On January 26, Maryland’s Department of Transportation (MDOT) announced some good news—and some bad news. The good news was that the Purple Line, a 16-mile light rail project to connect working-class Black and Latino suburbs immediately northeast of Washington, D.C., to job centers in the more affluent northwestern suburbs, was back on track. During the previous year and a half, most construction halted because the private companies that Governor Larry Hogan’s administration had originally hired to build the line walked away from the job. But a new consortium of contractors had now been approved, MDOT proclaimed. Construction would soon resume, and the Purple Line would open, an official said, “as soon as possible.”

The bad news? The new contract will cost taxpayers $1.4 billion more than the original deal would have and won’t be completed until late 2026, more than four and a half years behind schedule. 

The ballooning costs, MDOT explained, were the result of “supply chain issues, rising material costs, labor shortages and insurance increases” that “could not have been foreseen prior to the pandemic.” It seems like a reasonable explanation—who hasn’t felt the effects of COVID-driven inflation? The Maryland and D.C. press corps dutifully reported the assertion without question. But it turns out not to be true.

There certainly were events outside the governor’s control that contributed mightily to the project’s delays and cost overruns. Among these were a nuisance lawsuit by wealthy homeowners, a dispute with a freight rail monopoly over right-of-way, and changing environmental regulations—the kinds of factors that dog infrastructure projects all over the country.

In the case of the Purple Line, however, a series of decisions by the Hogan administration compounded the problem. Early in his tenure as governor, Hogan, a Republican who had opposed the Purple Line as a candidate in 2014, demanded that the project be redesigned and its costs cut to free up money for road construction. Some of that road building would benefit real estate ventures in which Hogan, a developer, had invested, as the Washington Monthly has previously reported. The redesign delayed the start of the light rail line’s construction by almost two years. 

Hogan’s administration also negotiated a contract with a group of private construction firms that contained an unusual provision: In the case of delays lasting more than a year, the companies could abandon the work, no questions asked. When the inevitable delays ensued and the contractors threatened to walk, Hogan’s hand-picked transportation secretary negotiated a new arrangement in which the companies agreed to stay and finish the project for less than $175 million. Then, on the eve of signing the deal, the administration backed away. 

Had it gone through with the transportation secretary’s deal, the contractors, not Maryland taxpayers, would have had to absorb the pandemic-related cost increases. And the Purple Line, according to MDOT projections in the spring of 2020, with COVID-19 already raging, would have been up and running, partially by 2022 and fully by the early summer of 2023—giving commuters, hit by high gas prices, more mass transit options. 

“We are very excited to begin a new chapter for the Purple Line to deliver a world-class transit system to the people of Maryland,” MDOT spokesperson David Abrams wrote in an email in early June in response to questions from the Washington Monthly. (The agency largely did not answer the Monthly’s queries.) Meanwhile, Hogan, whose second term as governor ends next January, is eyeing a 2024 presidential run. The exorbitant cost overruns won’t be his problem. His successor will inherit his mess.

Though mass transit projects are notoriously difficult to complete on time and within budget, the Purple Line should have been relatively easy. Much of the land needed to build it had been purchased by farsighted elected officials back in the 1980s. Because the whole line would lie within Maryland, it would not be subject to the multi-jurisdictional disputes over funding and governance that have long hobbled the Washington Metro, the D.C.-Maryland-Virginia mass transit system to which the Purple Line will connect. All the basic planning for the line had been completed, and the needed state and federal financing had been secured by Hogan’s predecessor, Democrat Martin O’Malley, whose two terms as governor ended in 2015.

Hogan won the race to succeed O’Malley in part by vowing to kill the Purple Line and another mass transit project, the Red Line in Baltimore, and to spend the freed-up funds on more road building. That position was popular with Republican voters in rural and small-town Maryland. Once in office, however, Hogan took six months before announcing his decision on the two projects: He would keep his campaign promise to kill the Red Line but allow the Purple Line to go forward so long as the counties and the contractors paid more of the costs and reduced the budget overall. His stated reason for the flip-flop was that the project would create construction jobs. But according to Annapolis insiders, Hogan also understood that the Purple Line was further along in the process and trying to stop it would put him crosswise with developers in the Greater Washington area whose political support and campaign contributions he would need. 

The Hogan administration then began to whittle away at the Purple Line’s expected costs. This included cutting some items that would have been good to have but weren’t strictly necessary, like using environmentally friendly materials for track beds. It also meant axing features that would have made the rail line more functional. For instance, the Silver Spring connection from the Purple Line to the Red Line—one of the D.C. Metro’s highest-volume lines—would no longer be on the same platform. Instead, riders would have to cross a long walkway to transfer from the Purple Line to the Red and vice versa. Hogan’s team also lengthened the times commuters would have to wait between trains from six minutes to seven and a half minutes during peak hours. 

These changes preserved funds that Hogan could route elsewhere—mainly to highway, road, and bridge projects. The Washington Monthly has learned through FOIA requests that from 2015 to 2017, MDOT spent $196 million less on the Purple Line than what was budgeted under the O’Malley administration. 

Changing the Purple Line’s procurement halted the project for almost two years. During that time, many of the road projects Hogan advanced in his transportation budget were near or adjacent to properties owned by his real estate firm—from which he did not divest. (After the Washington Monthly revealed these connections, the state legislature unanimously passed a law tightening up conflict of interest requirements for future governors and other officeholders. Hogan let the law go into effect without his signature.) 

It wasn’t until March 2016 that Hogan chose a team of private companies, Purple Line Transit Partners (PLTP), to build, operate, and maintain the project. As part of the contract, the consortium included Purple Line Transit Constructors (PLTC), led by the construction behemoth Fluor Corporation, to design and construct the rail line. A month later, the Maryland Board of Public Works unanimously approved the contract for $5.6 billion. But the contract had an odd provision that allowed either party to walk away from the deal if there were more than 365 days of extended delays. “That doesn’t make sense,” says Joseph Schofer, a professor at Northwestern University’s McCormick School of Engineering and an expert on public transportation projects. Sources familiar with the matter say the highly unusual stipulation was demanded by PLTP, and was included because of the possibility of a lawsuit that had been looming over the project for years. 

Sure enough, in August 2016, a U.S. District Court judge halted construction of the project—the first of several outside events that would delay the line’s construction and swell its cost. Judge Richard Leon claimed that the state did not conduct an adequate survey of the environmental impacts of the line. Almost immediately, the Purple Line’s advocates, as well as Hogan himself, noted a potential conflict of interest for Leon, who lived in Chevy Chase, not far from the proposed transit line. His wife was a member of advocacy organizations that had been trying to kill the line for years. That ruling set the project back almost a year and a half, until a U.S. Court of Appeals judge overruled Leon in December 2017 in favor of the Purple Line. 

The existence of the lawsuit also made it harder for the state during that year and a half to close deals with landowners to acquire the final 600 parcels of land needed to build the line. That caused further delays to the project even after the case was dismissed. A technical dispute with CSX Transportation, which would be sharing a portion of its freight rail right-of-way with the Purple Line, added an additional five months and $187.7 million in cost.

Then came the largest and most substantial delay. The Maryland Department of the Environment (MDE) changed regulations for transit projects based on a law that had been passed before Hogan was governor. The new rules classified embankments and associated culverts as “unintentional dams.” That forced the contractor to institute a series of redesigns, many of which Hogan’s MDE shot down. These back-and-forths over compliance with the new rules delayed the project by 976 calendar days, worth $519,112,360 in costs, according to the PLTC contractor consortium. 

By mid-2019, the consortium had had enough. It informed the state that it would exercise its right to leave the deal because far more than 365 days of delay had occurred, unless the state provided additional compensation to make up for some of the cost overruns associated with those delays. Maryland Transportation Secretary Pete Rahn, a Hogan appointee, then quietly scrambled to strike a deal with the contractors to stay on, Rahn told the Washington Monthly. “It was the very last thing I did,” said Rahn, who shortly thereafter left the administration. The consortium also thought it had a deal. “In December 2019, after six months of intense negotiations, all parties came to an agreement in principle on a settlement,” the consortium wrote in documents it later filed with the Maryland Circuit Court. 

But soon after Rahn resigned from the department, the Hogan administration rejected the deal its own transportation secretary had negotiated. (When asked by the Washington Monthly why the administration made this decision, MDOT did not reply.) The administration then made new demands, which the consortium rejected. 

On May 1, 2020, the consortium informed the state that it was exercising its right to walk away from the contract. Instead of continuing to negotiate, the Hogan administration took PLTC to court. But it didn’t take long for Maryland Circuit Court Judge Jeffrey Geller to determine it an open-and-shut case. On September 10, 2020, Geller ruled that the “clear, direct, and absolute” language of the contract gave PLTC the right to walk away from the project—which it proceeded to do. By the end of the year, the Hogan administration reached a settlement to pay the former design-build team $250 million after they left the project. 

With the original contractor consortium out of the picture, the Hogan administration had to find another design-build team to complete the project, and then negotiate a new contract with it. The process took a year and a half—an enormous additional delay. When, on January 26, the administration finally announced that it had selected a new construction consortium, led by the American subsidiaries of the Spanish firms Dragados and OHL, it blamed the delay on the pandemic—ignoring the fact that in the spring of 2020, with the pandemic fully under way and PLTC still on the job, MDOT was publicly predicting that the Purple Line would partially open in 2022 and fully in 2023. 

MDOT also blamed much of the $1.4 billion higher price tag on the pandemic, a charge it repeated in its emailed response to the Monthly, writing that “certain other claims [by the contractors], including those related to Covid-19, would have remained open, potentially exposing the State to further delay and costs.” According to the language of the original contract with PLTP, however, the contractors, not the state, would have been obliged to assume the higher material and other costs associated with the pandemic, since the concessionaire would have been responsible for any additional expenses under a force majeure event.  

In its response to the Monthly, MDOT also pointed to news articles reporting that the lead contractor, Fluor, had other business-related reasons for seeking to get out of the risky government contracting business. But when the lawyer for the state brought up that exact argument before the Maryland Circuit Court, Geller ruled it irrelevant to the case. Indeed, whatever Fluor’s larger business strategy may have been, it agreed to Rahn’s December 2019 negotiated offer to stay on the job.

The bottom line is that what was once one of the most promising mass transit projects in the country will now deliver less than what its planners originally envisioned, at far more cost to taxpayers, and years later than was promised. And instead of paying less than $175 million for the old contractors to finish the job, Maryland will cough up $1.4 billion (plus the $250 million settlement with PLTC) to finish the project. 

But it won’t be Hogan’s problem. After the term-limited governor leaves office next January, dealing with the extra costs, delays, and disruptions of the Purple Line fiasco will be left to his successor.

The post No Way to Build a Railroad appeared first on Washington Monthly.

Orson Welles once said, “The enemy of art is the absence of limitations.” It’s a statement full of wisdom, but it also carries a degree of irony. Welles made Citizen Kane—one of the most daring and inventive movies of all time—when RKO Radio Pictures granted him historic levels of artistic freedom. It might be more accurate, then, to say the enemy of art is the absence of limitations for most—but not for an exclusive few. 

