A Nation of Moochers (38 page)

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Even so, TracFone apparently wants to have it both ways. In Web ads pushing the free phones to poor people in Wisconsin, for example, TracFone touts: “FREE government supported cell phone.” But in a Lifeline/Safelink Fact Sheet, the company insists that “Safelink phones are not paid for by taxpayers or the federal government.” This is a quibble without a distinction, since the funds are paid for from the federally created Universal Service Administrative Company, which was created by Congress, set up by the Federal Communication Commission, and funded by the Universal Service Fee, which is a tax in all but name.

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Spending on welfare and low-income health care assistance rose 113.8 percent from 1989 to 1996, and then rose another 80.2 percent from 1997 to 2005. In just three years, from 2006 to 2009, it rose by another 43.3 percent. (“Confronting the Unsustainable Growth of Welfare Entitlements,” Heritage Foundation; Office of Management and Budget, Historical Tables; Budgets of the United States.)

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“Single mothers increase their chances of living in poverty 416 percent relative to married couples. High school dropouts increase their chances of living in poverty 529 percent relative to college graduates. Not working increases the chances of living in poverty 741 percent relative to those who are working full-time.” (Norman R. Cloutier, director, University of Wisconsin Parkside Center for Economic Education, December 3, 2010.)

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Reports analyst Robert Rector: “Some 92 percent of those who experienced hunger in 2002 were adults, and only 8 percent were children. Overall, some 567,000 children, or 0.8 percent of all children, were hungry at some point in 2002. In a typical month, roughly one child in 400 skipped one or more meals because the family lacked funds to buy food.… Among poor children, 2.4 percent experienced hunger at some point in the year. Overall, most poor households were not hungry and did not experience food shortages during the year.”

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Notes Rector, reliable data gathered by the government show that “the average nutriment consumption among the poor closely resembles that of the upper middle class. For example, children in families with incomes below the poverty level actually consume more meat than do children in families with incomes at 350 percent of the poverty level or higher (roughly $65,000 for a family of four in today’s dollars).…

“It is widely believed that a lack of financial resources forces poor people to eat low quality diets that are deficient in nutriments and high in fat. However, survey data show that nutriment density (amount of vitamins, minerals, and protein per kilocalorie of food) does not vary by income class. Nor do the poor consume higher fat diets than do the middle class; the percentage of persons with high fat intake (as a share of total calories) is virtually the same for low-income and upper-middle-income persons. Overconsumption of calories in general, however, is a major problem among the poor, as it is within the general U.S. population.”

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Reported the Associated Press: “Big money movies shot in Massachusetts in 2009 included ‘The Fighter,’ chronicling the career of Lowell boxer Micky Ward and starring Boston native Mark Wahlberg; ‘The Social Network,’ depicting the origin of Facebook, co-founded by Mark Zuckerberg in his Harvard dorm room in 2004; and the Ben Affleck movie ‘The Town,’ focusing on a Boston bank heist crew.”

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Another sweet deal: “Transferable” tax credits enable producers to sell their credits to a third party. The Center on Budget and Policy Priorities explains: “Often, those purchasers are financial services firms. Insurance companies find purchases of film tax credits especially profitable, since they can use them to reduce taxes on premiums. Through the end of fiscal year 2009, insurance companies had purchased about half of all transferred Massachusetts film tax credits, for example, and other financial institutions had purchased about a quarter of them.”

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Reports the Environmental Working Group: “Despite claims of reform … six of the top 10 recipients of commodity payments in 2009 were in the top 20 in both 2007 and 2008. Of the top 20, 8 were in the list all three years, and three more were there in 2009 and one other year. In contrast to the public fury over billion-dollar bailouts of Wall Street banks, all 20 top subsidy recipients in 2009 received more than $1 million each, several with multimillion-dollar hauls. And this is only one year’s worth of corporate handouts that have gone on for decades. Three of these repeat offenders did quite well in 2009. California’s SJR Farms took in $2,069,453, Louisiana’s Balmoral Farming Partnership received $1,910,834 and Arizona’s Gila River Farms collected $1,711,444.”

