Nation Topics - Economics | The Nation

How much does the White House stand to save from Bush's tax cut?

An activist think tank is fighting the right at the ballot box--and winning.

If all goes as the GOP has planned, George W. Bush will have on his desk by Memorial Day a $1.35 trillion tax bill that is wrongheaded and an utterly inequitable pander to the privileged. Every American should be clear about what this bill is: a blueprint that will define the political and social landscape we live in for decades to come. The immense tax cuts will not only disproportionately benefit the wealthy and increase the widening gap between rich and poor, they will also severely circumscribe the government's capacity to help improve the lives of all Americans. (As if to prove the point, the Senate Finance Committee voted out this tax giveaway the same day the Senate voted against increased funding for teachers to help reduce class size.) This downsizing--indeed, emaciation--of government is of course exactly what the right is aiming for. Grover Norquist, "field marshal" of the Bush tax plan, was quoted recently in these pages saying that his goal is "to cut government in half...to get it down to the size where we can drown it in the bathtub."

Under the plan, the 400 richest multimillionaires will receive tax breaks worth an average of $1 million a year. The poorest working families will get zip, even as the nation faces a growing investment deficit measured in children without healthcare, families without housing, overcrowded airports and neglected alternative energy and conservation. Senate "moderates" claim they improved the bill, which is true. Under the original Bush plan, 26 million children in low- and moderate-income families would get no benefit from the tax plan. Under the modified bill, that drops to 10.6 million. The $58 billion a year handed to the wealthiest 1 percent could be used to lift another 2 million children out of poverty, provide health insurance to 5.1 million uninsured children, fund universal preschool and expand childcare services to more than 9 million children--two-thirds of those eligible.

Besides being unfair, the bill, which stretches the cuts over eleven years rather than Bush's original ten, is dishonest--in reality a stealth raid on the Treasury. The Senate earlier voted to cut the Bush tax plan by 25 percent. To meet this, the Finance Committee simply backloaded the bill even more than originally planned--phasing in the full tax cuts later so they don't count under the ten-year limit used to estimate its costs. The $1.35 trillion giveaway balloons to $4.2 trillion in the next decade, after all the provisions kick in. It also calls for ending popular tax breaks in a few years--like the tax credit for research and development--in the confidence that no future Congress would choose to do so. Plus the bill is designed so that 40 million taxpayers will eventually be subject to the Alternative Minimum Tax, insuring changes that will add dramatically to the total cost. And the Republican Congress is just warming up: Even now the K Street lobbyists are cooking up ways to lard a minimum-wage-increase bill with fat corporate tax cuts.

Bush has peddled this tax cut as the elixir for a good economy and a bad one, for rising gas prices and declining stock prices, for small businesses and waitress moms. The repeal of the estate tax is shamelessly presented as a way to save family farmers, even though advocates cannot locate one farm that has actually been lost because of the tax. It's all hype, lies and distortion.

Remember--in 2002 and beyond--those responsible, from Bush to the Republican majority that marched lockstep in support, to the handful of Democratic renegades who provided the margin. They must be held accountable for this travesty.

Toward a North American economic community.

Maude Barlow's analysis of the FTAA is available in four languages on the council's website, www.canadians.org.

George Orwell would have appreciated the irony of President Bush and other hemispheric leaders declaring in Quebec their intention to spread democracy, as chain-link fences, tear gas, water cannons and mass arrests prevented citizens from getting anywhere near the April 20-22 Summit of the Americas. George W. Bush and the leaders of thirty-three other nations who agreed to establish a Free Trade Area of the Americas by the year 2005 claimed that their action would improve the lives of citizens from Alaska to Argentina, but their proclamations rang a bit hollow to those arrested for advocating democracy and the alleviation of poverty.

Meanwhile, inside the fortress, even some of the summiteers admitted to doubts about the magic of free trade; at one point when the leaders apparently thought public transmission of their comments had ended, Canadian International Trade Minister Pierre Pettigrew remarked, "It is not the market or trade per se that can eliminate inequality."

