute attempt to boost former Republican Rep. Pete Hoekstra in his bid to oust incumbent Sen. Debbie Stabenow, a Democrat.
The deadline for reporting donations made since Oct. 17 was Thursday.
Last-minute contributions are not unusual in politics, but thanks to the 2010 U.S. Supreme Court’s Citizens United decision and a lower court ruling, the amount a donor can give to outside groups’ electoral efforts is unlimited. Furthermore, donations to political action committees during the final three weeks of the election need not be reported until December.
The reporting gap should be closed, say watchdogs.
“Congress should amend our disclosure laws to give voters the information they need to make informed decisions on Election Day,” said Paul S. Ryan, an attorney at the Campaign Legal Center. “With current technology, disclosure is easier than ever for super PACs and other political players.”
Adelson, the top donor to super PACs in the 2012 election by a large margin, along with wife Miriam, also provided all $2 million of Republican Jewish Coalition Victory Fund’s war chest. The super PAC, which did not report any receipts before Election Day, pumped more than $1.7 million into advertising opposing President Barack Obama.
The Republican Jewish Coalition is a lobbying organization that seeks to “foster and enhance ties between the American Jewish community and Republican decision makers,” according to its website. It was started in 1985 and Adelson serves as the group’s board chairman.
Similarly, “Freedom Fund North America,” a GOP-aligned super PAC established on Oct. 15, spent $990,000 in the final weeks of the 2012 election, mostly attacking incumbent Sen. Jon Tester, D-Mont., and former North Dakota Attorney General Heidi Heitkamp.
Both Democrats prevailed in their hotly contested races.
The entirety of Freedom Fund's $1 million budget came from Texas businessman and Republican mega-donor Bob Perry, according to FEC reports.
New records further show that billionaire New York City Mayor Michael Bloomberg provided nearly $10 million to the “Independence USA PAC,” whose priorities include gun control, marriage equality for same-sex couples and education issues. It was launched on Oct. 18 and reported spending $8.2 million on five House races.
Two of its favored candidates — Democrat Gloria McLeod of California and Democrat Dan Maffei of California — won.
Super PACs can accept donations of unlimited amounts from corporations, unions and individuals.
FEC Vice Chairwoman Ellen Weintraub, a Democrat, stressed the importance of people having such information before they cast their votes.
“I always think the public benefits from and is entitled to transparency about the sources of political funds,” she said. “As the Supreme Court said in Citizens United, ‘The public has an interest in knowing who is speaking about a candidate shortly before an election.’”
The only other large contributions that went to the anti-Stabenow super PAC came from Amway President Doug DeVos and Michael Jandernoa, the former president and CEO of pharmaceutical company Perrigo, who each donated $100,000 to the group in October.
Ads from the super PAC accused her of dodging taxes on her “ritzy Washington, D.C., home,” voting for tax increases and “failing Michigan for years.”
Despite the spending, Stabenow easily captured nearly 60 percent of the vote. Yet the last-minute deluge earned ire from her campaign.
“The fact that secret money can be dumped into races like this, with no one knowing where the money came from until a month after the election, is awful for our democracy,” said Stabenow spokesman Cullen Schwarz.
The Obama administration is moving forward with plans to modify the Medicare payment system for radiological isotopes used in diagnostic procedures despite concerns that the change would not do enough to end health care providers’ reliance on bomb-grade uranium.
Effective Jan. 1, hospitals and other medical facilities will be entitled to an additional $10 in government reimbursement for every diagnostic procedure they conduct on Medicare patients using isotopes not derived from highly enriched uranium.
The Health and Human Services Department proposed the change in July, and it has been viewed favorably by nonproliferation advocates who want to see the United States weaned off of isotopes produced with material that could be used to make a nuclear weapon if it fell into the wrong hands.
Health care industry officials, however, have argued the administration underestimates how much more it will cost to switch to producing isotopes without HEU material. The extra $10 per procedure is not likely cover the cost increase passed on health care providers, and will therefore not be enough to persuade hospitals and other medical facilities to make the switch, industry officials argued in September comments to the HHS Centers for Medicare and Medicaid Services.
In a passage buried within a 357-page notice published in the Federal Register last month, CMS officials acknowledged the additional payment might not be a great incentive. They argued, though, that they are merely looking to compensate providers who switch to non-HEU sources, not give them motivation to do so.
“We did not create an additional payment to promote the administration’s initiative to eliminate domestic reliance on [medical isotopes derived] from HEU, as that is outside the scope of” the CMS rule, the notice says. “Rather the industry had conveyed to us that this conversion to non-HEU will occur in response to U.S. strategic policy, but that cost considerations have created barriers to that movement. … Although commenters have opined that a larger payment would be a better incentive to support non-HEU conversion, the purpose of the payment is limited to mitigating any adverse impact.”
Groups such as the American Hospital Association and the American Society of Nuclear Cardiology – which represent more than 5,000 hospitals and 4,500 specialists, respectively – have said they support the CMS plan in principal, but have argued the administration has not provided enough information about how its cost estimates were calculated.
In the final rule, CMS officials said their estimates were based in part on economic analyses of the world market for technetium 99 published by the Paris-based Organization for Economic Cooperation and Development, which some industry officials have argued are not relevant to the United States because they include little information from U.S. suppliers. Technetium 99 -- a product of the decay of molybdenum 99 – is the isotope commonly used in diagnostic procedures.
Administration officials argued, however, that these international studies “are pertinent to the United States because, at present, our entire supply comes from foreign sources.” According to the notice, “the fact remains that there is currently no supply available domestically. Thus, while the data we used may not reflect all of the unique market forces present in the domestic market, this data source provides the best estimation of the costs of non-HEU sources compared to HEU sources because the manufacturing steps are primarily overseas and therefore reflect the global market.”
Supplemental information industry provided to the administration did not significantly alter conclusions drawn by the international studies, the Federal Register notice says. The administration says it cannot release this information, though, because industry provided it on the condition the data remain confidential.
Andrew McKinley, associate director of health policy for the American Society of Nuclear Cardiology, told Global Security Newswire on Friday that the additional information on how the $10 figure was calculated was an improvement over the original proposal, “but not enough to make us feel satisfied at the end of the day.” Industry officials still believe costs would increase more per procedure and would have liked to see more detail about information CMS officials might have gathered from hospitals in the final rule, he said.
Another concern raised by industry groups is that, in the event of an audit, hospitals could be required to prove that a medical isotope for which they received the additional $10 credit was derived entirely from non-HEU sources. The American Hospital Association suggested the government should provide adjusted payments for lower percentages of non-HEU sources and institute a multiyear phase-in period.
The American Society of Nuclear Cardiology also encouraged a phase-in period and raised concerns about liability and an inability to prove an isotope was derived entirely from a non-HEU source might stifle efforts to convert.
Health and Human Services officials rejected the idea of adjusted payments in the notice. “Because payment must be driven by cost, a 20-percent blend would be limited to 20 percent of the $10 cost or $2, and hospitals are already concerned that the $10 additional payment is a small payment when they consider it against the effort involved in making tracking and billing changes.”
Regarding liability, CMS officials acknowledged that “there is no practical way for a hospital to prove chemically that a supply purported to be derived from a non-HEU source truly meets those requirements.
“On the other hand, the radiopharmaceutical industry is a heavily regulated industry closely monitored by the Food and Drug Administration, and it is our understanding that if a supplier indicates that a source is non-HEU, manufacturing records will be able to confirm that,” the CMS notice says. “We are confident that claims by suppliers as to the source of the [technetium 99] used can be satisfactorily audited through usual manufacturing processes without creating additional requirements for hospitals.”
McKinley, of the American Society of Nuclear Cardiology, said industry officials found the clarifying language in the final rule regarding liability to be “very helpful.” He added, though, that it remains to be seen how such verification will take place in practice.
Nonproliferation experts have described the CMS proposal as a positive step toward addressing concerns that Russia – which is expected to expand medical isotope production using highly enriched uranium when a Canadian reactor goes offline in 2016 – could undercut U.S. companies developing the likely more expensive technology needed to create a steady supply of isotopes derived from non HEU material.
Issue specialists have warned, however, that the dispute between the administration and industry as to how effective the plan will be in practice underscores concerns that it on its own might not be enough to ensure a switch to non-HEU material. Legislation mandating stronger incentives – such as regulations or taxes on the sale of medical isotopes produced with highly enriched uranium – might be needed, observers have suggested.
The Senate this week approved an amendment to the 2013 defense authorization bill that would phase out U.S. exports of HEU material to foreign isotope producers and encourage domestic production without HEU material by authorizing the U.S. government to engage in some cost-sharing with potential domestic firms. The legislation does not address the potential for Russia to undercut the market.
Story by Douglas P. Guarino, courtesy of Global Security Newswire.
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I’ve often said that the Affordable Care Act is the end of the beginning of health reform. It addresses many problems associated with health insurance, but more must be done to control costs and access real universal coverage. And flaws in the law need to be fixed.
However, the reform law will end some of the most abusive insurance industry practices, such as blackballing folks with pre-existing conditions and cancelling policyholders’ coverage when they get sick.
And health insurance companies now have to spend at least 80 percent of our premiums on actual health care. If they devote more than 20 percent to administrative overhead and profits, they are supposed to send rebate checks to their policyholders. Since that 80/20 rule went into effect last year, consumers have saved almost $1.5 billion, mostly in the form of those rebates, according to a new study by the Commonwealth Fund.
The rule has also resulted in lower premiums for many and elimination of hundreds of millions of dollars in administrative waste. That’s the good news. The no-so-good news is that because the reform law does not give the federal government the authority to regulate rates, many health plans used their administrative savings to boost profits instead of reducing premiums.