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Reported the
Post
: “The program that pays Matthews was the central feature of a landmark 1996 farm law that was meant to be a break with the farm handouts of the past.… Instead of cutting, Congress ended up expanding the program, now known as direct and countercyclical payments. A program intended to cost $36 billion over seven years instead topped $54 billion.… In fact, so many landowners and farmers are collecting money on their former ricelands—$37 million last year alone—that the acres no longer used for rice outnumber the planted ones.”

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The analogy has been frequently made. In a story on the program,
USA Today
quoted environmentalist David Conrad of the National Wildlife Federation as saying: “It does seem to fit Albert Einstein’s definition of insanity—to somehow expect something different when you do the same thing over and over again.” (Thomas Frank, “Insurance Underwater,”
USA Today
, August 26, 2010.)

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The New York Times
originally reported that the company had paid no federal tax at all and was actually able to tap the U.S. Treasury for a “tax benefit of $3.2 billion.” But this was later called into question by analyses that suggested that GE paid a minimal amount of 2010 taxes. (Allan Sloan and Jeff Gerth, “The Truth about GE’s Tax Bill,”
Fortune,
April 4, 2011.)

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According to the Center for Responsive Politics, the “Pharmaceutical/Health Products industry spent more on lobbying since 1998 than any other industry.” (
www.opensecrets.org
)

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A spokesman for Serious insisted the company had nothing to hide: “Robin Roy had worked for us long before Cathy [Zoi] was offered that job.” Quipped Stossel: “Of all the window companies in America, maybe it’s a coincidence that the one which gets presidential and vice presidential attention and a special tax credit is one whose company executives give thousands of dollars to the Obama campaign and where the policy officer spends nights at home with the Energy Department’s weatherization boss.”

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Mother Jones
detailed the special bennies extended to ADM: Beyond the corn-price support program, the company also benefited from the federal sugar program, which the magazine compared to a mini-OPEC, “setting prices, limiting production, and forcing Americans to spend $1.4 billion per year more for sugar,” according to the General Accounting Office. In addition, ADM benefits from ethanol tax credits and subsidies. “Since ADM makes 60 percent of all the ethanol in the country, the government is essentially contributing $2.1 billion to ADM’s bottom line. No other subsidy in the federal government’s box of goodies is so concentrated in the hands of a single company.” (Dan Carney, “Dwayne’s World,”
Mother Jones
, July/August 1995.)

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There is a Web site by that name:
http://www.pensiontsunami.com
.

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Steven Greenhut writes: “Pension payments are senior obligations of the state to its employees and accordingly have priority over every other expenditure except Proposition 98 (i.e., K–14) expenditures and arguably even before debt service.” David Crane, chief pension adviser to former California governor Arnold Schwarzenegger, notes that they must be funded before other programs: “All of the consequences of rising pension costs fall on the budgets for programs such as higher education, health and human services, parks and recreation and environmental protection that are junior in priority and therefore have their funding reduced whenever more money is needed to pay for pension costs. (Nieman Reports, “How Severe Is the US Pension Crisis,”
http://www.niemanwatchdog.org/index.cfm?fuseaction=ask_this.view&askthisid=00475
.)

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In addition to AFSCME, the National Education Association, the nation’s biggest teachers’ union, dropped $40 million on the campaign. AFSCME’s $87.5 million also exceeds the $75 million spent on pro-Republican campaign efforts by the U.S. Chamber of Commerce. (Brody Mullin and John D. McKinnon, “Campaign’s Big Spender,”
Wall Street Journal,
October 22, 2010.)

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Backdrop payments are a creative way of dramatically boosting public-employee pensions. They allow government workers to collect a lump sum equal to the amount of pension they would have received if they had retired on the date they were eligible for retirement up to the day they actually leave their jobs. In Milwaukee, workers hired before 1982 were also given a 25 percent pension bonus. For longtime county employees, this could mean seven-figure payouts.