Why are so many people so dubious about the FTAA? The experience of NAFTA, which was recently condemned by Human Rights Watch for creating structures that are consistently biased against the protection of working people, has made skeptics of citizens who can see that a corporate-defined free-trade regimen only enriches corporations. In Mexico, even by the government's conservative estimates, manufacturing wages dropped to $1.90 from $2.10 per hour between 1994 and 1999, after NAFTA came into effect. In the United States, more than 300,000 workers have qualified for training programs set up for those laid off because of NAFTA. It is realities like those that led to the protests in Quebec and to rallies in cities from Buffalo to San Diego. In Chicago, Service Employees Local 1 president Tom Balanoff asked workers: "We know what NAFTA did--why would we want to make the same mistake" with the FTAA? In St. Paul, Senator Paul Wellstone told a crowd that included truckers and teaching assistants, "We speak for a global economy that doesn't just work for greedy multinational corporations."

The broad-based coalition that was so effective in Seattle and that reasserted itself in Quebec will play an important role in the "fast track" fight that will soon stir in Congress. Bush will not have an easy time putting together the majority he needs to win fast track negotiating authority, which would allow the Administration to craft an agreement that could then be only voted up or down by Congress. But he doesn't lack leverage: Obliquely acknowledging the legitimacy of the protesters' demands, he has copied business's newfound rhetoric of sensitivity to labor and environmental concerns in an effort to win the votes of "centrist" Democrats, and there is talk that the Administration might be willing to cut deals with some labor and environmental groups in order to buy off opposition. On the GOP side, Bush faces possible defections among those concerned about home-state industries like steel and those from farm states, as well as a core group of traditional anti-free traders.

In 1997 and 1998 a labor, environmental and human rights coalition defeated Clinton in the House on fast track at a time when the opposition was not nearly as broad-based or well organized, and it can prevail again this year. To win, however, in a way that is viewed as a step forward for citizens everywhere, that effort should focus not only on what's wrong with the FTAA but also on the fact that its critics have developed responsible alternative visions to "globalization at any price" that include such things as right-to-know legislation that would require US multinationals to collect and disclose vital data on environmental damage and workplace conditions in their overseas production.

Canadian Prime Minister Jean Chrétien dismissed the thousands who came to Quebec City with the words On va protester et blablabla (they're coming to protest and blah blah blah). But as Naomi Klein wrote, "Quite the opposite. They're coming to Quebec to protest because they've had it with the blah blah blah." The demonstrators bore witness for those who weren't in Quebec--the people on the wrong end of globalization.

The protesters have done their job well, making it clear to the world that the spirit of Seattle is not only alive but growing stronger. Now it's up to US activists to make sure Congress gets the message.

"Phanzi, Pfizer, Phanzi!" "Get out, Pfizer, go!" At rallies they sing the old liberation songs, replacing the names of apartheid leaders with those of multinational pharmaceutical companies. On the streets they chant demands, no longer for the vote or a living wage or freedom, but for fluconazole and cotrimoxazole and nevirapine. Their leaders and organizers might well be human rights lawyers and healthcare professionals, but most of the foot soldiers of the Treatment Action Campaign (TAC)--which has spearheaded the campaign for affordable medicine for HIV-related illnesses in South Africa--are ordinary South African men and women, HIV-positive but too poor to afford the drugs needed to keep them alive.

For most of us, globalization remains an abstract and troubling concept, but for the TAC's activists the pharmaceutical industry's cynical abuse of international trade agreements to keep its profit margins high has meant that globalization is literally killing them. What makes their activism so compelling is that their battle for access to treatment has brought them up against the consequences of the global economy--and that they appear to be triumphant.

In mid-April, after a three-year fight, thirty-nine multinational pharmaceutical companies agreed to settle a suit against the South African government to prevent it from purchasing brand-name drugs from third parties at the cheapest rates possible. This, Big Pharma had claimed, was in violation of international trade and property agreements the South African government had signed. The withdrawal was brokered directly by UN Secretary General Kofi Annan, who had been asked by the five biggest companies to help them find a way out of what had become a public relations nightmare. Annan called South African President Thabo Mbeki, whose officials drafted a last-minute settlement that committed the country to negotiate with the multinationals before implementing its policy. The victory, however, was the TAC's: Not only had it proved that the suit was unwinnable, it had brilliantly mobilized a broad spectrum of support at home and abroad against the drug companies, which were shamed into the settlement--in effect, an honorable withdrawal.

The icon of this victory, broadcast all over the world, was the image of a large African man in the courtroom popping a bottle of champagne in a circle of jubilant celebrants. This man was Zwelinzima Vavi, the general secretary of Cosatu, South Africa's largest labor federation and the backbone of the "Revolutionary Alliance" that brought the African National Congress to power--and that keeps it there. Surrounding him was a fascinating mix of working-class activists, high-powered lobbyists from international organizations like Médecins Sans Frontières and Oxfam, and ecstatic government officials reliving, for one brief moment, the euphoria of activism.

