Harvey Rosenfield

Harvey Rosenfield has been fighting to protect consumers and taxpayers against rip-offs and abuse for thirty years. He’s the author of Proposition 103, the landmark insurance reform initiative, which has saved Californians more than $63 billion in insurance premiums.

Jan 232013

I’m starting to understand why there are 311 million Americans and 310 million guns in America. It’s not just about hunting or collecting.

It’s about self-defense – not against street crime, which has dropped like a rock over the last two decades, but against a world that seems to have run amok, and against which the government frequently seems inept or powerless.

I’m not just talking about 9/11 – though I’m willing to bet that gun sales spiked after our country, with all its military might and a $300 billion defense budget, proved defenseless against nineteen extremists with box cutters. Consider how Washington and Wall Street connived to betray America under the guise of “deregulation,” leaving our homes, jobs, and life savings at the mercy of greed-driven speculation. It will take years for most Americans to recover what they lost since 2008 – many never will. The U.S. government proved quite adept at arranging the immediate rescue of the Money Industry; but huge numbers of our citizenry are stuck in the equivalent of the New Orleans Superdome after Hurricane Katrina – left to fend for themselves.

Name a major disaster and then connect the dots, as I have attempted previously: the Enron/California Energy Crisis Hoax, 9/11, Katrina, the mass shootings by deranged loners who somehow “fall through the cracks” till they slaughter our loved ones. Then add the nation’s gravely inadequate response to global warming – the most dangerous and disruptive threat to our security on the horizon. A fearful pattern of incompetence emerges.

And so, if our government cannot protect us, we will protect ourselves ­– or at least try to, as if putting weapons in cockpits or classrooms is going to work.

A dramatic decline in public confidence in the government is clearly underway. 81% of Americans disapprove of the job Congress is doing, according to the Gallup polling organization. That’s actually an improvement over its all-time worst score of 90% last August, but hardly anything the Founders would be proud of. President Obama is also doing better, but his disapproval rating has soared from 15% in January 2009 to 43% a few days ago.

These numbers change when Americans are asked to assess the presidency and Congress as institutions in the abstract. The former scored a 43% disapproval rating – nearly identical to the current occupant’s. But only 65% of Americans disapproved of the legislative branch – fifteen points lower than the disapproval rate for the current Congress.

Rating the federal government as a whole, 63% of Americans say they are dissatisfied.

That the executive and legislative branches are held in low esteem is not news, and being the so-called “political” branches, not particularly surprising.

More important is the ranking of the branch of government whose single job is to maintain the basic software of the U.S. operating system – our laws. These are the principles, originating in the Constitution, by which democracy and its citizens are supposed to abide.  They are administered by the judicial branch, the one branch of government structured to be impervious to political pressure, including the influence of money.

Trust in the legal system is higher than either the executive or legislative branches, Gallup researchers report, but a solid third of all Americans disapprove of the judicial branch. The good news is that Americans’ view of the courts hasn’t changed much since 1973.

By some objective measures, however, America’s once vaunted system of laws fares poorly with respect to other socio-economically similar nations. The World Justice Project’s annual “Rule of Law Index” places the U.S. nineteenth out of twenty-nine countries, principally because of wealth-based disparities in Americans’ access to the legal system.

The judicial branch faces four serious challenges that, unless abated, are going to further undermine public confidence – not just in the judiciary, but also in government and democracy.

First is the increasingly politicized conduct of the courts themselves.

In 2000, the Republican appointees on the Supreme Court stopped the vote count process in Florida and awarded the election to George Bush. In 2011, the Republican majority on the high court ruled that those “arbitration clauses” inserted in the fine print of virtually every contract between a giant corporation and consumers must be enforced to deny people their right to sue a company in court. And then of course there is the infamous Citizens United case, in which the Republican majority ruled that injecting money into elections to influence the outcome is a form of free speech, and that corporations exercising that right are protected by the First Amendment. In that single decision, the Court disenfranchised the vast majority of Americans who cannot hire their own lobbyist or fund the election of a friendly politician.