That situation reflects not only a flaw in the federal reform law, but also the ineffectiveness of health insurance rate regulation at the state level. In only a few states do insurance commissioners have the authority to reject unwarranted rate increases, and even in the states that do, many health plans are exempt from state regulatory oversight.
Researchers for the Commonwealth Fund found that during 2011, the first year of the 80/20 rule, administrative costs fell by more than $785 million in the large-group market, a segment that comprises almost all large employers, but the cash was pocketed rather than shared with consumers. Because large employers typically self-insure—meaning they, not insurance companies, assume the risk for medical claims—they are not subject to regulation by state insurance commissioners. This is despite the fact that self-insured employers contract with insurance companies to administer their employee health care benefits.
Big employers were exempted from state regulation by a 1974 federal law intended to protect workers’ pension plans by bringing employee benefits under the regulation of the U.S. Department of Labor. Over the years, however, courts have ruled that this law, the Employee Retirement Income Security Act (ERISA), also applies to health benefit plans.
Members of Congress had no reason to believe that they would be undermining state regulation of health plans when they passed ERISA. Nevertheless, because of ERISA, most of us who are covered under an employer or union-sponsored group plan can get no help from state regulators when we have a problem with health benefits.
Allowing companies to increase profits instead of passing savings along to policyholders was likewise an unintended consequence of Obamacare. The reason for the 80/20 rule in the first place was to keep insurers from wasting our money on unnecessary overhead and diverting more and more premium money to reward shareholders and corporate executives.
Those of us who buy coverage on our own directly from insurance companies benefited much more from the 80/20 rule than people who are covered through an employer. The Commonwealth Fund researchers found that, unlike the group market, insurance firms passed the savings they realized from reducing administrative expenses along to consumers in the form of lower premiums.
The researchers suggested that “stronger measures,” including rate regulation, “may be needed if consumers are to benefit from reduced overhead in the group insurance markets.”
That point of view was echoed by the Los Angeles-based Consumer Watchdog, which has been leading an effort in California to give the state’s insurance commissioner the authority to reject unjustified rate increases.
“Absent rate regulation, health insurers are gaming the health reform law to keep premiums high and increase profits, said Carmen Balber, director Consumer Watchdog’s Washington office. “Health insurers should be required to open their books and justify their changes—including why they haven’t passed on to consumers nearly one billion dollars in savings.”
Consumer Watchdog anticipated this flaw back in 2010 as the 80/20 rule regulations were being written. In a letter to Health and Human Services Secretary Kathleen Sebelius in May 2010, Balber wrote, “In the same way that a Hollywood agent who gets a 20 percent cut of an actor’s salary has an incentive to seek the highest salary, insurers will have incentive to increase health care costs and raise premiums so that their…cut is a larger dollar amount.”
Both Congress and state lawmakers have roles to play in fixing this unintended consequence of the reform law. Congress should give the HHS Secretary the ability to reject unjustified rate increases from ERISA-protected group plans, and state lawmakers should give the same authority to state commissioners in the individual market.
Officials in central Indianapolis thought deeply a few years back about what equipment they needed to defend against a local attack involving weapons of mass destruction, such as chemical arms or a nuclear bomb, and their answer was (ba dum, ba dum) a hovercraft!
Luckily, the city didn’t even have to foot the$69,000 bill. The funds instead came from a Federal Emergency Management Agency program known as the Urban Area Security Initiative, which has so far spent more than $7 billion trying to make about five dozen of America’s cities safe from the threat of terrorism.
When officials in Louisiana calculated how they could best deal with the terrorism threat in their own backyard, their answer in part was – yes, really – a teleprompter and a lapel microphone, again purchased with funds from the FEMA initiative. Similarly, Oxnard-Thousand Oaks officials in California deliberated and decided to buy new fins and snorkels for their dive team.
But the City of Clovis in that state was even more creative: They used a $250,000 FEMA grant to buy an armored vehicle known as the BearCat, which wound up being used to patrol at an Easter egg hunt and other public events.
Some of the urban security funds were undoubtedly carefully spent. But a report last week by Sen. Tom Coburn (R-Okla.) highlighted the highly unusual spending choices listed above and accused FEMA of extraordinarily weak oversight. FEMA and the department in which it sits, Homeland Security, have failed either to carefully assess which cities need help or to examine which of its grants have been properly used, Coburn said.
“If in the days after 9/11 [when the initiative was approved] lawmakers were able to cast their gaze forward ten years, I imagine they would be surprised to see how a counter-terrorism initiative aimed at protecting our largest cities has transformed into another parochial grant program,” Coburn said in a cover note on the report, addressed “Dear Taxpayer.”
“We would have been frustrated to learn that limited federal resources were now subsidizing the purchase of low-priority items,” added Coburn, a physician who is the senior Republican member of the Homeland Security permanent subcommittee on investigations.
His report lists some of those: an underwater robot acquired by the police diving team in Columbus, Ohio; 13 sno-cone machines purchased by police officials in Michigan; and a video prepared for the Jacksonville police that warns members of the public to be suspicious of those with “average or above average intelligence” who display “conspicuous adaptation to western culture and values.”
The grant program was also used to reimburse expenses incurred by government participants at a security industry trade show in San Diego this year, where a mock attack was staged by SWAT team officers against “zombies” wearing fake blood. A $90,000 noise-generating machine was purchased by the Pittsburgh police to disperse crowds, an unlikely counter-terror mission, and a similar machine was deployed – but not used – by San Diego police outside a town hall meeting held by Rep. Darrell Issa (R-Cal.), Duncan Hunter (R-Cal.), and Susan Davis (D-Cal.).
FEMA’s public affairs officers did not respond to a request for comment about Coburn’s criticisms. His report states that the agency failed to set any concrete counter-terror goals for urban centers until Oct. 2011, eight years after the program got under way, making it impossible to assess whether any of the grants were worthwhile.
The officials in Michigan defended the sno-cone machine purchase, stating that they were needed to deal with heat-related emergencies or fill ice packs, according to Coburn’s report.
A report last year by the Center for Investigative Reporting, a nonprofit group based in California, said that federal counter-terror grants have often been spent on armored equipment and heavy weapons that give local police forces military-like capabilities, contributing to wider use of heavy force against domestic protesters.
Coburn, a longtime federal spending critic, last month issued another report highlighting waste, this time in the Defense Department. The permanent subcommittee on investigations, on which he sits, also published a report in October accusing Homeland Security officials of squandering substantial sums on intelligence “fusion” centers that produced “shoddy, rarely timely” reports on terror threats.
The U.S. intelligence community has confirmed in a new report that global power in the future will not be marked by the deployment of large military force or arsenals of nuclear weapons, two measures of American power still have a large following in Washington.
In a new report entitled “Global Trends 2030: Alternative Worlds”, the National Intelligence Council said global power in that year will be reflected instead by a mix of factors, including the state of technology, health, education, and governance as well as GDP (the size of the national economy), population size, and military spending.
And by 2030, countries in Asia will have surpassed the United States in many of these power metrics, meaning that “the ‘unipolar moment’ is over and Pax Americana – the era of American ascendancy in international politics that began in 1945 – is fast winding down,” the report said. “There will not be any hegemonic power” in 18 years but instead a collection of “networks and coalitions” in which Asian nations and rising economic powers such as India, Brazil, Colombia, Indonesia, Nigeria, South Africa and Turkey will take part.
This may not seem revolutionary, but it contravenes some rhetoric that surrounded the presidential campaign, which still animates those wedded to a nostalgic model of American predominance in global affairs. The days of primacy are over, says the council, which held meetings with scholars and experts in 10 states and 20 countries, and drew on studies by national laboratories and advice from Silicon Valley entrepreneurs.
Predominance is an ambition Americans cannot expect to see fulfilled, and certainly not by doing more of what we do now, says the report, prepared by an analytic unit of the White House’s Director of National Intelligence.
Military spending in the United States won’t remain at the current level “in the absence of a major emergency,” and could wind up being half its current proportion of the GDP, the report suggests. Moreover, “in a multispeed economic world in which the West continues to experience severe fiscal constraints…the trend toward an increasingly disproportionate share of military spending by the non-G-7 [industrialized nations] will continue to grow.”
The report, the fifth in a series and 137 pages, says that the country is at a “critical juncture,” facing decisions that can produce highly different outcomes. The worst of those would be an advanced state of international disorder and the best would be a long-term problem-solving partnership between the United States and China that produces stability around the globe. America should not retreat from the world, it says, but should remain “a global security provider” along with others.
Dark forces could readily disrupt human and economic progress, some of which the report calls “black swans.” These include a global recession, a pandemic, worse climate change than now expected, the collapse of China, an effective attack with cyber weapons, the detonation of a nuclear bomb, a devastating solar storm, and even a tsunami that originates in an earthquake near Puerto Rico and ravages the East Coast. The report also worries about the spread of new lethal technologies, including those that underlie precision-strike weapons and biowarfare.
Despite its many uncertainties, however, the report is littered with small but highly interested factoids and forecasts worthy of attention by those watching whether American lawmakers are preparing the nation for the challenges of the future. They include the following:
Despite outraising its Democratic counterpart by a 2-to-1 margin, the Republican Governors Association won only four of 11 races in the 2012 election, a far cry from the success it enjoyed two years ago.
The Washington D.C.-based political organization raised almost $100 million, according to recently released Internal Revenue Service data. The group targeted six states it considered winnable, losing five of them. Overall, Democrats won seven of this year's 11 contests, but the GOP still managed to pick up one seat in North Carolina, long held by Democrats.
The top donors to the so-called “527” organization, which can accept unlimited contributions from billionaires, corporations and unions, are familiar Republican Party patrons — No. 1 is Bob Perry, a Texas homebuilder and perennial RGA supporter, who gave $3.25 million. That’s a little more than half of what he gave in 2010.