The TAC has managed to put together the first seriously effective social movement since South Africa's transition to democracy in 1994. The keynote speaker at its first national conference, in March, was Cosatu president Willie Madisha. "There is no urgency from government," he told an audience of 500 delegates from more than 169 organizations, including major religious and healthcare groups. "Sometimes it drags its feet, at other times its HIV/AIDS work is incoherent. Broader social mobilization is essential to engage government constructively."

In 1994 most antiapartheid activists either went into government and became enmeshed in the workings of the new state or set off for the private sector to exercise their newfound freedom and follow their own interests. The result was that the broad-based social movements that brought apartheid to its knees in the 1980s ossified into bureaucracy or withered into nonexistence. The TAC offers a cogent example of the consequences: In the early 1990s, AIDS activists played a major role in the drafting of an exceptional National AIDS Plan, which was adopted by the African National Congress. But instead of mobilizing mass support to achieve the demands of the plan, AIDS activists found themselves inside the system and thus bound by the inevitable constraints of government, relying too heavily on what the TAC calls "the politics of access." Outsiders became insiders, and without the oxygen of a mass movement to keep it alive, the plan was suffocated by red tape.

But just a week before the victory against Big Pharma, TAC's chairman and chief strategist (himself a product of the antiapartheid movement), Zackie Achmat, publicly accused two senior government officials--both medical doctors and former healthcare activists themselves--of having the blood of children on their hands because they were retarding the implementation of antiretroviral programs for pregnant mothers with HIV. "We face a greater tragedy than the acts of omission of the drug companies," he said, "and that is the failure of government officials to act with courage, humility and urgency."

The accusation may have been unduly harsh--Achmat himself could be accused of understanding neither the constraints of bureaucracy nor the choices that the ill-resourced government must make--but he has a significant mass-based constituency behind him when he makes it. The TAC's brilliance was in recognizing that it had an issue that would appeal to the broad left wing of South African society not only because of the government's manifest ineptitude in the face of a horrifying pandemic (4.7 million infected out of a population of 40 million) but because the battle for treatment was a perfect vehicle for taking on the heartlessness of global capital and the perceived wrongheadedness of the ANC government's neoliberal macroeconomic policy. South Africa has been the good boy of the World Bank, the IMF and the WTO, Achmat says, and we're sicker and poorer than we've ever been.

The reason Cosatu and the left like the treatment access issue so much is that it allows them to say this; it puts flesh on their critique of the government's quest for a balanced budget in line with the World Bank's specifications, a quest that means less funding for programs like the provision of lifesaving medication. Globalization, finally, has a face. TAC activists appeared at court wearing ghostly, leering masks of Big Pharma's mandarins. Globalization is itself on trial: The masked activists were in handcuffs.

Just last year, Mbeki accused the TAC of actually being in the employ of Big Pharma because of its strident criticism of the government's AIDS policy. Now, despite the brief and effective courtroom alliance between activists and government, the same battle lines are drawn again, sharper than ever. Minister of Health Dr. Manto Tshabalala-Msimang held a press conference after the courtroom celebration at which she made it clear that providing AIDS drugs was not a government priority; the TAC shot back that it would do whatever was needed--including confronting government head on--to bring "real drugs to real people."

It remains to be seen whether the victory against Big Pharma is anything more than symbolic, whether it will have any effect at all in bringing affordable drugs to the ailing masses of South Africa. Its significance, rather, is in its creation of a mass-based, independent, critically minded social movement that takes the best of South Africa's tradition of struggle and engages it, in a sophisticated and tangible way, in a battle against the negative consequences of the global economy and the manipulation of institutions like the WTO by multinational corporations. The TAC's battle could provide the same brand of moral leadership in the global struggle that the antiapartheid movement did in decades past.

He's an archconservative who thinks big and knows how to get things done.

In one of the most foolish and cruelly ironic urban public policy decisions in recent memory, New York Governor George Pataki and New York City Mayor Rudolph Giuliani are planning to shower a series of subsidies, expected to total more than $1 billion, on the high citadel of self-styled free-market global capitalism, the New York Stock Exchange.

In December the city entered into a letter of intent to assist the NYSE in constructing a new trading floor. The arrangement commits the city to acquire land for the new exchange building, and for the city and state to construct a new trading floor for the NYSE and to grant it tax and subsidized energy benefits. In exchange, the taxpayers receive $10 million in annual rent, which will never come close to reimbursing the city and state for their costs.