Finally, most Americans are aware that Chief Justice Roberts broke with his Republican colleagues to uphold federal health care reform last year. What they’re not aware of is this: buried in the legalese of that decision, Justice Roberts opened the door to a change in constitutional jurisprudence that would roll back American law to the standards in effect in 1905, when the Supreme Court struck down congressional workplace and other reforms. Consistently favoring corporations over people is not just bad law, it’s bad for the credibility of the court.

And it’s not just the Supreme Court.  The overtly political and severely partisan appointments process for federal judges leads to decisions based on ideology rather than law, as the New York Times, surveying several recent books, reports.

Second, special interests are increasingly trying to corrupt judicial elections, a phenomenon that I’ve noted grew to serious proportions last year as a result of the Citizens United decision. Business groups seeking favorable treatment are challenging the judges who have ruled against them, or might do so in the future. John Grisham’s novel “The Appeal” is thinly veiled fact; the searing documentary “Hot Coffee” exposes the true story of how several state supreme court justices were ousted by business lobbyists. Far from being embarrassed by the assault on judicial impartiality, no less an institution than the U.S. Chamber of Commerce is leading the charge along with other business funded groups. The taxpayer-subsidized organizations’ two-step system is to first target state court systems based on whether they are pro-business or pro-consumer. A Chamber collaborator is slightly less nuanced: it calls these courts “judicial hellholes,” a term it has copyrighted. Then the groups help organize the political campaigns against the judges, replacing them with candidates who will rule in favor of big-business. An estimated $30 million was spent on TV ads alone in 2012 judicial elections. Once judges get sucked into the machinery of electoral campaigns, Americans will doubt their impartiality.

Third, the courts have approved crummy settlements in numerous lawsuits – often brought by government agencies – citing banks for unlawful foreclosure practices, illegal manipulation of interests rates, and a host of other multi-billion dollar heists and scams of breathtaking audacity connected to the financial debacle. My colleague Marty Berg has documented just a few of the many examples of settlements that leave the victims with next to nothing, while the banks and their fat cat execs get off with a slap on the wrist… or even a kiss on the lips. It’s not the courts’ fault that federal prosecutors can’t seem to throw a net around the high-level white-collar crooks that ran our economy into a ditch and destroyed so many people’s lives. But the courts do have the responsibility to reject the vacuous deals that benefit only the perps and their political friends. With the few notable exceptions of federal judges insisting on tougher terms, the vast majority of these sweetheart settlements are rubber-stamped.

Fourth, the court systems in many states have sustained heavy collateral damage from the Wall Street Financial Debacle of 2008. In California, budget deficits have led to massive cuts in funding for the courts; some courtrooms have closed; judges have retired; and parties now have to pay for their own court reporters to record the proceedings.  It is not mere inconvenience that concerns lawyers here. “Justice is now being rationed in our state,” Patrick Kelly, the President of the California State Bar said. He told the Los Angeles Daily Journal: “The public….[is] used to a court system that handles all these issues, child support obligations, contract disputes. What is going to happen when the court system can no longer take care of that? … There is a potential [for] serious degeneration of civil responsibility in California.”

By applying the rule of law, courts play a critical role in preserving American ideals of fairness, competition and impartial justice. John Adams, who helped Jefferson draft the Declaration of Independence and later became the second president of the United States, said this of the Seventh Amendment: “without the right to trial by jury we have no way to keep us from being ridden like horses, fleeced like sheep, fed like swine and clothed like hounds.”

The presence of a million more guns than people in this country is an alarming plebiscite on the nation’s confidence in the rule of law. If Americans lose faith in the courts as they have with other democratic institutions, disputes that would otherwise be settled by law will be settled by force. Take a look at the chaos and devastation now underway in countries where the only law that governs is the law of the jungle.

Dec 042012

We’re so worried about the fiscal cliff that we’ve all but forgotten the end of the 25,000 year Mayan calendar, supposedly on December 21, at which time – depending on who you talk to – the Earth’s poles will reverse, the Sun will disappear for awhile, and a select few will enter the Age of Aquarius, when shag haircuts will once again be in style.

Whoa. What if this is no coincidence and the two are related? Maybe the Mayans were off by ten days, and the global catastrophe they predicted was the expiration of tax breaks on New Year’s Eve!

I have no evidence linking the Maya to the Tea Party – except that they both liked to dress up in costumes.