In fact, in the history of motion pictures, there might be only one other filmmaker who could make films of such consequence and majesty with complete creative control: Buster Keaton. His life’s greatest tragedy was that, once he gave up that freedom, he could never get it back.

The vaudeville child star turned filmmaker had a run in the 1920s that makes him, as Roger Ebert once declared, arguably the greatest actor-director in the history of movies. During that decade, he churned out 10 silent feature films—including his most famous, The General—and a collection of shorts that created the grammar of cinema. At the dawn of the medium, Keaton figured out visual storytelling like none other. His gags worked not only because of his physical courage and prowess—he did his own stunts, often in one take—but because of his ingenuity with the camera. 

In his short film The Goat (1921), for instance, Keaton tries to escape from the police by hiding in a spare tire attached to the back of a car. Once the car drives away, however, we see that the spare tire is not, in fact, attached; rather, it’s part of a display for a tire store. We are then left with Buster, his body encased helplessly in rubber next to the curb. It’s a joke that requires hardly any technical trickery; it works because he knew where to put the camera. To this day, Keaton’s shots are among the most imitated, like the house collapse in Steamboat Bill, Jr. (1928) when a wall falls down on him, but he’s saved by standing on the perfect spot to pass through the attic window. 

Keaton loved the comedy of action and the ability of the camera to fool the eye. He was a genius at experimentation. With the exception of The General, he never worked with a completed script. He would devise a compelling beginning and a satisfying finish. “The middle will take care of itself,” he would say. 

Unfortunately, though, like all things, Keaton’s incredible run came to an end in 1928, when he joined MGM Studios and lost his creative control. The move, he said, was “the worst mistake of my life.” Around the same time, he was drinking excessively. He went in and out of rehab and nearly lost everything. MGM fired him. 

After an extended bout with chronic depression and alcoholism, he made his way back into pictures. None were as good as the ones he made in the 1920s. Then, after a lost period, he was at the cutting edge of television comedy in the 1950s. In many ways, his experience in vaudeville and silent film equipped him perfectly to reach audiences on a smaller screen, who were harder to capture without the inoculations a theater provides from the outside world.

As Dana Stevens writes in her new book, Camera Man—an impressive confluence of biography, film criticism, and cultural history—Keaton’s trajectory tells, in its own way, the history of modernity and the evolution of film technology.

Keaton’s life essentially coincided with the first 70 years of film. And yet he was stunningly ahead of his time. Indeed, a quick scan today of Instagram, YouTube, or TikTok yields an endless stream of gags that carry influences from Buster—even if their makers don’t realize it. 

Joseph Frank Keaton was born in the small town of Piqua, Kansas, in 1895, the same year the Lumière brothers made their first films. As Stevens, a film critic for Slate, notes, at some point in that year, Louis Lumière is said to have proclaimed, “The cinema is an invention with no future.” It’s no small irony that this is when our hero—the man who proved him wrong—emerged.

Buster’s parents, Joseph and Myra, were comedic performers in a traveling vaudeville show. As legend has it, when he was six months old, he fell down a set of stairs, amazingly without a scratch. Another traveling performer, Harry Houdini, witnessed the tumble and reportedly said to Joseph and Myra, “That’s some buster your kid took.” (“Buster” at the time was a common word for a fall.) From then on, young Joseph went by Buster. 

It wasn’t long before he became one of the nation’s premier vaudeville stars. Joseph, Myra, and Buster were known as “the Three Keatons,” with Buster as the main attraction. As a kid, he loved to make people laugh by taking the fall—a formative time for his physical comedy. His dangerous gags were such a pervasive part of the show that critics accused the elder Joseph of child abuse, including for once throwing a young Buster at a heckler in the audience. But as contemporary critics have noted, the Keatons were skilled performers who knew what they were doing, and Joseph likely wouldn’t have wanted to hurt his son, the star of the act. His parents weren’t avaricious, either. Buster was able to keep his share of the earnings. By the age of 12, he had his own car. 

In 1917, he appeared in his first film, The Butcher Boy, after being discovered by Roscoe “Fatty” Arbuckle. He went on to act in 20 of Arbuckle’s films, with an interruption to serve in World War I, where he lost hearing in one ear. 

Keaton got his next big break in 1920, when an impressed studio executive, Joseph Schenck, gave him his own production unit. From 1920 to 1929, Keaton made his masterpieces of silent film: Our Hospitality (1923), a satire of the warring Hatfield and McCoy families; Sherlock Jr. (1924), a surreal comedy about a movie projectionist who becomes the famed detective; Seven Chances (1925), about a man who must fulfill a series of bizarre terms to inherit $7 million; The General (1926), an epic tale of a Civil War train engineer who schemes to be reunited with the two loves of his life; College (1927); and Steamboat Bill, Jr. (1928). 

Keaton’s daring was unquestionable; his famous $42,000 train wreck in The General—almost $650,000 in today’s dollars—is the most expensive shot in silent film history. Two of Keaton’s most famous rules were to never fake a gag and to never use a stuntman. “Stuntmen,” he once said, “aren’t funny.” For Seven Chances, he manufactured an avalanche of rocks falling down a mountain so a camera could capture him running from them. The 1920s were also when he cemented his reputation as “the Great Stone Face.” He was known for maintaining a deadpan expression even as cataclysm was happening all around him. Because he was human, after all, he did eventually get hurt. At one point, he broke his neck—from which stunt, no one knows—but he didn’t even realize it. (Years later, a doctor asked him when he broke his neck. “Never,” Buster said. “Yes, you did,” the doctor replied.) 

In the century’s first three decades, Keaton rose from obscurity to become one of the industry’s biggest stars. 

But when MGM poached Keaton in 1928, both his friend Charlie Chaplin and Harold Lloyd advised him not to give up his independence. Financially, it was a hard offer to turn down; MGM was offering Keaton $3,000 a week (a little under $48,000 today). But the studio, one of the most regimented in all of Hollywood, was a stifling place for him. 

Although his first film with MGM, The Cameraman (1928), was a box office hit, there were endless battles behind the scenes. His entire method of filmmaking was deemed unacceptable. Scripts had to be written; everything had to be planned. From then on, Keaton’s films didn’t have the same energy.

Meanwhile, his personal life was also falling apart. Keaton began drinking heavily. In 1932, his wife Natalie divorced him, and his drinking got worse. He went to rehab, where he met a nurse and married her, but he couldn’t quite kick the booze. By 1933, MGM had fired him, but his drinking continued. He got divorced again, and then suffered a nervous breakdown and was taken to a hospital in a straitjacket. 

Newspapers said he would never appear in movies again, but after a year of sobriety, Buster went back to acting. He was clearly still depressed; on the set, he would take breaks to cry. 

Eventually, he signed a 10-film contract with Columbia Pictures, but again without creative freedom. His salary was also seriously diminished, from a peak of $3,000 a week to just $100. 

In 1940, Keaton got married, for the last time, to Eleanor Norris, a dancer whom he met playing bridge. (He was known as one of the best bridge players in Hollywood.) Keaton had lost most of his money, so they moved into his mother’s home. 

Around this time, he made the last big transition of his career: to television. 

In the 1940s and ’50s, he starred in commercials and made short appearances in a few feature films, including Sunset Boulevard (1950) and, most memorably and movingly, in Chaplin’s late film Limelight (1952), in a routine where the silent-era stars played a pair of inept stage musicians. It was the only time the two giants would ever appear together on film. 

But it was his appearances on television comedy shows, such as The Ed Wynn Show, that got him attention again. Keaton’s background in vaudeville proved highly useful, because so many of those early shows relied on skits. “The overlap between early television and vaudeville was so marked that a new term, ‘vaudeo,’ was coined to describe the phenomenon,” Stevens writes. 

This galvanized a reconsideration of his silent films from the 1920s. In 1960, Buster received an honorary Oscar. He had seemingly risen from obscurity once again. Suddenly, with the dawn of a new medium (television), a newfound appreciation had surfaced for an old medium (silent film), and the innovations from Keaton that had shaped it. 

In 1966, Keaton died while playing bridge. He was 70 years old and suffering from lung cancer. Luckily for the rest of us, Eleanor Keaton outlived her husband by 32 years and became a dedicated promoter of his work, traveling around the world to speak at screenings and festivals that featured Buster’s silents. 

Even as the industry continued to experience “sea changes,” as Stevens calls them—including the collapse of the studio system in the 1970s, shortly after Keaton’s death—his influence became increasingly visible. Jackie Chan re-created his gags—from falling out of windows to hanging on the side of moving buses—and Wes Anderson emulated his shots, with their emphasis on geometry and the way characters move inside of the frame.

Now, with the birth of social media, many of his stunts have become popular memes and gifs. On TikTok, whose short videos featuring physical comedy make it well suited to Keaton homage, there is an entire page with content from Buster’s films. It has received more than 44 million views. 

As Stevens makes clear, Keaton was a singular 20th-century man. He brought film from its inception to the present, and he created a cinematic language that now travels with virtually everyone, all the time, contained in a small device that we carry around in our pockets. “He is out there to be seen,” Stevens writes, “streaming past us on every conceivable platform, still and always ahead of his time.” 

And yet the best way to experience Keaton is in the mode he originally intended: on a big screen, in the company of others. That’s where the magic comes alive. 

I remember my first time seeing a Keaton film on a big screen, in 2017. It was a showing of The General at the AFI Silver Theatre, in Silver Spring, Maryland, with live musical accompaniment. The shots were astonishing, better than anything that computer-generated imagery can produce. The soundtrack was beautiful and elegant. But the most memorable part was laughing with the audience. The film was more than 90 years old at the time, and yet—like Citizen Kane, another movie made by an unconstrained genius and imitated for generations—Keaton’s comedy still held the power to delight and surprise.

The post How Buster Keaton Became a Digital Meme appeared first on Washington Monthly.

I must confess: When I first saw an opening for a job at the Washington Monthly, I’d never heard of it. I was in my mid-20s and had spent a few years reporting from abroad, in South Asia and the Middle East, and then covering U.S. foreign policy in Washington. But I was desperate to break into the magazine world. So many of my writer heroes had written for magazines.

After a quick consultation with Google, the Monthly gained instant credibility because of the long list of estimable journalists who began their careers at the magazine as editors: best-selling author Jonathan Alter, Pulitzer Prize–winning journalist Katherine Boo, Pulitzer Prize–winning historian Taylor Branch, veteran journalist Matt Cooper, New York Times reporter Nicholas Confessore, New York Times editorial board member Michelle Cottle, best-selling author Gregg Easterbrook, Atlantic correspondent James Fallows, Time correspondent Haley Sweetland Edwards, Bloomberg Businessweek reporter Joshua Green, Washington Post columnist David Ignatius, New Yorker staff writer Nicholas Lemann, Pulitzer Prize–winning biographer Jon Meacham, veteran journalist Timothy Noah, then Wired editor in chief (now Atlantic CEO) Nicholas Thompson, and others.

What stood out to me was the pattern. Young journalists had been starting off at this small magazine and going off to become some of the country’s most consequential writers and editors for decades. Its entire existence, in fact, has been an uninterrupted period of launching premier journalistic talent. (Even Ta-Nehisi Coates, while never an editor, began his career writing about race and culture for the Monthly.)