Billionaire casino magnate Sheldon Adelson is No. 2, with $3 million in donations between him and his wife. According to the latest Federal Election Commission reports, Adelson is the top donor to super PACs in 2012, doling out more than $93 million along with his family.
Conservative billionaire David Koch — who has not made any contributions to super PACs — was the organization’s third-highest donor, writing two checks totaling $2 million. Koch is co-owner of the second-largest privately held company in America, Koch Industries, an energy conglomerate.
Seven of the RGA’s top 10 donors are corporate executives who gave at least $1 million. Two of them, Paul Singer and Kenneth Griffin, are hedge fund managers.
Six of the Democratic Governors Association's top donors were unions. The American Federation of State County and Municipal Employees topped the DGA donors list, giving about $1.3 million. The Service Employees International Union gave about $1.1 million while the American Federation of Teachers gave at least $772,000.
Top corporate donors to the DGA included pharmaceutical giants Pfizer, which gave almost $700,000, and AstraZeneca, which contributed nearly $600,000. The companies also gave comparable sums to the RGA. The DGA also got corporate support from health insurer United Healthcare Services Inc., and AT&T.
The DGA raised nearly $50 million, the organization's "strongest fundraising year ever," according to spokeswoman Kate Hansen.
The DGA and RGA have devised national strategies for collecting unlimited funds from unions, corporations, and wealthy individuals, and funneling the money into state races. Using a network of state-based PACs, the RGA and DGA have maneuvered around various state limits on campaign giving.
“They’ve had an enormous impact on state elections across the nation,” said Ciara Torres-Spelliscy, an election law expert at Stetson Law School. “In many states they were consistently a top spender.”
The circuitous methods used by both organizations to inject corporate and union cash into state races and mask the identity of its donors have raised legal questions, prompted lawsuits, and tested the capacity of state election boards to enforce limits on outside spending.
Both organizations have told the Center for Public Integrity that they fully comply with campaign finance laws, and that they report their donors and spending to the IRS.
The RGA set up a federal super PAC called RGA Right Direction, and fed it with $9.8 million in contributions. The super PAC — another type of organization that can accept unlimited donations from individuals and corporations — then made a large contribution to Indiana Republican candidate Mike Pence, and bought ads in tight state races in Montana, Washington, New Hampshire, and West Virginia.
Super PACs are normally used to spend money on federal campaigns. By passing the funds through the super PAC, which reported its sole donor as the RGA, the association effectively shielded the identities of the donors who paid for ads in the state races.
In North Carolina, the RGA spent millions of dollars, directly from corporate treasuries to win in a state long led by Democratic governors. The unlimited contributions from dozens of corporations across the country went toward ads supporting Republican candidate Pat McCrory, who won convincingly over Democratic Lt. Gov. Walter Dalton.
The DGA, too, used a network of state-affiliated PACs, to fund ad campaigns in battleground states like Montana and North Carolina. It was the primary funder of a PAC called North Carolina Citizens for Progress, which purchased ads attacking McCrory.
While America’s wealthiest corporate executives tend to prefer the RGA, and unions give almost exclusively to the DGA, some donors played both sides this election.
Agricultural giant Monsanto, credit card company Visa and health insurance company Humana were large donors to both the RGA and DGA — each giving about $100,000 to both groups.
Despite the Republicans' win-loss record, RGA spokesman Michael Schrimpf called 2012 "a successful year by any standard" with Republicans now in control of governorships in 30 states. Most of those gains, however, came in 2010. The North Carolina win and the failed effort to recall Scott Walker, Wisconsin's Republican governor, in June, were high points for the GOP.
In addition, in five states targeted by the RGA where it lost, the Democrats held advantages unrelated to fundraising.
Missouri and West Virginia featured Democratic incumbents. Three other states — Montana, Washington and New Hampshire — had open seats where a Democrat had previously been in power.
The two organizations will put their fundraising powers to the test again in 2013, when Virginia and New Jersey choose their next governors.
Michael Beckel contributed to this report.
Amid protests by labor unions, and objections from the state’s congressional delegation and even the president, Michigan’s Republican Gov. Rick Snyder signed a “right-to-work” bill into law Tuesday, drawn word-for-word from a 32-year-old “model bill” pushed by a corporate-funded, conservative think tank.
The legislation deals a severe blow to organized labor in a state that has the fifth-highest union density in the country, and it marks the revival of an effort long promoted by the influential American Legislative Exchange Council, a Washington, D.C.-based nonprofit that has seen its share of controversy recently.
Since 1973, ALEC has hosted corporate-sponsored meetings where state legislators and lobbyists meet behind closed doors to write and vote on model legislation. In a 1992 annual report, the free-market think tank boasted that it “provides the private sector an unparalleled opportunity” to influence state legislation.
One of its first priorities was passage of “right-to-work” laws, which now exist in 24 states. The 16 states with the lowest union density in the country have right-to-work laws, mostly in the American South and West, while the 13 states with the highest union density do not, until this week.
In a publication celebrating its 25th year, ALEC said it “began striking out against forced unionism and for the right to work in 1979.” ALEC members endorsed the law as model legislation and began introducing it in states in 1980.
Federal law prohibits workplaces from requiring employees to belong to a union and pay dues. However, employees, be they union members or not, may still enjoy the benefits of a union-negotiated contract.
While labor organizations cannot compel workers to join the union, they can require workers at a unionized workplace to pay an “agency fee” to cover the cost of negotiating contracts on a worker’s behalf.
Unions argue that these fees, which are less than membership dues, prevent “free riders” who would reap the benefits of union representation without chipping in.
Right-to-work laws ban this arrangement, creating “open shops,” where new employees at a workplace that is unionized do not have to join the union, pay dues or pay the lesser agency fee.
Back to work
At its November conference in D.C., ALEC members on the Commerce, Insurance, and Economic Development Task Force voted to re-endorse 55 pieces of model legislation it has passed over the years, including the “right-to-work” bill, according to documents released by the liberal watchdog group Common Cause.
Since 2010, members of the task force have included some of the nation’s largest non-union and anti-union companies, including McDonalds, Wal-Mart, Bank of America and MillerCoors. All four of the companies quit the organization this year after ALEC faced scrutiny for its sponsorship of voter ID legislation.
Though long on ALEC’s agenda, “right-to-work” has been a tough sell in the states for decades. Since ALEC created the model legislation, only four states have passed it into law. In 1992, ALEC members introduced the bill in 11 state legislatures, including Michigan.
None of them passed.
In 1995, ALEC reported that its legislator-members introduced the bill in nine states, but again none passed new laws, according to ALEC annual reports. Idaho passed the law in 1985, but no state would pass it again until 2001, when 54 percent of Oklahomans approved a “right-to-work” constitutional amendment. The text of the Oklahoma law matched, word-for-word, that of ALEC’s model bill.
In 2012, a slew of ALEC members sponsored the bill in Indiana, which Republican Gov. Mitch Daniels signed into law in February.
Snyder flip flop
Michigan’s governor reversed his stance on what he had repeatedly called a “divisive” law that was not on his agenda. But last week, hours before the bill introduced, Snyder announced he would sign a bill if it arrived on his desk.
In a press conference, Snyder said the measure would help the state compete with “right-to-work” Indiana by enticing businesses to set up shop in a state plagued by the sustained flight of manufacturing jobs. He also passed the microphone to three “real Michigan workers” who gave support for the law. Hours later, the Michigan House and Senate, in a lame duck session, made a preliminary vote to approve the legislation without committee hearings.
At the time, Michigan state police locked protesters out of the state Capitol building in violation of a court order, while legislators prepared to vote. Some of Michigan’s Democratic state representatives briefly walked off the floor of the House chamber in protest.
When the Legislature reconvened a few days later to take final votes on the bills, which will apply to both public and private sector workers, thousands of pro-union protesters met them at the Capitol. After House members approved the bills, some began a sit-in at Gov. Snyder’s Lansing office, urging a veto.
The “right-to-work” measure comes after 57 percent of Michigan voters rejected a union-backed ballot initiative in November which would have made “right-to-work” laws unconstitutional. Union membership in the state has dropped significantly since 1989, according to the Bureau of Labor Statistics.
A month later, the measure’s opponents mobilized. The Chamber of Commerce, which backed a $26 million effort to sink the ballot initiative, endorsed the “right-to-work” bill soon before it was introduced in the Legislature.
The Michigan chapter of Americans for Prosperity, a national organization funded by the conservative billionaire brothers Charles and David Koch (who are also backers of ALEC), pitched a tent on the Capitol lawn that broadcast speeches by former President Ronald Reagan.
A nonprofit group called Michigan Freedom Fund cropped up in November. Run by an adviser to former Republican gubernatorial candidate Dick DeVos of the Amway family fortune, the group bought radio and television ads supporting the bills in December.
Another supporter of “right-to-work” laws on the ALEC Commerce, Insurance, and Economic Development Task Force is a Michigan-based think tank called the Mackinac Center. Mackinac’s Director Michael LaFaive wrote in December that the center has been pushing “right-to-work” laws since 1990.
In 2007, Mackinac released a “model” constitutional amendment for the law, which mirrored the text of the ALEC model bill.
Opponents and proponents disagree about the economic impact of the laws.
A study by the liberal Economic Policy Institute reports that right-to-work laws push down wages for all workers in a state “by an average of $1,500 per year” and that the rate of employer-sponsored health coverage was 2.6 percent lower in states with the law.
If Michigan adopted a “right-to-work” law, it would lead to lower wages, less access to health insurance and weakened pension benefits, wrote University of Oregon professor Gordon Lafer in a report on the potential impact of the law in Michigan.
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The so-called “school to prison pipeline” — which has been the subject of several Center for Public Integrity stories —was the focus of new attention on Capitol Hill Wednesday. Sen. Dick Durbin presided over the first Congressional hearing on schools suspending students and sending them to juvenile-justice authorities for minor discipline problems.