One of the weirdest events of 2012 – putting aside for a moment the melting of the polar ice caps – occurred at exactly 1:00 am the day after Election Day. Without any warning, the discussion of creating more jobs in America completely disappeared. Jobs had dominated American politics since September 17, 2011, when a group of angry, out of work Americans occupied a park near Wall Street and ignited a debate over the distribution of wealth in the U.S. between the .1% super-haves and the 99.9% have-nots. Eventually the presidential race became a debate over the best way to generate more jobs.

But the moment Romney stepped up to the podium to concede he had lost the election, the concern over jobs vanished. Now, we are back once again to debating the U.S. budget deficit – the issue Romney and his supporters cared the most about. The losers’ agenda is now driving the national debate.

It’s as if the polls got reversed on Election Day.

That’s the kind of strange phenomenon that occurs when our national leadership sacks out, as it did in July, 2011, when Congress decided it could not decide on a budget and the Republicans did not want to approve the government’s authority to borrow more money to cover federal programs.

The compromise was to kick the deficit issue down the road, till after the presidential election. So the Congress, treating itself like a child, set up a set of onerous financial consequences that will take effect if it doesn’t figure out some other plan by midnight on the 31st of this month. These include deep cuts in unemployment benefits and defense spending, and the elimination of payroll and income tax cuts, some dating back to President George W. Bush.

It’s like the classic Cold War satire “Dr. Strangelove,” in which the Soviets reveal they have constructed a doomsday device that will blow up the entire planet in the event the United States attacks Russia.

Though it’s not quite an extinction level event, the FC is not going to be shopping as usual either.

Everyone’s going to feel the effects if we careen off the edge. The United States will slip back into a recession, according to many economists. That’s particularly dark, given that the economists say the U.S. recession ended three years ago, but most Americans are still struggling to survive. And if America’s economy turns upside down, the ripple effect will trigger a global economic tailspin.

But you probably won’t be surprised to learn that the doomsday measures in the fiscal cliff will fall hardest upon the middle class and the poor. According to a Wall Street Journal analysis, wealthy people will pay the most in additional taxes, but their tax increase will average 20.3%. Single persons, students, and retirees will see their taxes go up by 55.2%, 37.9% and 42.4%, respectively.

It’s hard to fathom that we are even debating severe cuts in government spending at this point, with 12.3 million Americans unemployed and the economy far from recovered.

It’s just common sense: if your family runs into financial trouble, and your expenses are greater than your income, what do you do? Sure, you cut out the unnecessary expenditures. But then you borrow money to pay the important bills: food, the mortgage, health care. Stop paying those bills and you are dead, figuratively if not literally. Borrowing money can be dangerous, but it’s what keeps you afloat so you can survive – and repay the debt later.

Borrowing is standard practice in the business world: think of all those Silicon Valley start-ups like Apple, Google and Twitter that need capital infusions to get off the ground and keep growing. What kept the U.S. banks and credit card companies alive after the house of cards they constructed collapsed in 2008? Money they borrowed from the federal government – us. The trillion dollar taxpayer bailout was essential, according to their friends in high places, because bankruptcy would have been more devastating to the economy.

So what’s wrong with the government offering the rest of us more assistance?

Government deficit spending is most needed when times are tough and people need extra support – like unemployment benefits. Or jobs funded by the government because the private sector is too weak to hire. Think of it as your Uncle Sam taking care of a family member in need. If he’s got the cash – or can borrow it – that’s the right thing to do. He can deal with the debt later – when the family member recovers and can pay him back.

Barring Uncle Sam from providing aid and comfort to Americans in distress sits well with those who don’t need the government (at least for benefits) because they have enough money to ride out the storm on their own – like those captains of Wall Street who are earning record executive salaries once again. But check out what’s happened in Europe, where “deficit hawks” have imposed their will on nations trying to work their way out of the economic calamity triggered by Wall Street’s implosion in 2008. Drastic cuts in government spending have devastated the economies of Greece, Spain, Italy and France, creating despair and rage among their citizens.