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All of a sudden, sitting at my computer, I was exhilarated by the possibility of landing a job at a magazine that just moments before had been as foreign to me as a television set was to E.T.

After a long, rigorous, and somewhat excruciating hiring process, I got the gig. And once I made it through the doors of the Monthly’s then-dingy office space in D.C.’s Dupont Circle (it has since been beautifully renovated), it didn’t take long for me to recognize what made the place, for lack of a better word, special.

On my first day, editor in chief Paul Glastris took me and another new hire, Daniel Block, out to lunch at the Daily Grill, an art deco–styled restaurant on the first floor of our building. As we young guns awaited our wedge salads, Paul (who opted for the chicken pot pie) went into a long disquisition explaining the first principles of the magazine’s distinctive brand of solutions-based ideas journalism.

“Other places write about what everyone is talking about,” he said, with the motivational timbre of a coach and the intensity of a cult leader. “We write about what everyone should be talking about.” While the Monthly has an imperative to offer stories you can’t get elsewhere, he continued, we hold ourselves to an even higher standard. “The quintessential Monthly story,” Paul said, “offers a solution to a problem you didn’t know you have.”

Indeed, that is precisely what this magazine has been doing since Charlie Peters founded it in 1969—and has continued doing since Paul took the reins in 2001.

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The Monthly was the first publication, more than 10 years ago, to warn about the deleterious effects of the American economy’s Gilded Age levels of monopoly power, with landmark pieces by Phil Longman, Barry Lynn, and, at the time, a little-known policy wonk named Lina Khan (now the chair of the Federal Trade Commission). The magazine changed the national conversation around higher education with its annual college guide and rankings, which measure schools based on how well they serve their students and the country rather than by their exclusivity and price. It championed vote by mail before it was fashionable, laying the intellectual groundwork for its widespread expansion when the COVID-19 pandemic hit.

It’s clear to me now why the young editors who start their careers here—who struggle for two to three years with an awesome set of responsibilities and little pay—make such big impacts when they leave. It’s because they make big impacts while they’re here. Once they graduate to larger publications (places that can offer things like, you know, a 401k), they have already been indoctrinated in the Monthly way—and have shown results.

I’ve been at the Monthly for a little more than three years now and have had the great good fortune to not only learn my craft here but also make a difference, with stories on the chokehold Big Ag lobbyists have on Washington; on the titanic battle for Americans to have access to mail-in ballots; and on Maryland Governor Larry Hogan’s advancing transportation infrastructure projects near properties he owns, which led to the state legislature unanimously passing stronger new ethics laws.

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Eventually, my term of service will come to an end, as it does for all Monthly editors, and I’ll hope to keep the flame burning, just as my colleagues have who worked beside me but now do great things elsewhere, such as Saahil Desai at The Atlantic, Gilad Edelman at Wired, Grace Gedye at CalMatters, and Daniel Block at Foreign Affairs.

So, please, this holiday season, do something to help keep this tradition going: Donate to the Monthly.

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If you think the Monthly’s unique journalism is important, there’s something you can do to help: Make a donation. In fact, do it right now. As a nonprofit, we cannot do our work without your support.

Plus, as a token of our gratitude, if you give $50 or more, you’ll receive a one-year gift subscription to the print edition of the Washington Monthly.

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In 2012, a young researcher at what was then the New America Foundation’s Open Markets program published an exposé in the Washington Monthly about the plight of chicken farmers and ranchers who were being crushed by Big Ag monopolies. It described a reality in which the people responsible for the food most Americans eat are trapped in a web of exploitation that has not only battered their livelihoods but also has jacked up the prices for consumers and undermined the welfare of animals.

The story went on to explain how the Obama administration and its agriculture secretary at the time, Tom Vilsack, took aim against this exploitation by trying to update the rules of the Packers and Stockyards Act (PSA), a law passed in 1921 to protect farmers, consumers, and other stakeholders in the livestock, meat, and poultry industries from “unfair, deceptive, unjustly discriminatory and monopolistic practices.” The effort, however, was derailed once the large agribusinesses deployed their lobbying forces to Capitol Hill and stopped anything meaningful from getting done. 

Now, it’s 2021, and the writer of that piece, Lina Khan, is no longer an unknown D.C. policy wonk, but chair of the Federal Trade Commission, one of the federal government’s two main antitrust enforcement agencies. And on July 9, President Joe Biden, who appointed Khan to her role, issued an executive order containing 72 separate initiatives to crack down on consolidation across the American economy. One of those guidelines instructs the Department of Agriculture, again headed by Vilsack, to update the rules of the PSA along almost precisely the same lines the Obama administration tried. 

If the past is prologue, the Biden administration will face a similar battle getting the rule changes enacted. The difference this time, however, is that the effort will have more firepower on its side. Anti-monopolism was a fringe movement in Washington in 2009. There was little to no momentum to mount a battle over changing the rules to an obscure law from the 1920s to protect farmers. All that’s changed. Biden has clearly made antitrust a featured part of his domestic agenda, and there is growing awareness in both parties in Congress about the dangers of today’s Gilded Age–level corporate concentration, with sweeping antitrust bills gathering bipartisan support in both houses. 

But as multiple sources deeply entrenched in the fight have told the Washington Monthly, it is far from a sure thing. Big Ag monopolists will not go gently into that good night—and they will pour the same money and resources and deploy the same playbook as last time to trip up the regulatory process in its tracks. 

In August 2009, eight months into Obama’s first term, the administration began holding a series of hearings across the country to investigate consolidation in the poultry, dairy, cattle, and seed industries. The impetus was a provision in the 2008 farm bill, passed when George W. Bush was president, that instructed the USDA to update the Packers and Stockyards rules. 

In state after state, government officials heard the same stories again and again from livestock producers—that the market was broken, and oppressive. The reason, they were told, was that the federal government had allowed the meatpacking industry to consolidate. The four biggest meatpacking companies controlled 82 percent of the beef market, up from 25 percent in 1976. And the top four poultry processing firms controlled 54 percent of the poultry market, up from 35 percent in 1986. At the hearings, chicken farmers complained that because there are so few buyers for their products, they had no choice but to sign sharecropper-like contracts with one of the few mammoth chicken processors. These contracts obliged them to purchase almost all the supplies they needed—like chicks or feed—from the processors themselves, and to accept whatever prices the processors offered for the grown birds. Whenever farmers would try to negotiate better terms, the companies would often retaliate by sending them back lousy feed or sickly chicks, thereby depressing their incomes even more. The system, in other words, meant the farmers had no choice but to accept the terms—even if those terms were driving them out of business—and to keep their mouths shut in the process. 

Based on such testimony, the USDA proposed a new set of rules in June 2010. They included banning company retaliation against farmers who tried to renegotiate a contract; requiring any company that forced farmers to make capital investments to offer contracts long enough for those farmers to recover at least 80 percent of that investment; and, perhaps most importantly, getting rid of a provision that said farmers had to prove that breaches of PSA rules caused industry-wide harm—a standard that made it virtually impossible for farmers to successfully file a claim over a violation. These changes to an old law may not sound like a big deal, but for American livestock farmers, they would be life-changing. 

A month later, however, Republicans on the House Agriculture Committee, joined by a few Democrats, assailed the administration for ignoring the concerns of meatpacking industry trade groups, such as the National Chicken Council and the National Cattlemen’s Beef Association. In response, the USDA, under Vilsack, extended the period for public comments on the proposed rules from 60 to 150 days. 

That might sound reasonable enough. But the delay proved fatal, for two reasons. First, it pushed the public comment period beyond the midterms, which the Democrats lost. Second, it gave industry trade groups time to commission dubious research to counter the rules. “Anyone can pay economists to come up with studies to support their point of view,” Dudley Butler, then the top USDA official overseeing the livestock industry, told me. “And extending the time for comments allowed them to come back with their studies for why these new rules were going to destroy the industry and hurt consumers and all that.” 

In November 2010, Informa Economics, a Memphis-based agricultural research firm that often works with the meatpacking industry, released a report purporting to show that the new rules would cost more than 22,000 jobs, $1.64 billion in meat industry revenue, and $360 million in tax revenue. The data Informa used to calculate these estimates, though, was supplied by the livestock industry trade groups that commissioned the report. Since the data was proprietary, and not available to regulators or outside reform groups, there was no way to check its validity—a classic deep lobbying trick. 

Emboldened by the report, House Republicans and their Democratic allies in June 2011 added a rider in a government funding bill to strip the USDA of the funds it needed to implement the strongest of its proposed rule changes. Advocacy groups and farmers fought hard against the rider—6,000 people called the White House—but the industry lobbyists won. While the Senate supported the PSA provisions, the House members waged an all-out offensive over it—holding funding for crucial safety net programs, such as food stamps, hostage. 

The maneuver worked. The Obama administration decided this was a war it could not win—and retreated from the fight. By November 2011, the rider passed the House, then made it through the Senate, and was later signed into law by Obama. The next month, the USDA published four watered-down versions of the rule changes, hardly making an impact. The defeat was intensely disappointing for Butler, who resigned from his post in January 2012. 

For the next four years, the Obama administration let the issue fall by the wayside. But in its final days, it proposed three rule changes that stemmed from the 2009–11 hearings. Of course, Donald Trump was set to take office in less than a month, so the move was more symbolic than anything else. The Trump administration buried the proposed rule changes. 

Today, however, it’s no longer Donald Trump’s Washington. Joe Biden is in the White House, Democrats control both the House and the Senate, and there’s a chance to finish what the Obama administration started. 

This summer, Biden ordered the secretary of agriculture to propose new rules that would update the standards by which regulations and enforcement would be applied, almost entirely along Obama’s 2016 order, including getting rid of the current standard that any kind of alleged anticompetitive conduct, or PSA violation, must demonstrate industry-wide harm. Instead, anticompetitive conduct would be a violation simply by virtue of its being anticompetitive. 

The new rules would also prohibit grower-ranking systems, which allow poultry companies and contractors to shortchange farmers, and enact anti-retaliation protections for farmers who file complaints. 

But the proposals have already faced vociferous opposition from major trade associations that represent Big Ag, such as the North American Meat Institute, which promptly, upon Biden’s order being announced, said the changes would “open the floodgates for litigation” that would hurt livestock producers. They also sent out a flier to reporters that included an economic analysis from the Steiner Consulting Group—a consultancy that, in its mission statement, claims to work to “significantly improve the bottom line of food companies”—that says consolidation isn’t what has led to rising prices of meat. Rather, the report counters, meat has gotten more expensive because of issues of supply and demand. 

Reports like this are part of the rhetorical weaponry that skilled Big Ag lobbyists—like Randy Russell of the Russell Group; Michael Torrey, a private attorney; and Kevin Bailey of the firm Finsbury Glover Herring (previously known as the Glover Park Group)—will likely use to try to kill or scale back the regulations.

Even if the USDA manages to issue strong regulations, the meatpacking behemoths will undoubtedly try to challenge them in federal court. In that effort, they will be able to deploy some of DC’s most powerful law firms. Kirkland and Ellis represents Tyson Foods; WilmerHale represents Monsanto; Mayer Brown represents Cargill. These firms will also have the advantage of arguing before a federal bench filled with GOP-appointed judges steeped in anti-regulatory, pro-monopoly thinking. 