“For many young people, our schools are increasingly a gateway to the criminal justice system,” Durbin, an Illinois Democrat and assistant majority leader, said in his introductory remarks. “This phenomenon is a consequence of a culture of ‘zero tolerance’ that is widespread in our schools and is depriving many children of their fundamental right to an education.”
Durbin said he hoped the hearing, archived here, would highlight the troubling consequences of sending kids to court and placing them in the juvenile system for relatively minor reasons. He also called on speakers who testified that it’s possible to keep schools safe – and boost kids’ engagement in school – by cutting referrals to the justice system and instead employing counseling and innovative discipline methods.
The hearing was before the Senate Judiciary Committee’s Subcommittee on the Constitution, Civil Rights and Human Rights.
The room was packed with hundreds of community organizers from around the country who are especially concerned about the disproportionate impact that school police citations and arrests are having on African-American and Latino students. Speakers talked of very young students being handcuffed and arrested for tantrums, or forced to go to court for behavior that used to land them in the principal’s office, or in counseling.
“This is clearly an issue of great concern to all of us,” said Deborah Delisle, the Department of Education’s Assistant Secretary of Elementary and Secondary Education. Studies in various jurisdictions, she testified, have revealed that most suspensions and referrals to court are not for serious violent offenses.
In a series of stories over the last year, the Center for Public Integrity has reported on an escalation in school suspensions and expulsions for seemingly minor indiscretions.
Reports on Kern County in California’s Central Valley looked into why the sparsely populated region had been expelling more students annually than Los Angeles, and how the phenomenon hit black and Latino students hard.
Another series of reports analyzed the Los Angeles Unified School District Police Department’s citation records for 2009-2011. The data, which hadn’t previously been released, showed that more than 40 percent of tickets – many of them for fighting – were issued to students 14 and younger and were concentrated in lower-income middle schools.
A Los Angeles student, Michael Davis, submitted written testimony to the subcommittee. “Even for minor things,” he said, “it seems like police are always involved in our lives at school. It’s a big part of how we get pushed out of school. When you get treated like this it is demeaning.”
A Center report on police posted in New York City schools examined officer conduct and accusations of abusive treatment of students. A report on Mississippi looked at federal justice officials’ allegations that students’ rights were violated because of referrals from school that landed them directly in juvenile facilities.
Judith A. Browne Dianis of the Advancement Project, a national civil-rights organization, told the subcommittee in her testimony Wednesday that in many school districts today “pushing and shoving in the schoolyard is now a battery, and talking back is now disorderly conduct.”
Durbin said it was important to look at why schools might resort to heavy-handed methods— perhaps because they lacked training for staff, or were reeling from budget and staff cuts and have too few counselors.
The Department of Justice has focused efforts on offering grants and training for school districts to improve methods of “supportive” school discipline, said Melodee Hanes, acting administrator of the Office of Juvenile Justice and Delinquency Prevention.
Chief Judge Steven Teske of the Juvenile Court of Clayton County, Ga., recounted in his testimony that one-third of his cases stemmed from schools when he took the bench in 1999. By 2004, he said, 92 percent of the 1,400 referrals that came to his court were misdemeanor offenses based on school incidents of disruption, disorderly conduct and school fights.
Negotiations with Clayton school officials led to an agreement that such cases only be referred to court after a student had been warned once, and then referred to a conflict-skills workshop for a second offense.
Teske credits the agreement with helping to increase graduation rates and improve students’ relations with school police.
Hope that negotiations over the so-called “fiscal cliff” will avoid partisan politics were dashed this week as a round of ads targeting four precariously positioned Senate Democrats hit the airwaves.
Crossroads GPS, the politically active nonprofit that spent millions in the 2012 election, launched a $240,000 radio ad campaign urging Sens. Mark Begich of Alaska, Mary Landrieu of Louisiana, Kay Hagan of North Carolina and Tim Johnson of South Dakota to “stop the spending.”
All four senators’ seats are considered up-for-grabs in 2014.
Congress and the White House are scrambling to come to a deal on spending cuts and tax increases set to go into effect in the New Year.
Crossroads, co-founded by Karl Rove, a former aid to Republican President George W. Bush, is one of the heavy-hitting advocacy organizations speaking out.
Labor unions, big business and other groups with a vested interest in what happens in Washington are also peppering the public with messages urging citizens to tell Congress to cut spending, extend tax breaks and protect the social safety net — all in the name of avoiding the tax increases and spending cuts set to go into effect after the first of the year.
Return of Rove
Exactly one month after the most expensive election in history — one in which Crossroads GPS spent more than $70 million — the organization launched a $500,000 television campaign on cable networks attacking President Barack Obama’s plan to avoid the fiscal cliff.
“President Obama promised a balanced plan,” the ad says. “But so far, a huge tax increase is his solution.”
This was followed five days later by the senator-specific radio campaign, which continued to attack the Obama plan. The proposal features about $600 billion in spending cuts. The Republicans’ plan features about $1.2 trillion in cuts. Obama’s plan allows for $1.4 trillion in net new revenue; the Republicans’ plan, $800 billion in new revenue.
Crossroads GPS spokesman Jonathan Collegio would not discuss what the ad campaign has in store, other than to say that the group will continue to push the president for more spending cuts.
“If we don’t see the negotiations moving in that direction, we’ll continue to advocate in that direction,” he said. “At this point, the president isn’t coming forward with a balanced approach that has any kind of meaningful spending reductions.”
The Cook Political Report lists nine U.S. Senate races with Democrats as incumbents as competitive in 2014. The other five are West Virginia (Jay Rockefeller); Arkansas (Mark Pryor); Iowa (Tom Harkin); Minnesota (Al Franken) and Montana (Max Baucus).
While Crossroads is fighting for spending cuts, unions are fighting to prevent them.
The American Federation of State, County and Municipal Employees teamed up with the Service Employees International Union and the National Education Association to convince legislators not to cut Medicare, Medicaid, Social Security and education.
The trio opened its campaign with television and radio ads during the third week of November in Colorado, Missouri, Virginia, Pennsylvania and Alaska. A second round of ads debuted Dec. 7.
The ads target both Republicans and Democrats in the U.S. House and Senate.
Several of the Democrats named appeared to waver on opposition to spending cuts. Ads aimed at Republicans encouraged them to support revenue increases.
Both were “significant six-figure buys” according to Chris Fleming, an AFSCME spokesman.
Safety net programs have become the major focus for the three unions because they provide economic security to middle and working class families who have already taken a hit during the recession.
“Are [legislators] looking out to preserve middle class tax cuts for hard-working men and women, or tax loopholes for corporations and the wealthy?” said Kusler in a press release.
Kusler also told the Center that Medicare is of special interest to the NEA, which primarily deals with education issues, because when federal funding to Medicare is cut, states must make up the difference, often by cutting education budgets.
AARP is also defending Social Security and Medicare in a big way — a seven-figure ad campaign called “You’ve Earned a Say” involves television and print ads urging Washington not to “cram decisions about these programs into a last-minute deal.”
“The debate in this lame duck Congress has the potential to impact the lives of older Americans,” said AARP spokesman Joshua Rosenblum. An AARP survey of senior citizens just after the election showed that 70 percent favored no cuts to Social Security or Medicare, Rosenblum said.
Executives from some of America’s largest companies are more concerned with taxes than spending cuts.
The Business Roundtable, an association of CEOs from major companies, is pushing “It’s Time to Act,” a campaign that includes a series of print and radio ads specifically targeting Washington, D.C.
The group wants to extend many of the Bush-era tax cuts, which rung in lower personal income tax rates as well as lower capital gains and dividends rates, among others. Some analysts warn that higher taxes on investments could lead to a stock sell-off.
In a video on its website, CEOs from Caesars Entertainment Corp., Motorola Solutions Inc. and Aetna, among others, argue for “responsible spending,” “fixing the debt situation,” and above all, quickly coming to an agreement to reduce the uncertainty they say their companies now face.
The Alliance for Savings and Investment, whose members include many Fortune 500 companies, has also run print ads advocating keeping taxes low — in particular, the capital gains and dividends rates.
With the prospect of dividends rates rising from 15 percent to the normal income tax rate – as high as 43.3 percent for the upper bracket if all tax cuts expire – investors have been dumping dividend-paying stocks, and some dividend-paying companies will pay out early to shareholders to potentially save them from the higher tax rate. Some of these companies have had to borrow in order to do this.
The potential rise in capital gains from 15 percent to 25 percent could also spurn a stock sell-off as investors seek to take advantage of the more favorable rate.
The Alliance for Savings and Investment’s chairman is former Rep. Jim McCrery, R-La. who is also a member of the steering committee of “Fix the Debt,” a project of the Committee for a Responsible Federal Budget. Fix the Debt was co-founded by Democrat Erskine Bowles, chief of staff under President Bill Clinton, and former Republican Sen. Alan Simpson of Wyoming.
The pair headed Obama’s debt-reduction commission that spearheaded a plan to save about twice as much as both the president’s plan and the Republicans’ plan through a combination spending cuts and tax increases.
The organization is running print, online and outdoor ads. Its newest ad, online at The Nation, features what spokesman Jon Romano called “unlikely voices,” — a teacher and a fireman concerned about the national debt. Earlier ads riffed on famous slogans, including Nike (“Just fix it”) and McDonald’s (“I’m fixin’ it”). Television ads are in the works.
Fix the Debt has raised $42 million for its campaign to advocate avoiding the fiscal cliff with a combination of tax increases, spending cuts and entitlement reforms, Romano said. Romano did not respond to follow-up questions about who the group’s top donors are.
Crossroads GPS is a nonprofit and is not required to release the names of its donors.
Fix the Debt's leadership committee includes representatives from many of the same companies as the Alliance for Savings and Investment and the Business Roundtable — executives from AT&T and Verizon, for example, are members of all three.