The sole purported rationale for this corporate welfare bonanza is to retain the NYSE in New York City. If one were to credit this claim, the gift of more than $1 billion for the purpose of retaining fewer than 6,000 jobs--while not even ostensibly creating new ones--would, even by the corrupt standards of job-retention- blackmail deals between corporations and politicians, set a high-water mark for casuistry. However, the deal is even worse than that description suggests. There is no chance that the stock exchange would leave New York City. When I went on the NYSE floor last year and asked veteran traders about the possibility of the exchange moving to New Jersey, they laughed as they dismissed it out of hand. In addition to the institutional identity and reputation of the stock exchange, its personal connections to Wall Street firms--committed to New York City by history, by the Manhattan residences of many of their principals and employees and by long-term office rental commitments, increasingly sealed by yet other city subsidies--preclude the possibility of a move across the Hudson to become the Hoboken Stock Exchange.

NYSE's New Jersey ploy is nothing more than a ruse for covering public officials using what Justice Louis Brandeis once called "other people's money." As is typical of such arrangements, the corporate-politician conspiracy to ramrod the deal is shrouded in secrecy and in contempt for democratic processes. The city refuses to make available to the public a copy of the letter of intent it signed with the NYSE to proceed with the deal. The architectural plans for the building complex--expected by preservation advocates to generate outrage--remain concealed. The governor forced legislation authorizing the deal to go forward on a super-expedited basis, leaving legislators virtually no time to review the bill. They proceeded to pass it unanimously. New York City Council members also have failed to object to the bill.

The Fourth Estate, perhaps inured to the issue by the steady drumbeat of announcements regarding New York City taxpayer subsidies for big business, has done a less than stellar job covering this boondoggle. The New York Times editorial page endorsed the scheme years ago, when it was first being floated. Recognizing "why some oppose on principle any concession to the blackmailing tactics of businesses that threaten to move unless they get public assistance," the Times concluded that New York had no choice but to succumb. "If New York City refuses to play this game, other, hungrier cities and states will take advantage of that passivity." Apparently, the corporate executives at The New York Times Co. found this argument persuasive. In February the Times and New York City completed their own corporate welfare deal--giving the Times $29 million in tax breaks and other incentives to maintain its offices in Times Square.

It would be hard to script a more brazen and shameless corporate giveaway than a billion-dollar donation to the emblem of global capitalism from a city where nearly one in three children lives in poverty, and public investment necessities go begging. But the final act of the NYSE drama has yet to play out: There is still time for the citizens of New York, and at least one of the candidates seeking to replace Giuliani when his term expires at the end of this year, to demand cancellation of this corrupt deal.

When NAFTA was adopted in 1993, Chapter 11 in the trade and investment agreement was too obscure to stir controversy. Eight years later, it's the smoking gun in the intensifying argument over whether globalization trumps national sovereignty. Chapter 11 established a new system of private arbitration for foreign investors to bring injury claims against governments. As the business claims and money awards accumulate, the warnings from astute critics are confirmed--NAFTA has enabled multinational corporations to usurp the sovereign powers of government, not to mention the rights of citizens and communities.

The issue has exquisite resonance with the present moment. On April 20 thirty-four heads of state gather in Quebec City to lead cheers for a Free Trade Area for the Americas. The FTAA negotiations are designed to expand NAFTA's rules to cover the entire Western Hemisphere. The Quebec meeting should provide good theater but not much substance. Tony Clarke of the Polaris Institute, in Ottawa, says the meeting is intended to be "a face lift for the whole global agenda, by portraying free trade as democracy." Protesting citizens will be in the streets, challenging 6,000 police and Mounties, with an opposite message: Democracy is threatened by the corporate vision of globalization.

Chapter 11 of NAFTA should become a defining issue for FTAA negotiations. Many, including Clarke, vice chairman of the Council of Canadians, believe corporate governance was and is the FTAA's intent. "There is a conquering spirit at the heart of all this," he says, adding that the corporations' attitude is: "We have to get into every nook and cranny of the world and make it ours."