That’s why, if the Biden administration really wants to protect the plight of farmers from a concentrated food market, it needs not only to update the rules of the Packers and Stockyards Act but also to strengthen the law itself. That’s the only way to guard against the likelihood that conservative judges will toss out the regulations. 

Luckily, there’s already a bill in Congress waiting for Biden to start pushing for aggressively: the Farm System Reform Act, sponsored by Senator Cory Booker. (Representative Ro Khanna has introduced a companion bill in the House.) The legislation would codify into law many of the reforms Biden is seeking in the executive order, such as eliminating tournament or ranking systems for contract growers. Thus far, the bill is only supported by Democrats, but congressional staffers who are working on it, as well as Joe Maxwell, the president of Family Farm Action and a former lieutenant governor of Missouri, see a reason to be optimistic that a few Republicans will jump on board. 

At a Senate hearing on consolidation in the cattle market, for instance, Republican Senator Chuck Grassley grilled Justin Tupper, the vice president of the United States Cattlemen’s Association, on the need for price discovery mechanisms to ensure that small, independent producers have the same opportunity to market their cattle as the big producers that dominate the industry. It was a clear indication of his antipathy to the current arrangement, in which a small group of massive companies get to run the show. Grassley has also introduced separate legislation to promote more transparency in the cattle market, which has been cosponsored by Democrats as well as Republicans, such as Joni Ernst of Iowa and Steve Daines of Montana. It’s conceivable that enough of these Republicans could get behind a bill to rein in a concentrated food industry to overcome a filibuster. 

The case for optimism is that when it comes to agriculture, and the economy generally, the winds have shifted in Washington, with growing bipartisan recognition of the deleterious effects of concentrated markets. The case for pessimism is that corporations generally, and Big Ag in particular, have a deep bench of veteran Washington experts who have proven they know how to block attempts to reform a broken system. Either way, if reformers are going to win this fight, they will have to know what and who they are up against.

The post Can Biden Coop Up the Monopolies? appeared first on Washington Monthly.

Last August, Byron Brown filed a bizarre lawsuit. As the mayor of Buffalo, New York, for the past 16 years, he had just suffered a humiliating primary defeat to India Walton, then a relatively unknown community organizer and self-declared socialist. Unwilling to accept his loss, Brown tried to get on the November ballot by creating a third party—the “Buffalo Party”—but the Erie County Board of Elections denied his request; he had filed his petition two months after the deadline.

In response, Brown sued the board of elections in federal and state courts, claiming that it was unconstitutional to impose a deadline on third-party nominating petitions 23 weeks before a general election, thereby depriving him of “fair access” to the ballot. It was a strange basis for Brown’s suit, since he ran in the Democratic primary as a Democratic incumbent and had also previously served as chair of the state Democratic Party. In other words, it was an attempt to manipulate election law that seemed more befitting of a certain former Republican president than a Democratic mayor of a blue city.

Still, on September 3, a federal judge ordered the Erie County Board of Elections to put Brown on the ballot—a huge boost to Brown’s quest to hold on to power. There was one thing, however, that U.S. District Judge John L. Sinatra Jr., a Trump appointee, left out in his ruling: His brother, Nick Sinatra, a Trump donor and real estate developer in Buffalo, is a major funder of Brown’s campaign.

Even without the apparent conflict of interest­—Brown’s administration has approved dozens of Nick Sinatra’s development projects and given him tax breaks on some (Sinatra is also currently seeking a tax break on a 12-unit apartment building he’s constructing)—federal and New York state appellate courts overturned the district court’s ruling a week later.

But while the gambit fell short, Brown’s campaign is far from finished. He’s running as a write-in candidate (his slogan: “Write Down Byron Brown”) and recent polling shows him leading Walton. And while write-in campaigns are rarely successful, there are a few in recent memory that have worked: Lisa Murkowski retained her U.S. Senate seat in 2010 through such a bid. Mike Duggan also pulled it off when he became the mayor of Detroit in 2013. In both cases, the victorious campaigns had at least one thing in common: strong fund-raising.

Indeed, the strange turn of events surrounding Brown’s effort to get on the ballot reflects an odd dynamic as Buffalonians head to the polls on November 2: how a collection of Trump supporters and GOP donors are pouring millions of dollars into a mayoral race between two Democrats in an overwhelmingly Democratic city.

Many of Brown’s patrons share something else in common—they are real estate developers with whom he has close ties.

Beyond Sinatra—who last month held a fund-raiser in western New York for Florida Republican Governor Ron DeSantis—other GOP supporters are Paul Ciminelli, a Buffalo developer, and Carl Paladino, a real estate mogul and MAGA fanatic who once referred to Michelle Obama as a “gorilla.” A super PAC funded by New York’s real estate brokerage industry, which in 2018 spent millions trying to help Republicans take control of the State Senate, has also poured more than $300,00 into the race to re-elect Brown. And Douglas Jemal, a Washington, D.C.–based developer with a growing portfolio of commercial properties in Buffalo, is another Brown donor. He was pardoned of wire fraud by Trump in his last day in office.

Brown’s predicament is, in part, the direct result of hubris. The 63-year-old Queens native barely campaigned in the primary, having never faced a serious challenger in either a primary or a general election since he first took the helm at City Hall in 2006. (Were he to win this year, he’d become the longest-serving mayor in Buffalo history.)

But Brown’s primary loss was also a rebellion against a model of governance that has exacerbated inequality in a city where the divide between the haves and the have-nots has been growing steadily since the deindustrialization of the 1970s and ’80s, when some of Buffalo’s largest employers, such as Bethlehem Steel, shut down and the city descended into economic devastation.

As Geoff Kelly pointed out in The Nation, the city has essentially been a client of state and federal governments ever since, with state funding accounting for one-third of the city’s revenue to fight poverty and help rebuild the decayed urban landscape. Under that arrangement, mayors, along with a like-minded city council, have wielded power by determining the distribution of those funds. In turn, they often became close with the biggest developers, granting them tax breaks and approvals in exchange for political and financial support.

Under Brown’s tenure, there has been a modern renaissance in Buffalo—from the building of Canalside, a redeveloped district that has given new life to the town’s Lake Erie waterfront, and the expansion of commercial strips on Elmwood and Hertel Avenues, to a new medical campus downtown. But the working-class neighborhoods on the city’s east and west sides have been woefully neglected, rendering Buffalo one of the poorest large cities in America, with more than one-third of its 255,000 residents living below the poverty line. (This is a stunning fall from grace. Buffalo was once a thriving metropolis, sitting at the western end of the Erie Canal, and the eighth-largest American city at the turn of the 20th century. Today, it’s ranked 90th in population, behind Glendale, Arizona.)

In comes India Walton. A former nurse turned community activist, the 39-year-old emerged from one of the neighborhoods the Brown administration has ignored. Starting last winter, Walton mounted a volunteer-driven campaign made up of the city’s left-wing base that had long protested Brown’s corporatism. In a historically low-turnout election, her mobilization gave her a narrow victory of fewer than 2,000 votes.

Walton’s rise made national headlines not only because of the shock of her victory—if she wins the general, she’ll become the first socialist mayor of a major U.S. city in almost 60 years—but also because it came with resonance: She’s a survivor of the poverty that plagues the city. Walton grew up on welfare and food stamps, with a single mother; she had her first child at the age of 14, dropped out of high school, and birthed a set of twins at 19; she’s been a victim of sexual and domestic abuse, and has suffered a host of indignities that come from being poor. Even today, she makes DoorDash deliveries when she’s not campaigning.

I recently interviewed Walton at her WeWork-like campaign headquarters in downtown Buffalo. She’s small in stature, barely five feet tall—and disarming in a way that might be expected of a novice politician. When I told her I left Buffalo in 2014 but kept my Bills season tickets, and come up for a few games and sell the rest, she offered to take my seats when I was out of town. (In the interest of journalistic ethics, I declined her offer.)

As we had tea, Walton, who was donning a blue t-shirt, jeans, and yellow crocs, told me about the roots of her political awakening. When she was 11, she watched her mother lobby to get her husband (not Walton’s biological father) out of jail; he had been serving a 25-year-to-life sentence for drug trafficking. “My mother joined in an organization called Families Against Mandatory Minimums,” she said. “And I watched her write letters, make phone calls, go to Albany. I went to Albany with her multiple times. And she kept saying, ‘We’re gonna bring Daddy home. We’re gonna bring Daddy home.’ And one day, he came home. It took me a long time to realize that that was activism.” It wasn’t until she participated in a program for emerging leaders at a local college that she recognized the systemic forces grinding her down. “There were things that happened to me, but it wasn’t because I had done anything wrong, right? It’s because we live in a system, in a society that says these things are acceptable—and they’re not.”

Most of her adult life has been dedicated to righting the wrongs she’s experienced. After she delivered the twins prematurely and was bothered by the care—or lack thereof—at the hospital, she became a registered nurse, hoping to provide others with better treatment than she received. Eventually, she left nursing and became an activist on criminal justice and police reform (she was a prominent voice in Buffalo following the George Floyd murder) and fair housing rights.

In the city’s Fruit Belt neighborhood, where she’s from—a predominantly Black and working-class vicinity that gets its name from all the streets named after fruits: Grape Street, Orange Street, Peach Street, and so on—she created a land trust that purchased abandoned houses and turned them into affordable housing units before developers could swoop them up.

In December 2020, she launched her mayoral campaign on a platform of reforming Buffalo’s police—a department that had gained notoriety after an officer knocked down a 75-year-old social justice protestor the previous summer, sending him to the hospital with a skull fracture—and enacting a broad antipoverty agenda that includes bigger investments in education, public infrastructure, and more affordable housing. Many of her ideas came from influential nonprofits in town, such as the Partnership for the Public Good and PUSH Buffalo (formerly People United for Sustainable Housing).

Walton also signed on to Mayors for a Guaranteed Income and proposed other ideas to increase home ownership in struggling neighborhoods. “I want to establish a municipally funded revolving mortgage fund so that we can extend micro mortgages to folks who don’t traditionally qualify in the current financial system,” she told me. “We know that there are homes in Buffalo that are valued at less than $50,000. Well, how do you get a mortgage for less than $50,000? You don’t, right, but the city can step in and provide financing for folks . . . Why not give them an opportunity? Rental units don’t stabilize neighborhoods, ownership does. In that way, we’ll see poverty go down.”

It’s a key part of her message to voters: In Brown’s Buffalo, wealthy developers have been the beneficiaries of socialism through tax breaks and government subsidies. In her Buffalo, working people will finally be able to reap those benefits, too.

After Walton defeated Brown in the June primary—he had refused to debate her or even mention her name—Republicans lined up to tarnish her reputation and help Brown win the general. “I will do everything I can to destroy her candidacy,” Carl Paladino said.

Sure enough, in ads and interviews, Brown started painting Walton as a “radical socialist” out to defund the police as homicides were on the rise. “I think people themselves are afraid of her,” he told WGRZ, Buffalo’s NBC affiliate.