Despite this, Romano said Fix the Debt is really more of a “bipartisan, grassroots campaign.”
The group is active in 17 states and boasts more than 320,000 signatories of its “Citizens Petition to Fix the Debt,” according to its website.
“We believe that any deal needs to be big, bipartisan and balanced. It needs to include reining in spending; it needs to include real entitlement reform; and it needs to raise revenue,” Romano said. “It’s the test of our time for our political leaders.”
Federal officials, in an apparent effort to clamp down on Medicare fraud and abuse, are tightening scrutiny of the growing numbers of doctors who rely on electronic medical records to bill for their services.
The Centers for Medicare and Medicaid Services has directed its auditors to look more closely to make sure the systems are properly documenting the services being paid for by the government. The new policy, announced in November, went into effect earlier this week.
The new directive was first reported by FierceEMR.
At issue is the impact electronic medical records can have on billing for doctor visits. Doctors must choose one of five escalating payment levels, known as “Evaluation and Management” codes that best reflect the amount of time spent with a patient as well as the complexity of the care.
Medical groups argue that computers make it easier for them to document all of the work they do, which leads to higher codes and fees. But officials worry that the software also can be manipulated to inflate bills — a practice known as “upcoding.”
The stakes are high. Medicare spent more than $33.5 billion in 2010 using these numeric codes for services ranging from routine doctor office visits to outpatient hospital or nursing home care. More than half the doctors billing Medicare were using electronic records in 2011, and that number has since grown further, officials said.
CMS officials would not comment directly on the new policy, but said their purpose was partly to remind doctors that they must document that all billed medical care was necessary. The directive discourages the use of check-off lists that the agency said gather information “primarily for reimbursement purposes.” These sorts of records “generally do not provide sufficient information to adequately show” that a doctor visit was necessary, CMS said.
Dr. Stephen R. Levinson, a Connecticut physician and expert on medical coding, said that “this is another way of saying that cloned documentation won’t be approved for payment,” said Levinson.
Michelle Dougherty, director of research and development for the American Health Information Management Association, said the new directive “will help shape billing practices.” She said it was an “important clarification” that has identified weaknesses in billing using the software in electronic records systems. The group, which boasts about 64,000 members, has strongly supported more guidance from the government about what is proper as medicine enters the digital era.
Dr. David Kibbe, a senior advisor to the American Academy of Family Physicians on digital medicine, said the digital records systems can be misused in order to promote higher billing. “I don't know how extensive a problem this represents,” he added. “Perhaps no one does.”
The Medicare billing process has come under heightened scrutiny in the wake of the Center’s "Cracking the Codes" series, published in September. The investigative project documented that thousands of medical professionals have steadily billed Medicare for more complex and costly health care over the past decade — adding $11 billion or more to their fees—and strongly suggested that the rapid growth in the use of electronic health records and billing software has contributed to the higher charges.
The Center’s year-long examination also identified a wide range of costly billing errors and abuses that have plagued Medicare for years—from confusion over how to pick proper payment codes to outright false charges.
Officials have pushed ahead with digitizing medicine without taking steps to minimize billing fraud. Insurance auditors criticized digital records systems as far back as 2006. That year Medicare contractor First Coast Service Options chided Connecticut doctors who “frequently over-documented” to justify higher billing codes.
In early 2009, federal officials announced they would pay billions of dollars to hospitals and doctors who agreed to buy electronic medical records and use them to improve the quality of health care. CMS has since provided about $4 billion to medical professionals who made the switch.
Yet late last year, the Department of Health and Human Services Office of Inspector General said its contractors had detected overbilling and would begin investigating “potentially improper payments” linked to electronic medical records. The office also advised doctors they could be held accountable if the codes they used didn’t “accurately reflect the services they provide.”
William Mahon, a Virginia expert on health care fraud, called the new CMS directive a “big deal.” He said federal officials have realized they must strike a balance between encouraging doctors to adopt the new technology and preventing them from using it to game the system. “This will create a lot of waves,” Mahon said.
Joe Ferro, a Florida billing consultant who serves on a panel on fraud and abuse for the trade association Healthcare Information and Management Systems Society, or HIMSS, said that one of the selling points for electronic health records was their ability to offer powerful tools for documenting medical care. Now the government appears to be restricting the use of the tools. “That’s the way I read this,” he said.
Many experts believe electronic health records hold great potential to keep people healthier and the shift from paper to digital medical records has enjoyed strong political support in Congress. Yet in recent months Republicans have begun to question the billions in tax dollars spent on the program. Funds for the conversion are part of the nearly $800 billion economic stimulus package passed by Congress in February 2009.
Over the past couple of years I’ve met many people who, as my mother would suggest, were wishing their life away. But I quickly understood why.
These were folks in their early 60s—and even some in their 50s—who couldn’t wait until they turned 65. They were literally counting the days until they could enroll in Medicare.
Many of these folks had been uninsured for years because of pre-existing conditions. They’d been blackballed by insurance companies andcouldn’t buy a policy at any price because they’d been sick in the past. Others were underinsured because they simply couldn’t afford decent coverage. Policies that would better meet their needs were being sold to younger people for $300 a month or less. But for them: at least $1,500.
And even the people with coverage were sick and tired of fighting to get medical bills paid and doctor-ordered treatments approved.
I’m betting every member of Congress has heard these same stories. How, then, could any of them even give the idea of raising the Medicare eligibility age a moment’s thought?
Not only would such a thing be cruel, it doesn’t make sense from an economic point of view. If lawmakers take the time to consider the facts, this idea will quickly fall off the table during the fiscal cliff discussions.
On the surface it might seem a no-brainer. Raising the eligibility age from 65 to 67 would save Medicare billions because there would be fewer medical bills to pay. But those people will still need coverage and will still get sick. So raising the eligibility age would do nothing more than shift the cost of both health insurance and medical care, in many cases to those who can least afford it.
Proponents of this idea say its time has come because starting in 2014, insurers will no longer be able to deny coverage to anyone because of age or health status, thanks to the Affordable Care Act. People who can’t get coverage through the workplace will by then be able to shop for it on the state exchanges. But insurers will still be able to charge older people three times as much as younger folks. That would pose afinancial hardship for many seniors. The Kaiser Family Foundation estimates that two-thirds of 65 and 66–year-olds would have to pay at least $2,200 a year more for coverage than they would if they were on Medicare.
And some of the money that the Medicare program might save would actually cost other parts of the federal government more. People earning up to 400 percent of the federal poverty level will be eligible for subsidies from the government under the ACA to help them afford coverage. If the Medicare eligibility age is increased, more federal subsidy money will be needed to help 65 and 66-year-olds buy policies. And that money will go straight to insurance companies, meaning that about the only people benefiting from this idea would be insurance company executives and shareholders.
Even with the subsidies, some seniors undoubtedly would forgo coverage and pay a penalty to the IRS as required by the ACA because of the hit their family budgets would take from buying insurance. Nearly 15 percent of people between 55 and 65 are currently uninsured, according to the Census Bureau. Many of 65 and 66-year-olds who otherwise would be on Medicare undoubtedly would remain uninsured if the eligibility age was raised.
But those folks would still get sick and need hospital care. Many of them wouldn’t be able to pay for that care, meaning the hospitals would have to pass along the cost of their care to people with private insurance. Those of us with private insurance already pay $1,000 a year more than we otherwise would because of this cost shifting.
Raising the eligibility age would also cost businesses more because they would have to continue providing coverage for employees who would not retire at 65 because they would not yet be eligible for Medicare. Some small businesses would stop offering coverage entirely because of the additional costs.
Every one of us would pay more in yet another way. Putting those 65 and 66-year-olds back in the private insurance pool would mean that everybody else in the pool would pay more for coverage. That’s because those older people would be more likely to need care than the rest of us. All of our premiums would go up.
President Obama said last year he would consider raising the eligibility age as part of a deal to cut federal spending. He’s been silent on the issue so far this year, maybe because he’s given it more thought. Let’s hope so.
The National Rifle Association is keeping silent in response to calls for gun control measures in the wake of the massacre at Sandy Hook Elementary School in Newtown, Conn. Yet the massive trail of political money spent by the group shows the potent force any proposals for new restrictions will likely face when the anger and dismay over Sandy Hook recedes.
Since President Barack Obama took office, the NRA has spent millions to lobby Congress on gun legislation and bankroll the campaigns of supportive candidates. From 2009 through the first three quarters of 2012, the NRA spent more than $8.5 million to lobby on gun bills, according to mandated federal lobby disclosure records, most often to block proposed limits on weapons and ammunition access or support efforts to expand the right to carry concealed weapons in public. Direct federal lobbying accounts for only a small portion of the association’s total spending to influence state and federal gun policy; according the NRA’s 2010 tax return, it spent more than $20 million on “legislative action” that year. Much of the recent legislation on concealed weapons, in particular, has been at the state level.
Although federal lobbying disclosure records do not include itemized NRA spending on each bill, documents show that the association took sides on a number of initiatives, including a 2011 bill introduced by Sen. Frank Lautenberg (D-N.J.) that would have banned magazines holding more than 10 rounds of ammunition. Both Adam Lanza, the Sandy Hook Elementary School shooter, and Jacob Roberts, the masked gunman who killed two at an Oregon mall shooting earlier this month, carried high-capacity clips and civilian versions of the military M-16. Lautenberg has pledged to reintroduce the bill, which languished in committee during the 2012 session.
An assault weapons ban in effect from 1994 to 2004 included a ban on new high-capacity magazines. Gun-control advocates argue that large-capacity magazines allow criminals to quickly inflict mass casualties, since shooters do not need to reload until a clip is empty. The NRA, however, has said banning large-capacity magazines puts gun owners at risk at the hand of criminals. The ability to fire multiple shots improves “their odds in a defensive situation”, the NRA has said, particularly when assaulted by multiple assailants.