The drama of the fiscal cliff feeds our fascination with disaster. There’s a strong undercurrent in the American spirit that yearns for change – even radical change – as much as fears it. The closer we get to the edge, the more exciting it is. Angelenos were mesmerized by scenes of sections of their city sliding into the Pacific in the apocalyptic movie “2012.” We’re not there yet, but decisions we make or evade now will have grave consequences. America is not too big to fail: just ask the Mayans, who disappeared a millennium ago. Thanks to the election, U.S. politics are as polarized as ever, and no one in Washington seems able to exert the political gravity needed to order the planets into alignment.

Nov 162012

Beating the $5.5 million that the Money Industry spent against Harvard Law Professor Elizabeth Warren was the easy part.

Now Warren has to decide what she’s going to do in the U.S. Senate, where just a couple of years ago, powerful pro-Wall Street Democrats like Christopher Dodd and Treasury Secretary Geithner killed any chance that she’d be confirmed to head the new Consumer Financial Protection Bureau – possibly the most significant part of the post-2008 crash financial reform legislation. As they hoped, President Obama didn’t even bother to nominate her – even though the concept of a federal agency to protect consumers against Wall Street’s misdeeds was hers.

First, Warren has to choose what role she’ll play once she’s on the inside. Its members like to think of themselves as august and deliberative, but in fact the Senate is deeply dysfunctional and its Democratic leadership easily deterred from meaningful action by the mere threat of a filibuster. In a recent New York Times piece on the Senator-elect, you could easily spot the inside-the-Beltway types trying to crush expectations – Warren’s and ours.

Don’t dismiss the perils of the decision.

Official Washington wants Warren to play the game, wait her turn, not rock the boat and eventually win the respect and support of her “colleagues” – the traditional route to power, influence and effectiveness in the Senate. Or she can damn the torpedoes and go full speed ahead in support of popular consumer reforms, at the risk of angering and alienating those who might otherwise be her allies.

And don’t forget who her true opposition is:  the multinational corporations and their Washington lobbyists, who supply senators with the cash they need to get elected. That’s what drove the American economy into a depression four years ago, as we explained in our report “Sold Out: How Washington and Wall Street Betrayed America.” (PDF) Thanks to the U.S. Supreme Court’s decision in Citizens United, they’re free to spend as much of it as they want to influence the democratic process.

Senator-elect Warren has already indicated which way she’s headed. “If the notion … is we’re going to elect somebody to the United States Senate so they can be the 100th least senior person in there and be polite, and somewhere in their fourth or fifth year do some bipartisan bill that nobody cares about, don’t vote for me,” she has said.

That’s precisely the right call. Warren is a deceptively disarming warrior – I called her “the lawyer with the dragon tattoo” a few years back. She’s got unique nerd-quality credentials, a national support base, and the close attention of the news media. Not since Ralph Nader drew nationwide attention to consumer health, safety and environmental issues in the 1970s has there been such a respected and resonant voice on consumer issues.

No one else in the Senate – or even the federal government, with the exceptions of the President and the Secretary of State – comes close.  She can leverage her rock star status to propel a progressive agenda of reforms that will be so popular with the public that the other 99 will have little choice but to go along. Her leadership will prove particularly helpful to her fellow Democrats, who badly need to show that as a majority they can get something done for average Americans. The Congress and the country needs a lion in the Senate. That’s what they used to call Ted Kennedy, whose seat Warren will occupy. It’s poetic politics.

The next question for Warren will be what to work on. Here are five suggestions:

1. Bankruptcy reform. Warren, a bankruptcy expert, became widely known in the 1990s for her critique of the practices of America’s banks and credit card companies in law reviews and academic pieces. When the financial industry was lobbying Congress to make it harder for the average American to declare bankruptcy, Warren penned a landmark analysis (PDF) that concluded that most Americans sought bankruptcy protection not because they were freeloaders or deadbeats but because they could no longer afford to pay their medical bills. Unfortunately, Wall Street won, and the so-called “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” made it nearly impossible for beleaguered consumers to get a fresh start – a huge victory for the credit card industry that made sure repayment of plastic debt got higher priority than child support payments, for example. Warren should investigate the inequities of the 2005 law and then seek corrective amendments.

2. Lower credit card interest rates. Having bailed out the banking industry, Congress was under pressure to do something about credit card abuses. The “Credit Card Act of 2009” was the deeply compromised and flawed result – read our analysis here.  Missing, especially, was a cap on credit card interest rates. While consumers are struggling to cover their mortgages, and pay down credit card debt at 20-30% interest rates, the banks and credit card companies get to borrow taxpayer money – our money – from the Federal Reserve at nearly 0% interest rates. That needs to be fixed, and if it is: imagine the stimulus effect on the U.S. economy.