Meanwhile, the local press was openly hostile to Walton. The Buffalo News ran a breathless front-page story on Walton’s 2018 eviction from a house she was living in, based on an anonymous complaint about drug dealing—even though police investigated the claim and no charges were ever filed.

The Brown campaign and the media released more stories that weaponized Walton’s poverty against her: tales of unpaid taxes, food stamp fraud, and an arrest for driving on a suspended license. Earlier this month, Walton’s car was towed because of more than $600 in unpaid parking tickets, which she said in a Facebook post was possibly an act of retribution from Brown (although she didn’t dispute having been ticketed). Simply put, the Buffalo press corps has been an abiding partner in Brown’s campaign strategy to turn Walton’s inspiring story on its head. They used her saga of going from a single mother on welfare to the Democratic mayoral nominee as a knock against her rather than a traditional American success story.

There are signs that Brown’s smear tactics might be working. A September poll commissioned by the Kansas City–based polling firm co/efficient found Brown with a significant lead over likely voters. While polling, of course, is fallible, Walton’s campaign has brought in big guns from outside the city for help. This past weekend, Representative Alexandria Ocasio-Cortez toured Buffalo stumping for Walton, which included her tending bar at a popular watering hole in Buffalo’s vibrant Elmwood Village.

Ocasio-Cortez noted a distinction between Walton and herself and peers like Cori Bush, Ilhan Omar, and Rashida Talib: Walton, AOC said, would be in an executive position, able to enact—and give credibility to—the policies that leftist lawmakers push for in Congress. “We want to show that postindustrial cities like the city of Buffalo can thrive with progressive policies,” she said.

Going into the election Tuesday, Walton has an advantage as the official Democratic nominee and the only candidate on the ballot, but Brown has the advantage of spending nearly two decades as mayor; he’s a known quantity, not a leap into the unknown.

In many ways, Walton’s chances will be determined based on how well she can expand her base beyond the progressive enclaves of Elmwood Village and neighborhoods on the east and west sides, and whether she can pull in the city’s conservative and moderate Democrats, who are not exactly Jacobin readers.

To that end, Walton has been going into neighborhoods with those voters, like in South Buffalo, and delivering a simple message: “I have the benefit of not being a politician. I’m an organizer. Being a socialist means you expect government to perform for the people. Over the last 16 years, government has been performing for a handful of wealthy people, corporations, and developers. But so many people have not seen material improvements in their lives. The roads are not even getting paved.” That, she told me, is a message that resonates.

At the end of our interview, I posed to Walton a question I learned from an old journalism mentor: What’s one question no one from the press has asked you that they should have?

She paused, looked down, and then perked her head up. “What will I do if I lose?”

“What will you do if you lose?”

“I don’t know,” she told me. “I don’t have a Plan B.”

The post Why Trump Backers Fear the Socialist Who May Become Buffalo’s Next Mayor appeared first on Washington Monthly.

In June of 2018, CVS announced a first-of-its-kind deal: a partnership with the U.S. Postal Service to deliver prescription medications and over-the-counter products, such as toilet paper and facewash, to customers within one to two days for a modest delivery fee. The arrangement was driven by the obvious need to help the drugstore giant compete with an even bigger corporate behemoth that had all but taken over e-commerce—Amazon.

Indeed, the move came as Amazon was preparing to roll out a prescription drug offering and ramp up its sale of medical supplies, according to The Wall Street Journal. CVS soon launched the pilot from its nearly 10,000 pharmacy locations throughout the United States.

Sure enough, the program was a hit, according to the Rhode Island-based company, the largest pharmacy chain in the nation. “We’ve seen strong delivery growth and great customer feedback since our launch of one-to-two-day delivery and have since offered a three-hour on-demand delivery option,” Matthew Blanchette, a CVS spokesperson, told me.

The success of Amazon, after all, had proven that the convenience of online shopping was a boon for consumers. Why wouldn’t the same principle also work for other major retailers with a vast and expansive reach?

Other corporate titans caught on quickly. The next year, both Target and Walmart forged similar deals with the Postal Service to expedite the delivery of their products to customers after ordering them either online or over the phone. The timing was serendipitous. Unbeknownst to the higher-ups at the companies and the USPS, these services would become even more essential a year later, when the pandemic reached America’s shores and changed life as we once knew it. In 2020, for instance, e-commerce sales in the U.S. jumped by almost 93 percent, according to an Accenture study, making up 22 percent of all retail sales—double the amount from one year earlier. “A ‘never-normal’ has arrived for e-commerce sales—and consequently, for post and parcel organizations,” said Brody Buhler, a managing director at Accenture. “Simply put, more packages need to be delivered.”

But while these special programs between the Postal Service and large retail corporations have provided those companies with a much-needed lifeline during the Covid-19 crisis, no such USPS service has been available for small, local retailers, leaving them at yet another competitive disadvantage.

According to economists at the Federal Reserve, more than 200,000 establishments have permanently closed since the pandemic, more than 100,000 of which were small, local businesses. “Vacancy rates for office and retail are reaching levels last seen during the Great Recession,” the Fed study says. Meanwhile, major retailers have remained far less scathed.

Of course, it’s great that the USPS offers a valuable service to CVS, Target, Walmart, and the like that has benefited those businesses and their customers. It is also helping, to a certain extent, to level the playing field between Big Box stores and Amazon, which is projected to account for more than 40 percent of all e-commerce by years-end. The problem is that the agency is leaving out the rest of the retail industry—predominantly the smaller, local retailers that are vital parts of their community’s fabric. I asked the Postal Service about the existing programs and whether it was considering expanding them to include smaller retailers. “Like any prudent business, we do not discuss the specifics of our business relationships,” David Partenheimer, a USPS spokesman, told me.

Fortunately, however, there happens to be an easy way for the Postal Service to offer small businesses fast, local shipping, according to dozens of current and former USPS officials and industry analysts who spoke to the Washington Monthly.

The idea is simple. Local post offices can form arrangements with small, local retailers to offer same-day or next-day delivery to customers with addresses in the same or nearby zip codes. Postal workers could pick up the packages and then send them out for delivery rather than first routing the packages through processing centers. In some cases, especially in rural parts of the country, those facilities are more than 100 miles from the nearest post office, substantially slowing down delivery. In other words, the USPS would cut out the processing centers and deliver packages straight to the customers in less than 24 hours. Were the program a success, the USPS would surely need to make the necessary investments to expand it. But that would also mean that the program was working and thus bringing in more revenue for a semi-public institution that has for years been in dire financial straits.

It’s a model that has worked. As the Monthly first reported last October, the Postal Service expedited the delivery of absentee ballots in the final days of the 2020 election by allowing letter carriers and postal workers to forgo sending the ballots to processing centers and instead take them directly to local election boards (after the postal unions lobbied for the proposal). According to USPS insiders, the arrangement enabled hundreds of thousands of ballots to be delivered in one to two days—as opposed to five to seven days.

Imagine if the Postal Service could adopt the same model to help you get coffee beans from your favorite local roastery, or hair cream from your local salon, or new bicycle tires from a nearby shop within a day or two. That would be good for you. It would be good for the roastery, or the salon, or the bike shop. And it would be good for the USPS itself. Why, then, doesn’t the Postal Service offer such a service—or even want to talk about it?

According to multiple sources inside USPS, there’s nothing especially challenging about offering 24-hour local package delivery. In fact, unofficially, some post offices are already providing it. Lori Cash, president of the American Postal Workers Union’s Western New York chapter and a 23-year USPS veteran and post office clerk, told me that post offices under her jurisdiction already circumvent processing centers to get customers their packages more efficiently on a regular basis.

“If a package is shipped from a candy shop in Lockport to a house in Lockport, we’ll often just take it directly to the destination to get the shipment to the customer quicker,” she said. “So, we already do this, we just don’t market it. If we did advertise this as a service available for nearby businesses, I imagine that many local retailers in and around Buffalo would take advantage of it—and, I imagine, many customers would then buy products directly from those shops more often than through Big Box stores.” As she explained, “If you wanted Anchor Bar wing sauce, for example, you could order it straight from the Anchor Bar and support a small business on Main Street, literally, instead of going to your nearest Wegman’s [supermarket].” (Anchor Bar, the local restaurant and bar where chicken wings were invented as a modern delicacy, is on Buffalo’s Main Street.)

A source inside the USPS national headquarters, who asked to speak on background, also insisted that the idea would be relatively easy for the Postal Service to execute. “It could be shifting previously existing resources,” the source said. “For instance, there has been a decline in nonprofit and first-class mail, so that means there are employees within the Postal Service who have traditionally been assigned to dealing with that who could be transitioned over to dealing with this kind of program.”

Getting the program up and running would require two upfront costs. One would be an advertising campaign to let local retailers nationwide know about the program and one to inform consumers that they can start ordering from their local mom-and-pop stores and get the products delivered to them as quickly as if they ordered from Amazon. The second would be developing smaller processing equipment and trackers that can be housed in small post offices. That way, postal workers could still track packages and data without sending them to a large facility and delaying the delivery process. But those costs should be more than made up for in additional revenue that USPS would bring in, said the source.

The good news is that there is a ready vehicle for making those investments. In March, Postmaster General Louis DeJoy released a 10-year plan for USPS to achieve “financial sustainability” by, in part, generating $24 billion in net revenue from “enhanced package delivery services for business customers.” The bad news is that the plan was vague in the extreme about how it would meet that objective—with no hint of whether a new local express package delivery option was being contemplated as part of the plan.

As virtually all industry analysts suggest, the future lies in online shopping and package delivery. Increasingly, the majority of shipping will come more from local inventory; an Accenture analysis found that more than 50 percent of all e-commerce will come from local warehouses and fulfillment centers by as early as 2023, with the potential for that number reaching as high as 70 percent. That’s because of the growing popularity of online shopping and consumer demand for same-day or next-day delivery: 67 percent of the Accenture survey’s respondents said they valued that option and service.

Unsurprisingly, another Accenture consumer research poll discovered that online shipping has only become more popular since the pandemic. People who went from making one out of twenty of their purchases online now report making one in six of their purchases online. Clearly, once people start using a more convenient service, they don’t go back.

So far, this trend has only added to the crisis facing local retail. One only needs to drive through struggling small towns and urban and suburban neighborhoods to see the boarded-up shops and vacant buildings that were once filled with vibrant businesses. These businesses fill two needs at once for their communities: employing workers and offering products and services that people need and want. No question, if Amazon had its way, those retailers would be a thing of the past while the Goliath continues to dominate the entire e-commerce sector.

But no iron law of technology or economics says that the growing consumer appetite for same or next-day package delivery must hurt local retailers. In fact, the opposite is true: Their very proximity to their local customers ought to give them what David Ricardo famously called a “comparative advantage.”

The Postal Service is almost perfectly positioned to help them exploit that advantage. As a government agency and quasi-public institution, USPS has long advanced certain social goals. For instance, it promotes regional equality by not charging by the mile or requiring extra postage to ship mail and packages to low-volume and difficult-to-reach parts of the country. It also provides discounted rates for the shipping of books and other printed materials. There’s no reason, therefore, that it couldn’t also support small businesses by offering them lower rates for local express package delivery than it does for CVS or Amazon. At the very least, it shouldn’t put its thumb on the scale by providing the behemoths with volume discounts on delivery that are lower than what it offers the mom and pops.

