The Fine Print: How Big Companies Use "Plain English" to Rob You Blind (5 page)

Another revealing piece of history: the-rich-get-richer pattern in the present is the opposite of what happened in 1934, the year after the Great Depression officially ended. Back then the income of the vast majority soared almost 9 percent, anticipating four decades of real income increases. But those at the top of the top saw their incomes dip, down 3.4 percent in 1934 compared to 1933. (For the record, 1933 had been the best year ever for the stock market, which fuels incomes at the very top but has little effect on the vast majority.)

More recently, when the economy collapsed in 2008—a collapse worse by some measures than the Great Depression—many among the vast majority experienced at first hand a new era of massive numbers of pink slips. My analysis of the Medicare tax database reveals that every thirty-fourth person who had worked in 2008 went through all of 2009 without earning one dollar. Most of those long-term unemployed failed to find any work in the next two years, in part because, since the turn of the new century, the national population has grown six times faster than jobs.

Among the world’s thirty-four modern economies, America ranks second in the share of workers earning low wages. One in four employed Americans in 2010 was classified as a low-wage earner, just a smidgen below the share of low-paid workers in South Korea and far above the share of the same groups in Germany, Norway and other countries that remain broadly prosperous.

Adding to the distress of this growing chasm between the top and bottom is the decreasing number of jobs that come with benefits. More than one in four Americans goes without health insurance for part of each year. America’s largest employer, Walmart, cut the hours of tens of thousands of its workers so that they would no longer be eligible to buy into a company-sponsored health-care plan. Other employers have withheld wage increases, saying they had to divert more money to health-care insurance.

It’s not news that health-care costs devour an ever-larger share of the national economy. America will soon spend half of all the money in the world that is spent on health care or, more accurately, sick care. In 2011 health care consumed every sixth dollar of U.S. economic output, and medical finance experts warn that health costs could rise to one in four dollars. Devoting so large a portion of our economic output to health care means less money for everything else, from educating young people to maintaining roads and from inspecting food for dangerous pathogens to just having a little extra money to go out to dinner.

A look at the retirement system finds more bad news. Some corporate pensions are turning out to be more air than assets, and years of underfunding by many state governments reveal promises made but not funded. Worsening the problem is the legalized looting of pension plans when companies are sold and resold. And what of those do-it-yourself retirement schemes that promised to make the thrifty millionaires by the time they hit their golden years? As 2012 began, the total stock market, including reinvested dividends, was worth a third less than in 2000. Your 401(k) probably became what I call a 201(k).

THE RISE OF CORPORATE POWER IN AMERICA

American schoolchildren are taught that the American Revolution was a protest against taxation without representation. But what launched the colonists toward independence was more nuanced than that. The concern wasn’t so much high taxes as a tax break for a monopoly.

Contrary to what many Americans believe, including members of
today’s Tea Party, the original Boston Tea Party and the smaller ones that followed in other colonial cities were never protests against high taxes. They could not have been, as an examination of official documents at the British Library in London reveals. In that era, taxpayers in the mother country paid twenty-five to fifty times as much in taxes per person as the American colonists. What the colonists who filled Old South Church in Boston on December 16, 1773, were protesting was a tax exemption intended to bail out investors in the British East India Company. With tons of tea that it couldn’t sell, the threat of bankruptcy loomed. That would have meant ruin for friends of King George III in an era when debtors went to prison.

According to historian Benjamin Woods Labaree in his definitive
The Boston Tea Party
(1964), most Bostonians were drinking Dutch tea that fall, not because it was better but because it was cheaper. But the British Parliament had granted the East India Company a tax exemption, meaning the British tea would sell for less than Dutch tea. That might have seemed attractive to customers, but only in the short run, as a royal monopoly was to be strictly enforced. In time, tea prices would rise.

The Founding Fathers, who were sensitive to the potentially unbridled power of the East India Company, would be shocked by the rise of corporate power in our time. Early in the years following American independence, corporations were regarded with deep suspicion. Back then a corporation was allowed to exist for only a single purpose and for a limited period of time, usually twenty years. To retain the privilege of a corporate charter, the owners had to show that the corporation served a public purpose. Hiring people was not enough; that was understood to be necessary to do business. The idea that the government would give a corporation money to create jobs was, in the late eighteenth century, beyond imagining. In short, corporations were narrowly defined entities.

Not until well into the nineteenth century did the evolution of corporations into “people” begin. That story begins with a property tax dispute, one that hinged on the issue of whether the Fourteenth Amendment, adopted to make sure freed blacks were treated equally under the law following the Civil War, could be applied to companies.