3. Fix the Senate filibuster rule. The filibuster used to be a powerful tool for a minority of members of the Senate to take on the majority: Senators could block a vote on a bill by speaking on the floor of the Senate until they dropped… or sixty Senators voted to shut down the filibuster. Unfortunately, this extraordinary measure, once rarely invoked, has devolved. Under the current practice, a Senator need only threaten a filibuster to block a vote. It’s been used hundreds of times since 2006 by Senate Republicans to derail action on important bills and judicial appointments. Warren has already pledged to revise the filibuster rule when the Senate convenes in January. As she points out, preventing abuse of the filibuster is necessary if the Senate is going to move forward to address the nation’s most pressing problems.

4. Speak out every week. Lawmaking is just one role of a U.S. Senator. Another is to use the power and influence of the position to investigate and highlight problems in and outside of government. Wisconsin Senator William Proxmire did just that in the 1970s and 1980s through what he called “The Golden Fleece Award,” which he presented monthly to public officials who, he believed, were wasting taxpayer money. Proxmire’s pronouncements, which both amused and maddened taxpayers, were closely followed by the news media. Warren should initiate a weekly tradition of calling out waste, inefficiency, and corruption, wherever it is found.

 5. Restore the First Amendment to Human Beings. According to five members of the U.S. Supreme Court, the right of corporations to spend money to influence elections, and to give money and gifts to politicians for the purpose of influencing their votes, is protected by the First Amendment and cannot be limited or regulated. That’s the infamous ruling in Citizens United v. Federal Election Commission. The Supreme Court’s decision has unleashed a tidal wave of corporate money, often undisclosed, into our elections, one that has drowned out the voices of average Americans and turned our country into an aristocracy in which the People are taxed for the benefit of the powerful elites that run Wall Street and Washington. A grassroots campaign is underway to enact a Constitutional Amendment specifying that, “the protections of the First Amendment that apply to the spending of money on lobbying and elections, whether by contributions, expenditures or otherwise, shall extend only to human beings.” Senator Warren should be one of the leaders of that crucial reform.

Nov 052012


No matter which way it goes on Tuesday, this election – the first presidential contest since the U.S. Supreme Court let the dogs out in Citizens United – has to be recognized as a disaster for democracy. In thousands of races, from the presidential down to statehouse races, an unprecedented influx of money has corrupted the electoral process.

Here are five dangerous trends in American politics that have manifested themselves this year.

1. Spending by “Outsiders.” In Citizens United, the Supreme Court ruled that spending money is a form of freedom of speech under the First Amendment. And the court gave corporations the same “freedom of speech” that American citizens were granted by the Bill of Rights. That ruling, issued in January 2010, freed corporations and other inanimate entities from limits on influencing elections.

 Of the record $2 billion raised and spent in the presidential campaign, close to half appears to have come not from money raised by the candidates themselves or their political parties, but rather from Super PACS: campaign organizations that are supposed to be completely independent of the candidates. No talking is allowed between the candidate and the Super PAC. But this “firewall” is a fraud on the voters. All it takes is a few sophisticated lawyers and a “wink and nod” approach for the candidate campaigns to communicate their strategy and desires to the “independent” campaign.

We’re not really talking about “outsiders” here anyhow. The people running these operations are consummate insiders – usually people who have worked directly for the candidates and parties in the very recent past. Strategists for the Romney campaign also consult with Karl Rove’s Super PAC, American Crossroads, which is right down the hall. One of the pro-Obama Super PACs is run by two former White House aides.

2. “Issue” Advertising by Business Interests. The enormous spending reported for or against the presidential candidates by allegedly independent Super PAC supporters doesn’t include expenditures for so-called “issue advertising”: advertising propaganda dumped into our living rooms and pumped into our computers by political partisans who are able to skirt disclosure and other laws by discussing “causes” without actually urging a yes or no vote on a candidate  – even though it’s obvious from the message who the ad targets.