The association also lobbied against a second failed Lautenberg bill that would have prohibited online ammunition sales and required reporting of bulk ammunition purchases.
In addition to wielding its power in Congress, the NRA has long provided financial ammunition for candidates who share its values. Over the course of the 2010 and 2012 election cycles, the NRA’s political action committee contributed a total of more than $2 million to federal candidates, the overwhelming majority of whom were Republicans, according to Center for Responsive Politics. Since 2009, the NRA has also put more than $1 million into state campaigns, according to the National Institute for Money in State Politics.
The NRA has long been both respected and feared for its political muscle. In response to the 1994 assault weapons ban, the group is widely credited with helping engineer a Republican takeover of Congress. By contrast, more recently some NRA-backed candidates have lost, including Josh Mandel, the 2012 Republican challenger to incumbent Ohio Sen. Sherrod Brown, and former Wisconsin Gov. Tommy Thompson, who was defeated for a Wisconsin Senate seat by Democrat Tammy Baldwin.
Liberals are hoping that revulsion over the Connecticut shooting could further alter the political dynamic regarding the NRA. At least one beneficiary of the organization’s money appears to be backing away from NRA talking points. On Monday, Sen. Joe Manchin (D-W.Va.), who received $4,500 from the association for his 2012 campaign— the only Senate Democrat to receive NRA money, according to Center for Responsive Politics— announced that he may be open to gun control initiatives.
Rep. John Yarmuth, a moderate Kentucky Democrat, said Monday that the NRA is using its deep pockets to “instill fear in our citizens and politicians.” In a statement posted on his website, the pro-gun Yarmuth said the NRA “wants us to believe that the best protection against the irresponsible and lethal use of guns is for everyone to be armed. And while no specific gun regulation may have prevented the deaths of the 20 Sandy Hook Elementary children … the answer simply cannot be a gun in every elementary school lunchbox.”
The NRA did not respond to requests for comment.
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After a three-year investigation, authorities in Shelby County, Tenn. signed an agreement Monday with the U.S. Department of Justice to revamp a juvenile-justice system federal officials said was unduly harsh to black youth, including those accused of minor infractions.
The agreement will require Shelby, which includes the city of Memphis, to initiate sweeping staff training and changes to improve minors’ defense options, alter court proceedings to guarantee the rights of accused offenders and eliminate detention practices federal officials found dangerous.
In April, federal investigators published a litany of accusations about the Shelby County juvenile-justice system. Investigators alleged that local officials were routinely violating the constitutional rights of youths put into court proceedings and detention. Among the accusations: “cursory” decisions to transfer youths to adult court, inadequate counsel and an adult-court transfer rate for black wards twice that of white wards.
Detention officials also violated their own policies by strapping wards down in restraint chairs for lengthy periods of time and for inappropriate reasons, investigators with the U.S. Department of Justice’s Civil Rights Division alleged. In addition, they said custodians failed to protect wards from “self-injury” and used “dangerous and unconventional pressure point tactics” to subdue youth.
Juvenile-justice advocates consider the Shelby agreement an important step forward in a burgeoning national movement to reform suspect juvenile-court proceedings and detention policies. New York and other states are already scaling back large detention facilities and placing low-level offenders in community-based rehabilitation programs, which is Shelby’s plan now, as the New York Times reported.
The Memphis Commercial Appeal reported that some local elected officials were unhappy with the process leading up the agreement, even though some had also previously complained of suspect treatment of youth. Another local elected official reportedly said he thought allegations of disproportionate unfair treatment of black youth were blown “out of proportion.”
One member of the county’s elected Board of Commissioners said members might not vote to authorize spending $4.5 to $6.5 million in reforms they didn’t help plan, the newspaper said. If the conditions of agreement are not fulfilled, however, federal officials could sue Shelby.
The report that federal investigators released in April contains allegations of stark racial disparities that were uncovered, they said, by studying records and transcripts of juvenile proceedings in Shelby County.
Investigators found “a disparity in the initial detention of black children as compared to white children,” according to the report. “The case data showed that a black child was more than twice as likely to be detained as a white child. This number remained unchanged after accounting for other legal and social factors.”
Investigators also found that black children were one third less likely to receive a warning from local juvenile authorities than white children, “even after accounting for other factors such as prior contacts with the court, the severity of the charges, gender, and education.”
As the Center for Public Integrity reported in September, civil rights investigators with the U.S. Department of Justice have also scrutinized the juvenile court of the community of Meridian, Miss.
Federal officials sent a warning letter to Meridian after an investigation found that youths were being sent into detention unjustly in a “school to prison pipeline.” In October, federal officials filed suit against authorities in Meridian, alleging violations of constitutional rights of minors sent to detention because of violations of school discipline rules.
The Democratic Congressional Campaign Committee is running radio and Web ads that target 21 vulnerable Republican House members for “holding the middle class hostage” during the fiscal cliff negotiations.
The campaign is a bit unusual — most parties prefer to run ads a bit nearer to an actual election.
“It’s not really common to see much Democratic or Republican congressional spending this soon after an election,” said Michael Franz of the Wesleyan Media Project, which tracks and analyzes campaign advertising. “The permanent campaign is really here.”
As part of its “GOP Hostage Takers” campaign, the DCCC is targeting U.S. representatives with radio and web ads called the “Holiday Cliff,” which look and sound like mock movie trailers, complete with a car hurtling off a winding mountain road.
“This holiday season, if you make only one phone call, if you send only one email, tell Congressman Chris Gibson — don’t drive us off the cliff,” the narrator says.
In addition to Gibson, R-N.Y., the DCCC has targeted five other Republican representatives with video ads — Gary Miller of California, Dan Webster of Florida, Tom Latham of Iowa, John Kline of Minnesota and Jaime Herrera Beutler of Washington.
All six are considered vulnerable in 2014 according to Larry Sabato, the director of the University of Virginia’s Center for Politics. Eleven of the 15 members targeted in the radio ads are also beatable, according to the Center.
“The ads are about the here and now, not just about 2014,” Sabato told the Center in an email. “But no doubt they are also intended to send a message about the next election, that what the members do now will not be forgotten in two years.”
“It’s more of a warning to a member of Congress that, ‘Hey you’re in our sights. You better think carefully about this vote,’” said Travis Ridout, also of the Wesleyan Media Project.
A press release from the DCCC says the legislators were targeted for their refusal to sign a discharge petition to allow the House to vote on extending tax cuts for the middle class, a measure the Senate approved.
A discharge petition is an administrative tactic used to force a vote on a bill that is stuck in committee. In this case, it is the House version of the Senate’s bill to extend tax cuts on all but the wealthiest Americans.
The petition has 182 signatures. It needs 218 to bring the bill to the floor for a vote. No Republicans have signed.
A DCCC spokesman declined to comment on how much the ad campaign costs.
The DCCC spent more than $180 million on the 2012 election and had $2.5 million in the bank as of Nov. 26, according to Federal Election Commission records.
Crossroads GPS, a conservative nonprofit, is targeting vulnerable Democratic senators for not wanting to cut safety net programs.
Others groups, such as labor unions, AARP, big business groups and the anti-debt advocacy organization “Fix the Debt” are also airing ads.
The cliff the ads refer to occurs Jan. 1, 2013 when mandatory cuts in spending and the elimination of tax breaks are scheduled to kick in. Without a compromise between the two parties, it is feared the nation will slip into a recession.
CHICAGO — By the time Carlos Centeno arrived at the Loyola University Hospital Burn Center, more than 98 minutes had elapsed since his head, torso, arms and legs had been scalded by a 185-degree solution of water and citric acid inside a factory on this city’s southwestern edge.
The laborer, assigned to the plant that afternoon in November 2011 by a temporary staffing agency, was showered with the solution after it erupted from the open hatch of a 500-gallon chemical tank he was cleaning. Factory bosses, federal investigators would later contend, refused to call an ambulance as he awaited help, shirtless and screaming. He arrived at Loyola only after first being driven to a clinic by a co-worker.
At admission Centeno had burns over 80 percent of his body and suffered a pain level of 10 on a scale of 10, medical records show. Clad in a T-shirt, he wore no protective gear other than rubber boots and latex gloves in the factory, which makes household and personal-care products.
Centeno, 50, died three weeks later, on December 8, 2011.
A narrative account of the accident that killed him — and a description of conditions inside the Raani Corp. plant in Bedford Park, Ill. — are included in a U.S. Occupational Safety and Health Administration memorandum obtained by the Center for Public Integrity. The 11-page OSHA memo, dated May 10, 2012, argues that safety breakdowns in the plant warrant criminal prosecution — a rarity in worker death cases.
The story behind Centeno’s death underscores the burden faced by some of America’s 2.5 million temporary, or contingent, workers — a growing but mostly invisible group of laborers who often toil in the least desirable, most dangerous jobs. Such workers are hurt more frequently than permanent employees and their injuries often go unrecorded, new research shows.
Raani’s “lack of concern for employee safety was tangible” and injuries in its factory were “abundant,” Thomas Galassi, head of OSHA’s Directorate of Enforcement Programs, wrote in the memo to David Michaels, assistant secretary of labor for occupational safety and health.
Raani managers failed to put Centeno under a safety shower after he was burned and did not call 911 even though his skin was peeling and he was clearly in agony, Galassi wrote. “It took a minimum of 38 minutes before [Centeno] arrived at a local occupational health clinic … after having been transported by and in the vehicle of another employee while he shivered in shock and yelled, ‘hurry, hurry!’ ”
A clinic worker called an ambulance, which, according to Chicago Fire Department records, arrived at 2:26 p.m. Centeno was in “moderate to severe distress with 70-80% 1st and mostly 2nd degree burns to head, face, neck, chest, back, buttocks, arms and legs,” the records show. Paramedics administered morphine.