This kind of program could not only help revitalize local retail in America. It could also revive the Postal Service. USPS desperately needs some fresh thinking to address its crippling finances and find new methods for delivering for the evolving needs of the American consumer. Express package delivery for local retailers seems like an obvious opportunity. The question is whether the Postal Service has the leadership it needs to seize it.

The post How the Postal Service Can Help Local Retailers Beat Amazon appeared first on Washington Monthly.

On Thursday, after a marathon 29-hour mark-up session, the House Judiciary Committee advanced, with substantial bipartisan support, the most sweeping package of antitrust legislation in decades. The suite of six bills would funnel more funds into the government’s antitrust enforcement agencies, prevent tech giants from acquiring potential rivals, prohibit such firms from giving their own products and services preference over their competitors on their platforms, and give federal regulators the authority to sue to break up behemoths like Google and Amazon when their role as an operator platform creates an “irreconcilable” conflict of interest with their other lines of business.

That this phalanx of potent reform legislation moved forward at all would have been politically unthinkable as recently as a year ago. And it did so despite fierce opposition from an army of industry lobbyists and tech industry-funded research and advocacy groups—some left of center, like the Progressive Policy Institute, others right of center, like the Alliance on Antitrust. Apple sent letters to committee leaders warning that the bills, if turned into law, would thwart the company from offering privacy and security protections to users. CEO Tim Cook, according to the New York Times, called House Speaker Nancy Pelosi to try and sway her from backing the effort.

While final passage is not assured—a number of House Democrats from tech-heavy California districts oppose the bills—Pelosi, who also represents such a district in San Francisco, has indicated a commitment to getting them through the chamber, and her track record of successfully shepherding legislation is legendary. “We are not going to ignore the consolidation that has happened and the concern that exists on both sides of the aisle,” she said.

As with most legislation nowadays, though, the biggest obstacle will be the Senate, where the filibuster, likely to continue in its present form, will mean that 60 votes will be needed for the legislation to make it to President Joe Biden’s desk. Still, several Senate Republicans, such as Josh Hawley of Missouri and Ted Cruz of Texas, have been leading the rhetorical fight against tech monopolies, which they accuse of shutting down conservative speech, among other sins. With anti-monopoly becoming a rallying point among the conservative base voters, more GOP senators might be tempted to jump on board.

In situations like this, a classic Washington maneuver is to offer up legislation that seems to address a problem, but actually doesn’t, in order to give on-the-fence lawmakers a way of looking like they are doing something about it when, in fact, they are not. Two GOP senators have already done precisely that. Mike Lee, of Utah, and Chuck Grassley, of Iowa, might have seemed to join the growing cohort of anti-monopoly lawmakers in Congress last week when they introduced the TEAM Act to Reform Antitrust Law. The TEAM acronym stands for “Tougher Enforcement Against Monopolies.” “Anticompetitive and monopolistic business practices hurt innovation and consumers,” Grassley said in a press release announcing the legislation. “This bill streamlines and strengthens antitrust enforcement and holds bad actors accountable for their actions while preserving a free market.”

But according to a number of antitrust experts, the measure would do the opposite. Under the Orwellian guise of claiming to ramp up antitrust enforcement, critics say, the bill would weaken America’s antitrust regime by taking away the Federal Trade Commission’s enforcement authority and enshrining into law the very approach that led to the crisis reformers are trying to address. “This is very much a pro-monopoly bill,” Sandeep Vaheesan, a former Federal Trade Commission official who is now the legal director for the Open Markets Institute, an anti-monopoly think tank, told me. “The Tougher Enforcement Against Monopolies title is false advertising.”

The Lee-Grassley legislation would primarily do two things. It would consolidate all antitrust enforcement to just one agency—the Department of Justice—and would codify into federal law the consumer welfare standard, the theory espoused by the late jurist Robert Bork in the 1970s that antitrust law should focus narrowly on the effects on consumers and not on the potential harm that a merger or a corporation’s conduct may have on competitors. In fact, before this theory was adopted by both the courts and the enforcement agencies in the 1980s, antitrust was widely understood as having a much broader design—to engineer a socially just economy by preventing dangerous concentrations of economic and political power.

Indeed, the hands-off approach initiated by the Reagan administration—and maintained by its successors—has induced a cascade of ever-increasing mergers and acquisitions, resulting in the economy becoming more consolidated than at any point since the original Gilded Age. Four airlines control more than 85 percent of all domestic air travel, three chains own 99 percent of all pharmacies, and one tech giant accounts for more than half of all e-commerce. And the fact that the national economy is now dominated by fewer and fewer companies, in fewer and fewer places, has led to a clustering of wealth and opportunity in just a handful of coastal cities while most of middle America has been hung out to dry, creating unprecedented new levels of regional inequality.

A Senate staffer who worked on the drafting of the bill told me that eliminating the dual-agency construct was “a way of making our antitrust enforcement system work better.” The frustration, the source said, was that, in recent years, there has been bureaucratic infighting between the agencies over who gets to do what case. At the same time, the FTC, they argued, has been unable to take on cases when there is turnover among commissioners. “At the end of the Obama administration, there were like two commissioners up there,” they said. “So, they are really hamstrung with reviewing different cases and mergers. We think this is a way to make it all work better, to put it under one roof at the DOJ.”

That provision is also supported by conservative policy advocates who are challenging the expanding appetite among lawmakers to ramp up antitrust. “I think it makes a lot of sense to consolidate agency enforcement. The overlapping agency enforcement has been a big problem, both for efficiency and for merger review and enforcement,” Ashley Baker, who runs the Alliance on Antitrust, told me.

Few people would argue that the current dual-agency system has worked smoothly, Vaheesan said. But turning the FTC strictly into a consumer protection agency, he added, would do little to confront the oligopolies that now dominate the American economy. In fact, it would eviscerate the original doctrine that guided the Federal Trade Commission Act of 1914—that antitrust enforcement itself should never become concentrated by one government entity, lest it becomes captured, as often happens, by the people it is supposed to be regulating. Moreover, as Vaheesan has previously pointed out in these pages, the FTC has statutory power for fighting monopolies that go far beyond those of the Department of Justice or other antitrust regulators.

Lee, for his part, has been a skeptic of the dual-agency construct for years, long before Biden named the anti-monopoly crusader Lina Khan to chair the FTC. In 2019, the Utah Senator, whose father was the Solicitor General under Reagan, questioned the arrangement in which the FTC would investigate Facebook, and the DOJ would probe Google. “Given the similarity in competition issues involved, divvying up these investigations is sure to waste resources, split valuable expertise across the agencies, and likely result in divergent antitrust enforcement,” he said at the time.

Antitrust reformers also question the provision to codify the consumer welfare standard into law. “This is exactly the wrong direction,” Alex Harman, a competition policy advocate at Public Citizen, told me. “We are trying to make the case that the harm of monopoly power is more than just price. Sometimes, price isn’t an issue at all, like with the tech companies. There’s harm to communities, harm to small businesses, harm to workers, harm to consumers in the sense that there’s a lack of choice. Lack of innovation. Harm to democracy as these companies have become the richest companies on the planet. They’re able to spend huge quantities of money influencing the government through political contributions and lobbying expenditures. Amazon and Facebook are the two companies that spend the most amount of money on corporate lobbying, each. It’s craziness. To reaffirm that the only thing that matters here is consumer price is tone deaf.”

According to both the Senate staffer and Baker, the language of the bill “clarifies” that the consumer welfare standard applies to more than just price.

“When courts are looking at whether something is anticompetitive, they need to be looking at what are the effects on consumers,” the staffer told me. “But it’s also making clear that that’s not limited to price. It never really has been limited to price. That’s a misnomer that people pass around, largely, I think, because that makes it easier to argue against the consumer welfare standard. But this would put it into law that it is not limited to price. It includes quality, output, innovation, consumer choice, and that’s not an exhaustive list.”

Anti-monopoly advocates argue that even this articulation of the consumer welfare standard would not result in stronger antitrust enforcement.

“The Supreme Court has consistently defined the consumer welfare standard as involving price and output, with sometimes taking into account quality and innovation,” Vaheesan said. “But the problem is that what appears to be a scientific inquiry is actually based on an impossibly subjective standard.” In other words, even something as straightforward as what the effect of a merger will be on prices still relies on supposition and contending speculating experts. And there is also the discrepancy between what the effects on prices will be in the short-term and the long-term. Instead, Vaheesan argued for a return to the bright-line rules that traditionally governed antitrust prior to the 1980s, which strictly prohibited mergers and acquisitions that resulted in high degrees of concentration.

According to Bork’s formulation when he devised the standard, antitrust law was marked by a fundamental contradiction: It was meant to safeguard consumers from higher prices as well as small businesses from behemoths that can squash them. As a consequence, Bork argued, antitrust was allowing small businesses to charge higher prices, thereby hurting the very consumers it was intended to help. Hence the title of his famous tome, The Antitrust Paradox. The solution, then, he said, was to only look at the effect of a merger or acquisition on “consumer welfare” and not other factors. In fact, concentration, he would say, often led to efficiencies that led to lower prices and thus benefited consumers.

Bork’s view has been the modus operandi of both the courts and antitrust enforcement practitioners since—which has led to high levels of concentration and which is one of the reasons why critics of the bill say it would do little to fight monopolies. “The bill doubles down on the existing approach to antitrust,” Vaheesan said.

“[Senator] Lee’s a smart guy,” Vaheesan added. “He sees there’s a growing movement among Democrats and some Republicans to crack down on concentration. But he’s really committed to the status quo. He doesn’t want things to change. He’s savvy enough to realize he has to sing a somewhat different tune now. He can’t just say what he’s been saying for the last five years on antitrust. He needs to offer some concessions.”

Those concessions, presumably, are provisions in the bill to increase merger filing fees and implement a market-share merger presumption, both of which come out of legislation previously introduced by Minnesota Democrat Amy Klobuchar, the chair of the Senate’s antitrust subcommittee. It would also apply to all markets across the economy, not just the tech industry. But perhaps most importantly, it reveals a new strategy on the part of Republicans to dampen anti-monopoly sentiment in Congress and within the GOP base—proposing ideas claiming to crack down on corporate giants but that would, in effect, allow them to continue to monopolize the American economy.

“Our view is that antitrust law is not fundamentally broken,” the Senate staffer told me. “At the same time, obviously based on everything in our bill, we don’t think it’s perfect. We think there’s stuff that can be improved, but we’re not trying to radically upend the antitrust law framework in the country. We just want to make it work better for consumers.”

The post The Republican Plan to Water Down Antitrust Reform appeared first on Washington Monthly.

Last spring, as the pandemic was taking hold, Ashley Baker, a 32-year-old conservative policy advocate, noticed a trend that alarmed her: A growing number of Republican elected officials were starting to join Democrats in attacking corporate monopolies. Missouri Senator Josh Hawley had introduced several bills to crack down on Big Tech, and more GOP legislators were showing an interest in doing the same. Texas Senator Ted Cruz had argued that “Big Tech is out of control” and posed a threat to the future of American democracy. Colorado Representative Ken Buck, ranking member of the House Antitrust Committee and a former member of the Tea Party, had started floating the idea of creating new regulations for oligopolistic corporations. “I was one of those people that believed that the market could correct itself,” Buck said, “until I saw the cheating.”