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Before Walker’s proposal, Wisconsin taxpayers were paying $19,128 toward the average employee’s family premium. The average employee contributed a mere $936. Under Walker’s plan, employee contributions would have averaged about $2,500, still far less than the average private-sector employee’s contribution.

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“In part because of these practices, thirteen correctional officers made more than $100,000 in 2009, despite earning base wages of less than $60,000 per year. The officers received an average of $66,000 in overtime pay for an average annual salary of more than $123,000 with the highest paid receiving $151,181.” (Press release, Governor Scott Walker’s office, March 7, 2011.)

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On Christmas Eve 2009, the Treasury Department quietly removed the $400 billion cap on the amount of money taxpayers might have to spend bailing out the profligate Fannie and Freddie. (
Wall Street Journal,
“Fannie and Freddie Amnesia,” April 20, 2010.)

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With apologies to Winston Churchill.

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Ritholtz also noted that while other portfolios had been forced to take “haircuts” of 40, 50, even 65 percent, Citi was asked to “suffer only an 11 percent haircut.”

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An example of a strategic default would be someone who has taken out a $300,000 mortgage to buy a $380,000 house. If the value of the house drops to, say, $250,000, the mortgagee is considered “underwater,” even if they have the income to continue to make monthly payments. Most mortgagees will continue to make those payments, hoping that the value of their home recovers or because they think they have a moral obligation not to walk away. But in strategic default, the homeowner decides to walk away from the mortgage, despite being able to pay for it. A 2009 study found that 26 percent of defaults were strategic.

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Pemberton and Reboyras later took issue with the
Times’s
portrayal, insisting that they only rarely went out on their yellow airboat or visited Outback or casinos. But they continued to defend their decision. In an interview with the
St. Petersburg Times
, they insisted that they were “actually helping the economy by using money saved on mortgage payments to buy TV ads” for their business. (Susan Taylor Martin, “How Dare They Quit Paying Their Mortgage? Hey, That’s Us!”
St. Petersburg Times,
June 9, 2010.)

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They were not alone:
The Wall Street Journal
, for example, profiled 30-year-old Derek Figg, who also decided to stop paying his mortgage: “Mr. Figg felt trapped in a home he bought two years ago in the Phoenix suburb of Tempe for $340,000. He still owes about $318,000 but figures the home’s value has dropped to $230,000 or less. After agonizing over the pros and cons, he decided recently to stop making loan payments, even though he can afford them. Mr. Figg plans to rent an apartment nearby, saving about $700 a month.” The
Journal
reported that such defaults were especially popular in Arizona, California, Florida, and Nevada. (James R. Hagerty and Nick Timiraos, “Debtor’s Dilemma: Pay the Mortgage or Walk Away,”
Wall Street Journal
, December 17, 2009.)

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The study found some variations in moral attitudes toward default: “Younger people (less than 35 years old) are less moral, but so are older ones (older than 65). More educated people exhibit less moral conviction as do African Americans. Wealthier people have higher moral standards, while people from the Northeast and the West less so.”

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The median age for a first marriage has risen from 23 in 1980 to 27 for men and 26 for women; almost all racial and income groups report a delay in childbearing.

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The Kaiser Family Foundation explains its health reform subsidy calculator: “Based on the Patient Protection and Affordable Care Act (including subsequent amendments in the Health Care and Education Reconciliation Act of 2010), as signed by the President.…

“The premiums are illustrative examples in 2014 dollars derived from estimates of average premiums for 2016 from the Congressional Budget Office. For a 40 year old single adult, the premium for a silver plan is assumed to be $4,500 for a plan with a 70% actuarial value. To the extent that actual expected enrollment in 2014 differs from what CBO assumed for 2016—e.g., it has a different composition of people by health status or age—then premiums could vary from this amount.