“The EMT’s were horrified and angered at the employer, for not calling 911 at the scene and further delaying his care by transferring him to a clinic instead of a hospital,” Galassi’s memo says.
John Newquist, who retired from OSHA in September after 30 years with the agency, said the case was among the most disturbing he encountered as an assistant regional administrator in Chicago.
“I cannot remember a case where somebody got severely burned and nobody called 911,” said Newquist, a former compliance officer who investigated more than 100 fatal accidents during his career. “It’s beyond me.”
On May 15, OSHA proposed a $473,000 fine against Raani for 14 alleged violations, six of which are classified as willful, indicating “plain indifference” toward employee safety and health. No decision has been made on whether the case will be referred to the Department of Justice for possible prosecution, agency spokesman Jesse Lawder said. OSHA hadn’t inspected the Raani factory for 18 years prior to the accident.
“It’s just wrong, what happened,” Centeno’s 26-year-old son, Carlos Jr., said of Raani managers’ actions after his father’s accident. “They were not thinking of him as a human being.”
Raani is appealing the OSHA citations. H. Patrick Morris, a lawyer for the company, did not answer questions about the alleged violations. Morris said, however, that while Centeno was “a good worker and nice person,” the company has “good and valid defenses” to the allegations in the family’s lawsuit. Raani has yet to file court documents outlining its position.
Jeffrey Kehl, a lawyer for Ron’s Staffing, declined to comment.
‘I wanted him to quit’
Carlos Centeno came to Chicago from Mexico City in 1994. He was joined six years later by his partner, Velia Carbot, and Carlos Jr. A daughter, Alma, stayed behind.
The family settled in Humboldt Park, a working-class neighborhood on the city’s northwest side. A second daughter, Melanie, was born in 2001.
Centeno held jobs as a bartender, newspaper deliveryman and forklift driver at a warehouse. In June 2010, after being laid off by the warehouse, he put in an application at the Ron’s Staffing office on West 63rd Street, not far from Midway International Airport. He was sent to the nearby Raani Corp. factory, which makes products ranging from shampoos, styling gels and deodorant sticks to dishwashing liquids and household cleaners. His starting pay was $8.25 an hour.
Raani, founded in 1983 by Rashid A. Chaudary, a Pakistani chemist-turned-entrepreneur, has about 150 employees, roughly 40 percent of whom are contingent workers, according to the May 2012 OSHA memo. Centeno cleaned the tanks in which the factory’s products are mixed. His work clothes became so rank, he had his own laundry basket at the family’s apartment, partner Carbot said; about six months before the fatal accident, chemicals splashed in his right eye and he couldn’t see out of it for three days, she said.
“I wanted him to quit,” Carbot, speaking in Spanish, said. “But, at the same time, we knew he hadn’t found another job yet, and expenses continued, unfortunately, and he had to work.”
The OSHA memo describes a factory in which workers were often hurt and injuries were not properly recorded. An OSHA inspection on December 9, 2011, the day after Centeno died, revealed, for example, that workers “were handling chemicals including, but not limited to, corrosives and acids while wearing only medical grade latex gloves,” the memo says.
Workers were seen putting their hands directly into streams of chemicals poured from drums, OSHA enforcement director Galassi wrote. “Another significant hazard [to] which employees are exposed, as evidenced by the fatality, was the high temperature (nearly boiling) water and cleaning solutions used for cleaning tanks, process lines and floors. Employees interacted with high temperature liquids wearing only latex gloves and tee-shirts.”
A manager explained that thick, black gloves were kept in the maintenance department “because they were expensive and the employees stole them,” Galassi wrote. The manager said, however, that “any employee could obtain the black gloves if so desired.”
A review of Raani’s medical files turned up five injuries, apart from Centeno’s, that had occurred since 2010 but had not been entered in OSHA logs, as required by federal law, Galassi wrote. Injuries “involving chemical exposure to eyes, high temperature liquid burns and cuts had been a common occurrence for years,” his memo says. One worker who had been burned and whose skin was peeling was told by a manager “to leave it alone, it wasn’t dangerous.”
Another was burned so badly he needed skin grafts, but the incident wasn’t recorded even though CEO Chaudary “stated he was aware of the injury,” Galassi wrote. On January 27, 2012, more than two months after Centeno was scalded, a worker performing a similar tank-cleaning procedure received severe burns to his left leg. He was handed a written notice from management. “You are hereby warned to be careful in the future,” it said in part.
“Instead of issuing the appropriate [protective gear] to its workers and ensuring its usage, Raani Corporation has chosen to blame their employees outright for their injuries and non-compliance,” Galassi wrote.
Two managers “admitted to witnessing [Centeno] with his shirt off and speaking with him” shortly after he was burned, the memo says. “Both managers agreed the injured employee’s skin was burned, damaged, wrinkled and parts were ‘peeling.’ ”
The managers not only failed to call 911 — they made Centeno wait while one filled out paperwork before allowing him to be taken to a local clinic, Galassi wrote. The co-worker who drove Centeno about four miles to the MacNeal Clearing Clinic said “he was asked to lie on his written statement and write that Carlos Centeno was acting fine, conscious and talking on the drive to the clinic. Even after the incident, company officials have not concluded that 911 should have been called immediately.”
Chaudary, who was not on the scene the day of the accident — November 17, 2011 — told an OSHA inspector that the “wrong valve opened” on the tank Centeno was cleaning, according to the memo, but insisted that “if Carlos Centeno had lived, the decision to not call an ambulance would have been the right call.”
Centeno’s co-workers, however, “provided signed statements of the severity of the injury and the extreme delayed response in seeking medical care,” Galassi wrote.
Chaudary did not respond to requests for comment.
Not long after he was doused with the hot water-citric acid mixture, Centeno called Velia Carbot, asking for Carlos Jr. He sounded agitated and had trouble speaking, Carbot said, but would not explain what had happened.
Carbot went across the street and got Carlos Jr., who called his father’s cell phone. It was answered by a co-worker, Samuel Meza, who said Carlos Sr. had been burned at work. “He was like, ‘I’m taking him to the clinic,’ ” Carlos Jr. said.
Meza called Carlos Jr. after he arrived at the MacNeal Clearing Clinic. While they talked, Carlos Jr. said, “I could hear that the nurse in the clinic was telling him, ‘Why are you bringing him here? … He needs to go to the emergency room.’ ”
Carbot and Carlos Jr. began driving to the clinic, 13 miles south of Humboldt Park, but diverted west to Loyola Hospital when Meza told them that’s where Centeno would be heading.
Carlos Jr. and Carbot got there first, watching ambulance after ambulance pull up. “I remember just walking up to all the ambulances and it was someone else,” Carlos Jr. said. “It wasn’t my dad. It just makes you more anxious.”
At 3:08 p.m., more than 98 minutes after he had been burned, Carlos Sr. made it to Loyola. “When they finally opened the doors and I saw it was him, I could just see he was in pain,” Carlos Jr. said. “He was trying to hide it. He saw my mom and I could see his eyes started to tear.”
Carlos Centeno Sr. died three weeks later, on December 8. OSHA, which learned of his death from the Cook County medical examiner, began its inspection of Raani the next day. Its last visit to the plant had been in 1993, when, responding to a worker complaint, it cited the company for six alleged violations — including failing to protect workers from unexpected energizing or startup of machines — and proposed a $9,500 fine. Raani settled the case for $6,500 in 1994.
In an emailed statement, OSHA said no follow-up inspection was conducted. This is “not unusual,” the agency said, “as long as we receive documentation from the employer that the violations were corrected.”
Dangers of temp work
The use of contingent workers by U.S. employers has soared over the past two decades. In 1990, according to the U.S. Bureau of Labor Statistics, there were about 1.1 million such workers; as of August 2012, the number was 2.54 million, down slightly from pre-recession levels but climbing.
The American Staffing Association, a trade group, says the hiring of contingent workers allows employers to staff up at their busiest times and downsize during lulls. Temporary work enables employees to have flexible hours and “provides a bridge to permanent employment,” the group says on its website.
Recent research, however, suggests a dark side to contingent work.
A study published this year of nearly 4,000 amputations among workers in Illinois found that five of the 10 employers with the highest number of incidents were temp agencies. Each of the 10 employers had between six and 12 amputations from 2000 through 2007. Most of the victims lost fingertips, but some lost legs, arms or hands.
The researchers, from the University of Illinois at Chicago School of Public Health, called the glut of amputations a “public health emergency,” inflicting psychological and physical harm and costing billions.
Another study, published in 2010, found that temp workers in Washington State had higher injury rates than permanent workers, based on a review of workers’ compensation claims. In particular, temp workers were far more likely to be struck by or caught in machinery in the construction and manufacturing industries.
“Although there are no differences in the [OSHA] regulations between standard employment workers and temporary agency employed workers, those in temporary employment situations are for the most part a vulnerable population with few employment protections,” wrote the researchers, with the Washington State Department of Labor and Industries.
In fact, experts say, there’s little incentive for host employers to rigorously train and supervise temp workers because staffing agencies carry their comp insurance. If an agency has a high number of injuries within its workforce, it — not the host employer — is penalized with higher premiums.
“This is really about an abdication of responsibility,” said Tom Juravich, a professor at the University of Massachusetts, Amherst, who has studied the temp worker phenomenon. “If some of the jobs in your facility are undesirable and dangerous, you outsource them to people who won’t complain. If you have a direct worker who’s injured, you have an obligation to him through workers’ comp. If he’s a contingent worker, you don’t have that obligation.”
As part of a three-year study, researchers in Canada interviewed temp workers and managers at temp agencies and client companies. “To be frank,” one agency manager confided, “clients hire us to have temps do the jobs they don’t want to do.” Co-author Ellen MacEachen, of the University of Toronto and the Institute for Work and Health, said, “Even if [temp workers] are not cheaper, they’re more disposable. … You can get rid of them when you want, and you don’t pay benefits.”