At the same time, then President Donald Trump was flailing. His botched response to the coronavirus outbreak was clear, and his approval ratings hit new lows. There was newfound reason to believe that Joe Biden could clinch the White House, and an emerging bipartisan consensus—or something resembling it—on antitrust meant that it could be one of the few areas where the status quo was truly at risk.

That’s when Baker, the director of public policy at the Committee for Justice, an outfit that advocates for conservative judicial nominees, had an idea: to create a new organization dedicated to pushing a pro-monopoly line on Republicans. Baker aimed for this new group, which would be dubbed the Alliance on Antitrust, to align conservatives on the narrow and limited view of antitrust that Robert Bork popularized in the 1970s, called the “consumer welfare standard.” The late jurist and Yale Law School professor’s argument was that antitrust law was meant strictly to protect consumers from higher prices. Monopolies, he argued, often created efficiencies that led to lower prices and, therefore, should generally not be toppled. Both parties largely accepted the Bork line until a few years ago, when Democrats—only a few at first, like Senator Elizabeth Warren, but eventually most—broke from it. As Republicans also started voicing a desire to rein in monopolies, Baker realized that there needed to be an infrastructure that would convince them that monopolies are really not that bad.

“My starting thought was to pull together people who are like-minded on this issue, who I have worked with in some capacity, to come together to try to do something about it, lay down what the conservative position is—that this is what the conservative position on this issue has been for 40 years,” she told me in a recent interview.

The “like-minded people” who formed the new alliance are a who’s who of Washington’s longtime conservative and libertarian policy activists. They include Grover Norquist of Americans for Tax Reform, Douglas Holtz-Eakin of the American Action Forum, and David Williams of the Taxpayers Protection Alliance. In addition, Baker pulled together the heads of a number of other influential groups on the right, like FreedomWorks, Libertas, the Goldwater Institute, the American Conservative Union, and more.

Notably, none of these groups had ever before focused much on antitrust, training their energies instead on reducing corporate and personal income tax rates, cutting regulations, and promoting conservative jurists. What they have in common is a keen understanding of the mechanics of Washington governance and influence, a shared history of successfully advancing pro-corporate policies within the GOP coalition, and a sudden sense of vulnerability as Republican lawmakers and their constituents increasingly abandon those policies in favor of right-wing populist attacks on “woke” corporate behavior, including the perceived anti-conservative biases of tech monopolies.

Baker created the Alliance on Antitrust, a program of the Committee for Justice, to engage in the rough-and-tumble of persuading these elected officials to return to that traditionally conservative—that is, pro-monopoly—view of antitrust. She runs the Alliance’s day-to-day operations almost completely on her own: organizing monthly meetings with her members and recruiting them to sign on to letters when they think Capitol Hill lawmakers are weighing an idea that they consider outré.

The launch of the Alliance was deliberately timed for last July, when the CEOs of Amazon, Apple, Google, and Facebook testified before Congress. It was just four months before the 2020 election, and partisan tensions were, predictably, high. Yet at those hearings, held by the House antitrust subcommittee, both Democrats and Republicans excoriated Big Tech, albeit for different reasons. Democrat David Cicilline, chairman of the subcommittee, called Google the “gateway to the internet” that had too much monopoly power. Republican Jim Jordan accused the companies of being “out to get conservatives” by censoring right-wing voices, despite there being little evidence at the time to support that claim. Facebook, of course, has been a hotbed of right-wing misinformation, while YouTube algorithms have helped lure users to far-right extremist channels. Those differences aside, members from both sides showed a willingness—indeed, in some cases, an eagerness—to use antitrust enforcement to combat the monopolist corporations that have gained a precarious level of market power as the American economy has become more concentrated than at any other time since the Gilded Age.

That’s when the Alliance on Antitrust sprang into action, putting out a series of statements in conservative media warning Republicans against the idea. One of the Alliance’s members, Josh Withrow, then of FreedomWorks, for example, told The Washington Times that expanding the scope of antitrust enforcement to take on Big Tech would open a “Pandora’s box that could have dire consequences throughout our economy.” The group also sent a letter to the House antitrust subcommittee making a similar point, arguing that the “economic consequences of many of the recent proposals,” such as creating more stringent merger prohibitions, would “make the American economy and consumers substantially worse off across a wide array of industries.”

As it happens, this professed concern—that cracking down on tech monopolies would punish other industries—aligns with the interests that fund the Alliance and its member organizations. Most of these groups receive financial support from Big Tech—including the Committee for Justice, which gets donations from Google, according to the tech company’s political engagement disclosures—but also from monopolistic corporations in other sectors such as oil and gas, Big Ag, telecom, banking, and pharmaceuticals. These corporations will themselves soon face antitrust enforcement—and potentially major reductions in profits—if something isn’t done now to stop Congress from creating new and stricter laws against companies amassing too much market power.

The emergence of this new conservative antitrust infrastructure owes much to the success of a rival progressive antitrust infrastructure that began a few years earlier, according to Republican insiders. “The organizations and institutions on the left have been very successful at persuading politicians on the left that it’s a winner to go here,” says Joshua Wright, a former federal trade commissioner and a professor at George Mason University’s Antonin Scalia Law School. Anti-monopoly groups like the Open Markets Institute and the American Economic Liberties Project, he told me, “have shown politicians that it’s not just a safe but rewarding place to embrace some of these ideas.” Indeed, when Baker’s Alliance was still just getting started last spring, three Democratic senators, Warren, Cory Booker, and Amy Klobuchar, were campaigning in the presidential primary on legislation they’d sponsored to strengthen antitrust laws and enforcement.

Wright has been especially privy to the sea change that’s been happening on the left. For years, he practically occupied the conservative pro-monopoly space on his own. He wrote a famous, some would say infamous, paper derailing “hipster antitrust”—referring to left-wing activists pushing for a crackdown on corporate concentration. And he has gained a reputation in conservative circles as the de facto expert on the subject, often appearing on panel discussions hosted by the Federalist Society and other right-wing think tanks. National Review once said he was “widely considered his generation’s greatest mind on antitrust law.”

Wright’s longtime—um—monopoly on conservative pro-monopoly policy work was due largely to the fact that, for decades, antitrust simply wasn’t a live political issue in Washington. The only real action was at regulatory agencies and the courts, where corporations had to go to gain approval for mergers and acquisitions. Wright is a master of this inside game. At George Mason he runs the law school’s Global Antitrust Institute, which, he told me, specializes in “training judges and antitrust practitioners.” The institute receives major funding from tech behemoths like Google and Amazon as well as the wireless giant Qualcomm. Wright also works as a paid consultant to such companies, like Google, charging, according to ProPublica, more than $500 an hour advising them on how to get mergers approved before the Federal Trade Commission, where he spent several years as a commissioner. Most recently, as the Tech Transparency Project, a research initiative of the watchdog Campaign for Public Accountability, discovered, the FTC’s inspector general reported that Wright improperly lobbied the agency on behalf of Qualcomm. Trump’s Justice Department decided not to prosecute him on those charges; Wright was chosen to lead Trump’s transition on antitrust policy in 2016. The 44-year-old former commissioner told me he did nothing wrong: “My side of the story is that the Department of Justice read the FTC’s inspector general’s report and dismissed and declined to prosecute based on the evidence. Simple as that.”

But now that antitrust has become a major political issue, the inside game is no longer sufficient to protect the interests of corporate oligarchs. Hence the need—which Ashley Baker grasped—for a more public advocacy campaign to keep Republicans from joining the anti-monopoly team. The Alliance on Antitrust “has done a fantastic job of bringing in a lot of disparate groups that are interested in antitrust values and pulling them together with these different perspectives,” Wright said. “Progressives have done a better job retailing their ideas while conservatives watch.”

Others on the right have also seen the need to preach the old faith with more gusto. While Baker was creating the Alliance, Robert Bork Jr., son of the late jurist, established the Bork Foundation to promote his father’s philosophy, with a special focus on antitrust. One of the foundation’s first acts was to republish Bork’s influential 1978 tome, The Antitrust Paradox, which has been out of print for decades.

The concern Baker, Wright, and other pro-monopoly advocates have is that conservative anger at social media giants will make antitrust enforcement look appealing, but if those standards are imposed across every sector, it will change the American economy as we know it. “Where the rubber hits the road is the minute you get some of these regulatory proposals actually written down on paper—the burdens on mergers legislation will enter, you’re going to rein in certain types of conduct,” a GOP source told me on background. “On the right, they would like to target some of this stuff at tech, right? But the second you go after commerce generally, you hit supermarkets and you hit Caterpillar and you hit Pharma and you hit sort of everybody.”

That argument may be the one that resonates most with Republican elected officials, who, on the one hand, may be open to the idea of supporting antitrust reform but, on the other, know which corporate donors have long been most generous to the party. According to data from the Center for Responsive Politics, the Koch family is a donor to some of the groups in the Alliance on Antitrust through the Charles G. Koch Charitable Foundation. They also distribute funds widely among the Republican Party apparatus, such as the Republican National Committee, various conservative think tanks including the Heritage Foundation and the American Enterprise Institute, and scores of individual candidates. If the Koch family, for instance, sends the clear message that corporate crackdowns will have reverberations beyond Big Tech, many GOP lawmakers will certainly pay attention.

Those same elected officials, however, are also acutely aware of the swelling tide of populist anger on the right at big companies. That anger has recently reached tsunami-like proportions after major corporations sided with Democrats in opposing state-level Republican efforts to restrict voting rights and after Facebook extended its ban on Donald Trump. The former president not only still controls the party but is also now one of its loudest anti-monopoly voices—even though his administration signed off on tech mergers between AT&T and Time Warner as well as T-Mobile and Sprint.

Despite this pressure, longtime conservative economic influencers I spoke with express faith in Baker, whom they see as a shrewd policy advocate who can shape GOP opinion on antitrust. “She has really been the leader who has put this all together and has built a new architecture for us to make sure that people really understand the value of the consumer welfare standard and what’s at stake if we abandon a principle that has served us so well for so many years,” said Thomas Schatz, president of Citizens Against Government Waste and a member of the Alliance on Antitrust, referring to the Borkian maxim that antitrust is about prices and not power.

In a way, Baker already has a leg up. As Washington policy activists know well, the hardest thing to do in this town is to get lawmakers to embrace novel ideas. The status quo is the status quo for a reason—the deeper a policy or approach gets into the government’s muscle memory, the harder it is to eviscerate. It’s much easier to stop something from happening, especially when the power of corporate money gets involved.

Still, Baker has her work cut out for her. Rage at Big Tech and major corporations is what animates the GOP base at the moment—and the über-powerful corporations that once held the most sway are losing their potency. Thwarting enthusiasm for renewing antitrust may have been easy when it was just the left pushing for the idea. It will be far tougher now that both sides share the same alacrity for ridding these companies of their enormous market power.

In many ways, the battle over antitrust policy is now a test of how much mojo the pro-corporate wing of the Republican Party still has—and Baker is calling every available voice and operative to the ramparts. “I think it’s fair to say,” Wright told me, “that the space was much lonelier a year or two ago than it is now.”