The Southern Pacific Railroad was fighting a property tax imposed by California counties in what is now called Silicon Valley. The decision rendered in the case,
Santa Clara County v. Southern Pacific Railroad
, came not from the justices, but amazingly from the pen of the official court clerk, J. C. Bancroft Davis, who just happened to be a former president of Newburgh and New York Rail. Davis’s one-paragraph statement asserted
that the court did not need to hear the case to conclude that corporations were persons under the Fourteenth Amendment and thus were entitled to dispute the tax with the county authorities. Even though the Supreme Court never heard the case, corporations as of that moment were granted personhood in matters of property.

Very much later Associate Justice William Rehnquist, who would subsequently be elevated to chief justice of the United States, noted that the personhood grant applied only to property. Rehnquist warned in a 1978 case that it was one thing to treat corporations as persons when it came to property rights, but altogether different, and dangerous, to give corporations political rights. Rehnquist wrote that Congress, thirty state legislatures and the highest court in Massachusetts were among the many bodies that had

A bit more than a quarter century later, however, Rehnquist’s warning was summarily rejected when, in 2010, under his successor Chief Justice John Glover Roberts, the Supreme Court proclaimed corporations the equal of people in politics. In the case
Citizens United v. Federal Election Commission
, the court went far beyond the narrow issues before it, holding that no law may constrain the spending by corporations, unions, nonprofits or others to influence elections and, further, that the names of those spending money can be kept secret. The notion is one that the framers of our Constitution would never have embraced, yet Roberts and
his confreres insist that their guiding principle is strict adherence to the original intent of the framers. The so-called conservatives who so often rail against what they call judicial activism scarcely acknowledged this act of extreme judicial activism.

Such judicial activism will play a major role in many of the stories that follow about corporate power and how customers, investors, workers and others are abused, often with no way to seek redress for their grievances or losses. Keep in mind that justices Antonin Scalia and Clarence Thomas insist that they are “originalists,” meaning that they apply the intent of the framers, as best they can discern it, to interpreting our Constitution as a document fixed in time. No honest originalist could possibly have signed on to
Citizens United
, but intellectually corrupt justices who worship corporatism, disdain the poor and enjoy the perks of power did so.

It is difficult to overstate the significance of the ideas that Milton Friedman launched in 1970, now compounded by the
Citizens United
decision and the power granted to make corporate values, already dominant, pervasive in every aspect of American life.

Citizens United
is to the expansion of corporate power what the big bang was to the beginning of existence—it is the whole universe.

3.
In Wyoming’s Powder
River Basin, where the high plains merge into the high desert, the countryside takes on a pale green hue in spring as melting snow reveals fresh shoots reaching toward the sun. Soon, though, the summer wind robs the plants of their moisture, tanning the countryside. Just beneath this shifting palette, spread across a million-plus acre expanse larger than Delaware, lies a reddish-brown rock called clinker. Here and there pieces of this natural ceramic litter the surface, like giant shards of pottery smashed eons ago by rampaging Gargantuans.

Looking at the landscape today, one would hardly imagine that the Powder River Basin was once a lush tropical swamp. Crocodiles basked beneath palm trees covered with thick vines watered by more than a hundred inches of warm rain each year. Life flourished in this languid atmosphere sixty million years ago, each plant and animal competing and cooperating until its time ran out and its remains sank into the continually renewed waters. Over five million years, their gooey black residue formed a deposit hundreds of feet deep.

About 55 million years ago, when magma from deep inside the earth raised the land, the fresh water drained away. Between the Black Hills of South Dakota, with their rich veins of gold, and the majestic Big Horn Mountains to the west, dirt and debris slowly covered the former swamp. Heat from the molten rock far below began to dry the goo, cooking it into the black rock we call coal. From the skies, lightning strikes
ignited fires that over eons burned off perhaps 90 percent of the coal, creating natural furnaces that fused rock and dirt above the coal into ceramic clinker.

Cut to the present: this little-known ancient swamp now plays a role in the American economy as a whole and in your wallet in particular. Once again, the trick is to look beneath the surface, to see more than the headlines and to understand the fine print.

Just as geologists can read the layers of rock to understand what the Powder River Basin was like in earlier eons and how a tropical swamp was transformed, so can the record of human choices be peeled back to reveal how America has been transformed from a land of growing economic plenty into a hollow shell. In just a third of a century, the widespread liquidity that nourished the economy—reliable streams of cash going to workers and owners alike—has, like the rainfall that sustained the ancient swamp, dried up. Once so many greenbacks rained down every week or month that the share of people who had too little was shrinking. Today, instead of receding, poverty spreads while the middle class shrinks.

What caused this economic disaster in a few decades is no more a mystery than what happened in Wyoming over a span of 60 million years. Grasping the explanation requires knowledge, but the principles are not complicated. That said, those who have profited from the transformation do their best to describe their actions in language as alien as the Latin Mass was to Catholics before Vatican II brought in the vernacular.

CLINKERS, CARBON AND COAL