Bureau of Labor Statistics numbers say contingent workers’ injuries are declining. Yet, new evidence suggests these injuries are undercounted.
In a BLS-funded project completed last summer, officials with the Washington State Department of Labor and Industries interviewed 53 employers who had used temp workers. Only one-third said they would enter a temp worker injury in their OSHA log, as the law requires. The others said they wouldn’t or claimed ignorance. “A lot of them just didn’t know” the rules, said Dr. David Bonauto, the department’s associate medical director.
The executive director of the Chicago Workers’ Collaborative, which advocates for temp workers, says OSHA should target employers known to make heavy use of staffing agencies.
“The rise of the staffing industry is partially to give companies a greater distance from regulation,” said Leone José Bicchieri. “OSHA needs to come up with different approaches for this rapidly growing sector” — meeting with temp workers offsite, for example, so they’re not intimidated by supervisors.
Temp workers are often reluctant to report injuries because they are so easily replaced, Bicchieri said.
“They have no power to speak up,” he said. “The whole temp industry was created so the client company has less liability. We need to put workplace injuries back on the plate of the client company.”
Stephen Dwyer, the American Staffing Association's general counsel, cautioned against an OSHA crackdown on temp agencies. "To the extent that efforts become heavy-handed, there can be a disincentive, then, to using temporary workers," Dwyer said, to the detriment of the workers, client employers and "the overall economy."
In a statement, OSHA said it “feels strongly that temporary or contingent workers must be protected. They often work in low wage jobs with many job hazards — and employers must provide these workers with a safe workplace.”
The agency said it has brought a number of recent enforcement actions against employers for accidents involving temp workers. In June, for example, OSHA citedTribe Mediterranean Foods for 18 alleged violations following the death of a worker at its plant in Taunton, Mass. The worker — not properly trained, according to OSHA — was crushed by two rotating augers while cleaning a machine used to make hummus. The case was closed after Tribe agreed to fix hazards and pay a $540,000 fine.
“While some employers believe they are not responsible for temporary workers … OSHA requires that employers ensure the health and safety of all workers under their supervision,” the agency said.
Weak law, few prosecutions
Although the Galassi memo recommends criminal action in the Centeno case, employers in America are rarely prosecuted for worker deaths.
The Occupational Safety and Health Act of 1970 is exceptionally weak when it comes to criminal penalties. An employer found to have committed flagrant violations that led to a worker’s death faces, at worst, a misdemeanor punishable by six months in jail.
By comparison, a violation of the Endangered Species Act carries a maximum sentence of one year.
“It should not be the case that a facility that commits willful violations of the worker safety laws faces only misdemeanor charges when a worker dies because of those violations,” said David Uhlmann, a law professor at the University of Michigan and former chief of the Justice Department’s Environmental Crimes Section.
“The company involved as well as any responsible corporate officials should face felony charges that carry significant financial penalties for the company and the possibility of lengthy jail terms for the individuals," Uhlmann said. "Anything less sends a terrible message about how we value the lives of American workers.”
Federal prosecutors are generally unenthusiastic about worker cases, said Jordan Barab, second-in-command at OSHA. The Justice Department “often says, ‘You know, we’re not going to spend all these resources just to prosecute a misdemeanor,’ ” Barab said.
At Justice, Uhlmann made creative use of environmental statutes to get around the OSH Act. In one case, a worker at an Idaho fertilizer plant named Scott Dominguez nearly died after being sent into a steel storage tank containing cyanide-rich sludge. Dominguez had been ordered into the 25,000-gallon tank without protective equipment by the plant’s owner, Allan Elias, who had refused to test the atmosphere inside the vessel.
Dominguez collapsed and sustained brain damage from the cyanide exposure. Prosecutors charged Elias with three felony counts under environmental laws, including the Resource Conservation and Recovery Act, which governs the handling and disposal of hazardous waste.
Because Elias had fabricated a confined-space entry permit indicating it was safe for workers to enter the tank, he also was charged with one count under a section of Title 18 of the United States Code, for making a false statement to, or otherwise conspiring to defraud, government regulators.
After a jury trial in 1999, Elias was convicted on all counts and sentenced to 17 years in prison.
Environmental statutes don’t always apply in worker death or injury cases. The accident that mortally wounded Carlos Centeno, for example, appears not to have involved hazardous waste, or air or water pollution.
Charges under Title 18 remain a possibility, Uhlmann said. Nonetheless, he said, the OSH Act needs revision. Congress came close to adding felony provisions to the law in 2010 but failed amid pushback from the business community.
“Accidents are not criminal,” Uhlmann said. “What are criminal are egregious violations of the worker safety laws that result in not just deaths but serious injuries.”
Sen. Tom Harkin, an Iowa Democrat who chairs the Senate Health, Education, Labor and Pensions Committee, is a co-sponsor of the Protecting America’s Workers Act, which would enhance criminal and civil penalties for OSHA violations.
“In every other walk of life, if a person engages in willful conduct that results in someone else’s death, we throw the book at them,” Harkin said in a statement. “But if someone dies on the job, the rules are different. Even intentional lawbreaking that kills a worker brings no more than a slap on the wrist.”
Whether a bulked-up worker-protection law would have improved conditions at the Raani Corp. is a matter of speculation. According to Thomas Galassi’s memo, the accident that ultimately killed Carlos Centeno merited only a one-line entry in the company’s files, stating that an internal committee would investigate.
During the inspection after Centeno’s death, a newly hired Raani manager asked OSHA officials to help him convince his superiors to train and provide safety gear to workers, Galassi wrote. The manager had concluded that those above him had “no respect for the hazards of the chemicals on site or human life.”
Esteemed political journalist Dave Levinthal will join the Center for Public Integrity Jan. 7 as a senior member of its team investigating the impact of the ever-increasing flow of money in elections.
Levinthal comes to the Center from Politico, the online and print chronicle of Washington politics. Since July 2011, he has co-authored the daily Politico Influence column, reporting on campaign finance and lobbying issues. He will join the Center's “Consider the Source” project, which was created to investigate the impact of the Supreme Court’s Citizens United decision on the 2012 election.
“Dave Levinthal is a talented journalist and one of the nation’s leading reporters in the areas of money and politics,” said Executive Director William E. Buzenberg. “We are delighted to have him join the Center for Public Integrity’s growing cadre of investigative reporters digging into political corruption.”
Before joining Politico, Levinthal worked for two years as editor of OpenSecrets.org for the Center for Responsive Politics. He is a well-known political analyst, having provided commentary to hundreds of television, radio and print news outlets.
Between 2003 and 2009, Dave reported on Dallas city government for the Dallas Morning News. From 2000 to 2002, he covered the New Hampshire statehouse for the Lawrence (Mass.) Eagle-Tribune. Levinthal is a graduate of Syracuse University where he edited The Daily Orange.
Dave was born and raised in Buffalo, N.Y. His first job in newspapers: Delivering the Buffalo News door-to-door at age 10.
The Center for Public Integrity is a nonprofit, nonpartisan and independent news organization specializing in investigative journalism on significant public policy issues. Since 1990, the Washington, D.C.-based Center has released more than 500 investigative reports and 17 books to provide greater transparency and accountability of government and other institutions.
The deaths of four Americans in Benghazi on Sept. 11, including the U.S. ambassador to Libya, stemmed from systemic shortcomings in the State Department’s handling of diplomatic security, according to an independent review ordered by the department and published this week.
These included a failure by the department to anticipate the gravity of the security threat, and a failure to have adequate forces in place or in a position to rush to the Benghazi mission during the attack that unfolded during Amb. Chris Steven’s visit there.
But they also stemmed from some fairly prosaic failures at the mission itself, according to a less-noticed portion of the department’s report. The attack unfolded quickly, but it was a surprise to those inside partly because an additional set of surveillance cameras “remained in boxes uninstalled” and a camera in the guard booth at the main gate “was inoperable on the day of the attacks, a repair which also awaited the arrival of a technical team.”
Also, the review board concluded that diplomatic security officials failed to anticipate the possibility that those at the mission could be put at risk from smoke, even though fires are ubiquitous when military ordnance explodes, as it often does in conflict and post-conflict locales. “The lack of fire safety equipment severely impacted the Ambassador’s and [security guard] Sean Smith’s ability to escape,” the panel said.
At a Senate Foreign Relations committee hearing on Dec. 20, Deputy Secretary of State Thomas R. Nides promised that the department was “realigning resources in our 2013 budget request to address physical vulnerabilities and reinforce structures wherever needed, and to reduce the risks from fire.” Three State Department officials were reassigned and one was retired in the wake of the review panel’s harsh conclusions.
The hearing was noteworthy in part because it was chaired by Sen. John Kerry (D-Mass.), who is President Obama’s likely nominee to become the Secretary of State during his second presidential term. In an opening statement, Kerry added his voice to complaints by members of the review board, in their report, that many of the State Department’s essential functions – including security – have not been adequately funded.
Congress “bears some responsibility here,” Kerry said. “For some time now, overseas resources have been withheld or cut and important foreign policy objectives have, in some cases, been starved. Consider that last year, we spent approximately $650 billion on our military. By contrast, the international affairs budget is less than one-tenth of the Pentagon’s.”
Adequately funding America’s foreign policy objectives, Kerry added, “is not spending—it’s investing in our long term security and more often than not it saves far more expensive expenditures in dollars and lives for the conflicts that we failed to see or avoid. We need to invest in America’s long-term interests in order to do the job of diplomacy in a dangerous world. And this report makes that crystal clear.”
The administration has asked Congress to approve the shift of more than a billion dollars to help repair security defects at dangerous embassies overseas.
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the message was lost.
For want of a message the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
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