Chapter 11 provides a model of how this might be accomplished. The operative principle is that foreign capital investing in Canada, Mexico and the United States may demand compensation if the profit-making potential of their ventures has been injured by government decisions--"tantamount to expropriation." Thus, foreign-based companies are given more rights than domestic businesses operating in their home country. For example:

§ California banned a methanol-based gasoline additive, MTBE, after the EPA reported potential cancer risks and at least 10,000 groundwater sites were found polluted by the substance. Methanex of Vancouver, British Columbia, the world's largest methanol producer, filed a $970 million claim against the United States. If the NAFTA panel rules for the company, many similar complaints are expected, since at least ten other states followed California's lead. The federal government would have to pay the awards. California State Senator Sheila Kuehl and others have asked the US Trade Representative to explain how this squares with a state's sovereign right to protect health and the environment.

§ In Mexico, a US waste-disposal company, Metalclad, was awarded $16.7 million in damages after the state of San Luis Potosí blocked its waste site in the village of Guadalcazar. Local residents complained that the Mexican government was not enforcing environmental standards and that the project threatened their water supply. Metalclad's victory established that NAFTA's dispute mechanism reaches to subnational governments, including municipalities.

§ In Canada, the government banned another gasoline additive, MMT, as a suspected health hazard and one that damages catalytic converters, according to auto makers. The Ethyl Corporation of Virginia, producer of MMT, filed a $250 million claim but settled for $13 million after Canada agreed to withdraw its ban and apologize.

§ The Loewen Group Inc., a Canadian operator of far-flung funeral homes, lodged a $750 million complaint against the United States, claiming that a Biloxi, Mississippi, jury made an excessive award of $500 million when it found Loewen liable for contract fraud against a small local competitor.

§ Sunbelt Water Inc. of California has filed the largest and most audacious claim--seeking $10.5 billion from Canada for revoking its license to export water by supertanker from British Columbia to water-scarce areas of the United States.

§ Canada's Mondev International is claiming $50 million from the United States because the City of Boston canceled a sales contract for an office building with a shopping mall. Boston invoked sovereign immunity against such lawsuits and was upheld by a local judge and the Massachusetts Supreme Court. The US Supreme Court declined to hear the appeal. So the company turned to NAFTA for relief.

"When just the threat of a Chapter 11 action may suffice to wrest a financial settlement from a government, investors have unprecedented leverage against states," Lydia Lazar, a Chicago attorney who has worked in global commerce, wrote in Global Financial Markets magazine. Mexico, Canada and the United States effectively waived the doctrine of sovereign immunity, she explained, when they signed NAFTA.

As many as fifteen cases have been launched to date, but no one can be sure of the number, since there's no requirement to inform the public. The contesting parties choose the judges who will arbitrate, choose which issues and legal principles are to apply and also decide whether the public has any access to the proceedings. The design follows the format for private arbitration cases between contesting business interests. With the same arrogance that designed the WTO and other international trade forums, it is assumed that these disputes are none of the public's business--even though public laws are under attack and taxpayers' money will pay the fines. The core legal issue is described as damage to an investor's property--property in the form of anticipated profits. The NAFTA logic thus establishes the "regulatory takings" doctrine the right has promoted unsuccessfully for two decades--a retrograde version of property rights designed to cripple or even dismantle the administrative state's regulatory powers. "NAFTA is really an end run around the Constitution," says Lazar.

The fundamental difference in Chapter 11, unlike other trade agreements, is that the global corporations are free to litigate on their own without having to ask national governments to act on their behalf in global forums. Clearly, some of the business complaints so far are more exotic than anyone probably anticipated. These initial cases will set precedents, however, that major global firms can apply later. If nobody stops this process, the national identity of multinationals will become even weaker and less relevant, Lazar points out, since they have status to challenge government as "an open class of 'legal equals.'"

In Canada a private lawsuit was filed recently challenging the constitutionality of Chapter 11, since Canada's Constitution states that the government cannot delegate justice to other bodies. The Canadian government, itself embarrassed by the cases against it, expressed doubt that Chapter 11 should be included in the hemispheric agreement, though it appears to be backing away from outright opposition. In US localities, the cases are beginning to stir questions, but lawmakers and jurists are only beginning to learn the implications.

Does George W. Bush understand what he is proposing for the Americas? Did Bill Clinton and Bush the elder understand the fundamental shift in legal foundations buried in NAFTA's fine print? They knew this is what business and finance wanted. As the public learns more, the smoking gun should become a focal point in this year's trade debate, confronting politicians with embarrassing questions about global governance. Who voted to shoot down national sovereignty? Who crowned the corporate investors the new monarchs of public values?