Wednesday, July 31, 2013

ALEC: Corporations buy their own laws (first in a series)

The American Legislative Exchange Council (ALEC) is among the most powerful and dangerous front groups for anonymous corporate contributions. ALEC claims to be non-partisan, but there are few Democrats to be found among the notable personalities with which it decorates its web site. The Board of Scholars on ALEC's web site consists of Arthur Laffer, Stephen Moore, Victor Schwartz, Dr. Richard Vedder, and Bob Williams. All these men have influenced conservative policies.

Arthur Laffer was the godfather of Republican supply-side economics. Laffer argued that if you reduced taxes, you would increase revenues, and, conversely, if you raised taxes, you would decrease revenues. Following Laffer's philosophy, Newt Gingrich predicted that Clinton's tax raise in 1994 would lead to a recession, a loss of jobs, and a decrease in tax revenues. Instead, it led to five years of increased revenue and a boom that lasted until 2000. Gingrich later claimed that the boom in 1997 was due to a capital gains tax decrease, which he said gave more money to the job creators. When Clinton lowered the capital gains tax in 1997, the economy was already riding a wave of prosperity. The relatively small increase in capital gains tax revenue that followed the reduction was caused by the booming economy, not the reduction in capital gains tax rate.

Supply-side economic theory had predicted a recession following tax increases. Instead there was a boom. This boom was a complete repudiation of Laffer's supply-side theories.

In 2000, the federal government collected taxes equal to 20.6% of the Gross Domestic Product (GDP). Again following the Laffer philosophy, the Republicans passed massive tax cuts in 2001. While the tax bill was debated in the Congress, the American Heritage Foundation (another Conservative front group) predicted that the new tax cuts would pay off the federal national debt by 2010. They also predicted the new, lower taxes would increase employment by 20 million new jobs, and raise the GDP by $3.5 trillion.

After Bush lowered income tax rates, revenues fell immediately and remain lower than the revenues for 2000 until the present day. Bush's tax policies increased the national debt by $8 trillion and resulted in one million more jobs, not the 20 million he predicted. This number of jobs was not sufficient to provide employment for new entrants into the employment market.

Stephen Moore claimed the failure of Bush's tax cuts to raise revenues was due to increased spending. This statement is total nonsense. Laffer's theory states that lowering taxes will raise revenues. During the Bush administration, tax revenues fell. Bush relied on Laffer's theory when he raised spending. He believed, irrationally, that revenues would rise eventually, but they did not. Furthermore, both Republican and Democratic presidents before Bush routinely increased government spending to stimulate the economy. If Moore's opinion was correct, there should have been increased tax revenues and an economic boom. Instead, revenues fell and the economy collapsed.

Despite the utter failure of Laffer's policies, ALEC's web site praises him as “one of the [twentieth] century's greatest minds." 

Stephen Moore was a founder of the Club for Growth, a front group that raises money for conservative candidates. Moore led the Club for Growth in furthering Laffer's policies, which meant supporting candidates who favored smaller government and lower taxes. His group was instrumental in passing the Bush tax bill of 2001 which contributed to the great recession of 2009.

Moore made excuses for the economy's poor performance by claiming, in 2005, that Bush's capital gains tax cut in 2003 had increased taxes because it increased prosperity. But prosperity was not increased in 2004, because capital gains tax revenues were artificially inflated by the real estate market and the bond market. Rather than increase prosperity, those bubbles led to the collapse of the bond market and the Great Recession, as well as a decrease in capital gains tax revenues by $100 billion over two years.

Under Moore's leadership, the Club for Growth supported primary challenges against Republicans who fail to support its policies. This practice has contributed to the rise of the Tea Party and the subsequent stalemate in Congress. Moore, like Laffer, has proved himself an ideologue who ignores the serious negative consequences of his economic policies. Instead, he continues to support candidates who favor more tax cuts and deeper cuts in government spending.

Victor Schwartz was a director of the American Tort Reform Association (ATRA). ATRA was formed by Johns-Manville, a company facing numerous lawsuits for knowingly exposing its employees to asbestos in the workplace. ATRA presented itself as a grass-roots organization that was trying to stop abuses by plaintiff's lawyers. It was actually a public relations shop run by Matthew Swetonic, a Johns-Manville employee out of Hill and Knowlton (H&K), a public relations firm. Eventually, the asbestos industry joined with the tobacco industry to fight against adverse judgments for cancer victims of cigarette smoking or asbestos installation.

ATRA anonymously planted false and misleading stories as op-eds and magazine articles. Swetonic sometimes wrote these articles and used fake names. ATRA also formed astro-turf groups in the individual states and wrote sensationalized articles to make the public believe that plaintiff's attorneys were getting huge settlements for people who weren't actually injured.

ATRA eventually morphed into ALEC, which writes bills for their corporate clients and pushes them to its conservative customers, mostly legislators. The problem with this approach is that legislators are supposed to represent the interests of their constituents, not corporations and their lobbyists. ALEC takes the constituents out of the equation and delivers the legislators to the corporations. Frequently, the legislators do not know who is pushing these model laws or why. The legislators have no opportunity to discover adverse consequences to ALEC's laws because the corporations spoon feed them one-sided arguments.

Schwartz has always been a corporation lawyer, especially for tobacco companies, who argued for years that tobacco was not harmful before it was revealed that executives knew about the deadly effects of their product all along. In his opinion, corporations have no responsibility for the safety of the products they market. He says the warning label should be sufficient. But tobacco is a physically addictive product. Users do not understand that they are addicts and tobacco companies do not tell them.

Consumers will get no sympathy from Schwartz and his kind, whose motto will always be, let the buyer beware. Schwartz is a fine lawyer and has written many books on tort litigation. There is no consumer representative in ALEC, however. The legal system is based on advocates for both parties arguing in open court. There is no adversary allowed to argue against corporate interests here.

ALEC makes the claim that it is a non-partisan membership association for lawmakers who believe in limited government, free markets, federalism, and individual liberty. This is a misleading statement. Only one percent of its budget is funded by membership dues. ALEC is bankrolled by corporations who want to use the government to gain higher profits. These corporations spin their profitable legislation as advancing limited government and the rest, but they are only interested in their bottom line.

These three “scholars” prove that ALEC has strong corporate ties: Laffer created the intellectual basis for giving taxpayer funds to corporations and their owners. Stephen Moore helped install a generation of Republican lawmakers who ignore the express wishes of a majority of voters and prefer to stall government rather than trying to make it work for the people. Schwartz led the movement toward laws that prevent consumers and victims from receiving just recompense for their injuries. Together they have made voters and consumers irrelevant to the running of the country, which is still nominally a democracy.

See also how ALEC has been used by the Private Prison Industry and caused mass incarceration.

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