In the post-Citizens United world, the lines are getting even blurrier: business interests that want to explicitly influence candidate elections without revealing their identity have begun funneling money through non-profit organizations set up for that purpose, an abuse of the laws granting tax exempt status to social welfare organizations. For example, Citizens for Responsibility and Ethics in Washington was able to track $7.4 million in donations the Aetna, the health insurance company, made to two non-profit organizations, and attacking lawmakers for supporting Obamacare – at the same time that the president of Aetna was making public speeches in support of the law. But that is an exception: sophisticated corporations can easily avoid disclosing their “donations” to ersatz non-profit organizations.

3.  Corporations buying the courts. Most state judges are appointed by the governor, but must run for re-election or “retention.” Increasingly, business groups who want favorable court rulings are challenging judges who have ruled against them or might do so. Big money – tens of millions of dollars – is pouring into judicial elections in half a dozen states on Tuesday, featuring the kind of nasty and deceptive thirty second ads that have polluted the airwaves in candidate races. Leading this attempt to stack the deck in the courts is the U.S. Chamber of Commerce, whose corporate members want to elect judges who will throw out consumer, defective product and environmental protection cases. Confronted with well-funded challenges by a special interest, the judges can only defend themselves by raising money from…some other special interest.

This is not just tawdry, it’s a devastating threat to our country. The judiciary is the one branch of government that is supposed to be insulated from partisanship; where decisions are made based on the rule of law, not political considerations. A series of rulings by the current US Supreme Court – Bush v Gore, for example, Citizens United, and even its decision upholding federal health care reform (read the fine print) – have already undermined that principle; public disapproval of the high court, once held sacrosanct, now approaches 40%. Once the American people lose confidence in the integrity of the judicial branch, democracy itself is in jeopardy.

4. The Millionaires Club. Let’s say you want to run for public office because you want to help solve America’s problems. And you aren’t beholden to anyone; in fact, corruption is one of the problems you want to solve. There are lots of Americans of all political stripes who would want to serve their country. But with so much corporate money in politics, how are people who are not in the pocket of some special interest able to run? You have to be rich! Nearly half of the US House of Representatives, and two-thirds of the US Senate, are millionaires, according to a study published last year.

It’s tempting to think that the wealthy will better serve the public because they have no need to raise money from special interests, but we in California learned the hard way that that is not necessarily true: “As you know, I don’t need to take any money from anybody” then action movie star Arnold Schwarzenegger told Jay Leno” back in 2003. “I have plenty of money myself.” The next year, Schwarzenegger ran for Governor to replace Governor Gray Davis, who was widely criticized for his incessant fundraising. As Governor, Schwarzenegger broke Davis’s fundraising record.

The disparity in wealth between elected officials and the people they are supposed to represent is at least partly why America’s economy is in terrible shape today. When Wall Street and Washington got together, few public officials were willing to oppose the deregulatory policies that led to the financial crash in 2008. (Download our report on the Great Betrayal here.) It’s the reason why, when Congress passed credit card reform, the piece most important to average Americans was missing: a cap on interest rates. The experience of being a member of the middle class, or poor, isn’t a reality for most of our elected officials. The rest of us pay for that.

5. Your vote, nullified. Supporters of the Wild West approach to political funding like to point out that the voters still have the last word. Corporations ostensibly can’t vote – at least not yet.  But take a look at what has happened: the average American has little possibility of running for office when up against well-funded candidates beholden to special interests. We have freedom of speech, but unless you own a TV station, your views are drowned out by billions of dollars in paid advertising. Meanwhile, pocketbook issues of profound import for the middle class – international trade, Social Security – are off the table – hardly debated by the candidates, so as not to offend the powerful. Voters today have been reduced to spectators: we are presented with a slate of candidates and causes by way of thirty-second commercials, and we have to hope we can discern the truth.

There is only one solution to this crisis: a constitutional amendment to restore our democracy to the people.  Here’s our formulation of the 28th Amendment to the Constitution:

“The protections of the First Amendment that apply to the spending of money on lobbying and elections, whether by contributions, expenditures or otherwise, shall extend only to human beings.”

Whatever the outcome tomorrow, this is the campaign all Americans need to get behind.

Images of Pres. Obama and Gov. Romney (c) Charles Lynn Bragg – Thanks, Bro!