The post The Conservatives Out to Stop the New Bipartisan Antitrust Movement appeared first on Washington Monthly.

Senators Josh Hawley and Richard Blumenthal rarely agree on anything. But at a hearing Wednesday of the Senate Antitrust Subcommittee, the Missouri Republican and the Connecticut Democrat were practically finishing each other’s sentences on an issue that has often been ignored inside the halls of Congress: the deleterious effects of hospital consolidation throughout the United States.

Hawley, who in January helped incite a violent insurrection on the U.S. Capitol, sounded the alarm over Wall Street financing hospital mergers, especially in small towns. “I’m concerned about the possibility that private equity and their intervention here is actually helping drive consolidation in a way that is unhealthy in this industry and can be particularly harmful for rural communities, like many that make up my state,” he said. Blumenthal, a former prosecutor who has pushed for a criminal investigation of Donald Trump’s misconduct, expressed the same concerns. “Large hospital chains under private equity management have been forced to sell off and close hospitals to meet their debt burden,” he declared. “The incentives and self-interest of the private equity funds drive the finances rather than respect and care for the patients who are there or the professional staff who ensure quality care.”

The takeaway from the hearing was clear: While just a few years ago, hardly anyone identified consolidation in the health care “provider market” (hospitals, doctor groups, etc.) as a driver of the rising costs of health care and other ills plaguing the industry, something of a bipartisan consensus has emerged that recognizes the trend as alarming.

There were even unlikely bedfellows among the witnesses. Michael Cannon, the director of health policy studies at the libertarian, Koch-funded Cato Institute, noted that “provider consolidation” was an “important contributor” to exorbitant costs and low-quality care. At the same time, Ahmer Qadeer, director of strategic initiatives at the Service Employees International Union (SEIU), castigated hospital consolidation for its exploitative impact on workers. “There is substantial empirical evidence that when employment is concentrated among fewer firms and workers have fewer employment options, it leads to lower wages,” he told the senators.

In fact, only one speaker was willing to argue in favor of hospital mergers: Rod Hochman, chair of the American Hospital Association (AHA), the industry’s main trade group. “Integration is necessary to assure that both the human and financial capital is available to stand up, reconfigure, or even reimagine the services needed and how best to deliver them in a field facing increasing competition,” he said.

The lawmakers didn’t seem to buy it. Democratic Senator Amy Klobuchar, who chairs the subcommittee, cited a 2018 study that found that hospital prices are 12 percent higher in monopoly markets compared to those with four or more competing hospitals. She added that hospital mergers “can also reduce incentives to innovate in the way they deliver care.” Hawley, too, scoffed at Hochman’s argument.  “Hospital mergers lead to or can enhance monopsony power in labor markets … this can depress wages below the efficient level, distort hiring decisions, and in the long run, harm incentives for investments in human capital,” he said.

The Senate’s bipartisan recognition of the problems caused by hospital consolidation is overdue. For years, mergers in the hospital sector, which makes up a third of all health care spending, have been a catalyst behind the nation’s rising health care costs. Average premiums have increased more than twice as fast as wages since 2009 and deductibles have nearly doubled. Health care spending per person in the U.S. is roughly twice that of other wealthy nations, with no appreciable differences in outcomes.

Yet while Hochman, the AHA chair, seemed to be outgunned at the hearing, his organization remains as powerful, or more so, than many better-known lobbying groups like the NRA and AIPAC. AHA is a substantial donor to both Democrats and Republicans in Washington, including Joe Biden, both the Democratic and Republican senatorial and congressional campaign committees; and to party leaders like Nancy Pelosi, Chuck Schumer, Kevin McCarthy, and Mitch McConnell, and scores of other members of Congress, according to data from the Center for Responsive Politics. In 2017, APCO Worldwide’s annual TradeMarks survey labeled AHA the number one trade association for advocacy effectiveness.

The group’s power was on display as recently as last year, when Congress, in a similar moment of bipartisan reform zeal, tried to take on an especially scandalous aspect of the hospital cost problem: “surprise billing.” This typically happens when a patient checks in to a hospital covered by their insurance but gets treated by doctors (often working for outside physician groups financed by private equity) who don’t accept that insurance, and then wind up with whopper bills they have to pay out of pocket. As Daniel Block has reported in the Monthly, AHA was among a handful of organizations that managed to temporarily derail legislation to eliminate surprise billing, before ultimately making sure that the reforms that did pass were weak.

Hospitals are also currently enjoying extra clout from the public’s admiration for the role they—or at least their doctors and nurses—played in fighting the Covid-19 pandemic. Lawmakers funneled more than $275 billion to hospitals last year.

But the heroism of the hospital staff aside, elected officials and thought leaders on the right and left have caught on to the pernicious consequences of hospital mergers—and now are pursuing remedies. Just last week, the antitrust subcommittee unanimously advanced a bill, introduced by Klobuchar and Iowa Republican Chuck Grassley, that would update filing fees for all mergers for the first time since 2001. Meanwhile, the committee is considering other bills that Klobuchar has introduced to more tightly restrict mergers and acquisitions. In other words, momentum is swinging against concentration more broadly, which could, as a consequence, have considerable impacts on the hospital sector in particular.

While the legislation Klobuchar and others are championing may well slow the pace of future merger activity, it won’t do much to unwind the already deep and damaging level of concentration in the health care sector. Indeed, nearly 75 percent of all American hospital markets are “highly concentrated,” according to a 2019 study by the Health Care Cost Institute. Breaking up hospital monopolies will require, among other things, stronger antitrust actions from agencies like the Federal Trade Commission. One of the witnesses Wednesday, Brian Miller, a former FTC official, said that agency employees work 14-hour days and “regularly pass on transactions due to lack of staffing.” For that reason, one of Klobuchar’s bills would beef up federal antitrust enforcement at the FTC and the Department of Justice antitrust division, so that they could take on more cases.

If Wednesday’s hearing is any indication, lawmakers are eager to crack down on hospital monopolies. But if they want to bring about reform, they should know what they are up against—and better get ready for a hell of a fight.

The post The Hospital Industry’s No Good, Very Bad Day appeared first on Washington Monthly.

The Maryland Senate has unanimously voted for more enhanced disclosure requirements for elected officials, following a Washington Monthly exposé of Governor Larry Hogan who, unbeknownst to legislators or the public, advanced road and highway infrastructure projects near properties owned by his real-estate firm—a move that can increase the value of those properties.

According to insiders privy to legislative maneuvers in Annapolis, the state capital, Senate leaders were expecting the legislation, dubbed the Integrity in High Office Act, to provoke intense debate on the chamber floor over the weekend. But, remarkably, the bill advanced 47-0 with no debate. State Senator Cheryl Kagan, a Democrat, described it as “common sense, increases transparency, and increases disclosure” during its second reading. No senator voiced an objection.

The measure, which the Maryland House of Delegates unanimously passed three weeks ago, now heads to the governors’ desk. Hogan, who derided the January 2020 Monthly story as a “blog thing,” has not yet said whether he will sign the bill into law, although that seems likely given that there are more than enough votes to override the governor’s veto. A veto, moreover, would only draw attention to Hogan’s ethical lapses at a time when he’s nearing the end of his career in state politics.

He has not discouraged speculation that he might seek the Republican presidential nomination in 2024. Elected in 2014, Hogan is term-limited as governor and he’s worked assiduously to build a national profile as a moderate eager to challenge the Trumpian wing of the party. Last year, the 64-year-old said that he had written in “Ronald Reagan” in lieu of Trump or Biden.

Hogan’s legacy on ethics could well be an issue in any future electoral bid; it also runs against the Hogan family brand. His late father, also named Lawrence, was hailed as an ethics champion when, as a congressman on the House Judiciary Committee, he became the first Republican in 1974 to announce his vote for articles of impeachment against Richard Nixon.

In Hogan’s first term as governor, he upended years of state transportation policy by cancelling a planned $2.9 billion rail line through Baltimore and directed the freed-up funds to road projects. Several of those projects were adjacent to properties owned by his company, which he did not divest from. They included a new $58 million interchange and $23.5 million in road and sidewalk improvement. Hogan did not disclose his ownership stake in those properties before the legislature approved the infrastructure projects in 2015 and 2017, respectively, even though Maryland law requires officials to recuse themselves from decisions that could financially benefit them or their family.

The Integrity in High Office Act would tighten the state’s disclosure laws by requiring the governor, lieutenant governor, attorney general, treasurer and any agency head to notify state ethics officials and members of the General Assembly whenever they face a decision in which they or a relative have a monetary interest. What’s more, it would require all elected officials to reveal more information about businesses in which they have at least a 10 percent ownership stake—such as what, if any, properties they own.

That is something Hogan has not done. In his annual financial disclosure reports, Hogan has only listed the limited liability companies (LLCs) in which he has ownership, but not the properties those companies own. As a result, he was able to steer state dollars toward road and highway infrastructure projects in Maryland without anyone knowing they would increase the value of his holdings.

Maryland State Senator Bill Ferguson, a Democrat, told the Monthly in September 2020 that he had “none of this information” when working on the transportation budget in those years. (He became Senate president a month later.) “Had I known this information, I think there would have been much more targeted and purposeful questions about the necessity of projects that appear to have a financial benefit to the governor.”

Hogan has argued that he’s kept separation from his company, HOGAN, a real estate brokerage firm with assets across the state, by putting his holdings into a trust agreement that was approved by the State Ethics Commission. But the proximity of those managing the trust to Hogan is startling. Hogan left his brother in charge of the company and three business associates—two of which are current executives at HOGAN—in charge of the trust.

The arrangement has been lucrative for Hogan: According to tax returns from his first three years as governor, which he released when he was running for reelection in 2018, Hogan made $2.4 million in total. His annual government salary is roughly $180,000. According to John Willis, an historian of Maryland politics, Hogan is the first and only one of the state’s 62 governors to have made millions of dollars while in office.

The trust arrangement, ethics experts note, does not prevent conflicts of interest because it allows Hogan to be fully apprised of the company’s activities. “He owns it, he will benefit from it, he is not shielded from knowledge of what his holdings are,” said Kathleen Clark, a government ethics professor at Washington University in St. Louis’s School of Law, last year.

Public Citizen, a government watchdog organization based in Washington, D.C. filed a complaint with the Maryland State Ethics Commission in February 2020, shortly after the Monthly story was published, alleging that Hogan violated Maryland law by advancing transportation projects that could enrich himself and his family. The Ethics Commission has not yet issued any response to the complaint.

The Integrity in High Office Act would not have any retroactive application, so it would not reveal any more information pertaining to Hogan’s holdings before the new law would take effect. Still, the bill’s author and chief sponsor, Delegate Vaughn Stewart, a Democrat, says that the statute would prevent future governors from replicating Hogan’s behavior. “In recent years, the public’s trust in state government has been tested by several ethics scandals, including allegations against Governor Hogan,” Stewart said after its House passage. “Sunlight is the best disinfectant. The Integrity in High Office Act will strengthen our disclosure laws and help ensure Maryland’s elected officials serve the public interest, rather than their own.”

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