Multinational Monitor Editors blog

The BBC World Business Report recently aired a slightly revised version of this commentary:

In Washington, D.C., like other American cities, a strange ritual occurs on the evening of April 15.

As the sun sets and the clock ticks towards midnight, more and more cars converge on Washington’s old central post office.

Lines of cars form, waiting to hand envelopes and packages to postal workers who stand in the street and take their parcels.

What explains this unlikely ceremony? April 15 is tax day in the United States, the deadline to file your income tax returns for the previous year.
For perhaps millions of procrastinators, the familiar protocol is to wait until the last moment to prepare your tax forms, and then dash to the post office. I know this routine very well. I’ve done it more than once myself.

But for millions of other Americans, there is a different rush — to file their tax forms as soon as possible. These Americans are eagerly seeking refunds for overpayment of estimated taxes during the course of the previous year, or payment through a supplemental income program for low-wage earners. This program, known as the Earned Income Tax Credit, is probably the most important American anti-poverty program of recent decades.

Unfortunately, a booming segment of the financial services industry sees this hunger for refund checks as an opportunity for exploitation.

Quite large tax preparation companies — among them, H&R Block, and Jackson Hewitt — have innovated a deceptive scam. They offer “Refund Anticipation Loans,” that make loans to consumers for the amount they will get back from the federal tax authorities — at the cost of steep fees. Because the loans are for a very short period — typically 7 to 14 days — fees for these loans translate into super-high interest rates, in some cases as high as 700 percent on an annual basis. The U.S. National Consumer Law Center and the Consumer Federation of America have documented how such loans in 2004 drained $1.4 billion from the wallets of more than 12 million U.S. taxpayers — mostly lower-income working Americans.

These Refund Anticipation Loans are only one of a growing number of predatory lending schemes directed at lower-income people in the United States. Because mainstream financial institutions under-serve poor and minority neighborhoods in the provision of standard forms of credit, working people are often left with dismal options for short-term loans, low-cost borrowing or standard banking services.

Into this financial services vacuum come the predatory lenders — not infrequently connected to the very banking institutions that under-serve low-income communities.

In addition to Refund Anticipation Loans, predatory lending includes “subprime” mortgage loans with both high interest rates and extensive extra fees attached, and “payday loans” — short-term loans in anticipation of a paycheck, that may charge interest rates over 1,000 percent on an annual basis.

Led by the national community group ACORN and allied organizations, affected communities are fighting back against this organized theft from poor people. And they have achieved some considerable success in demanding changes by the largest predatory lenders, and winning local and state rules to curb predatory lending abuses.

But the United States has a long way to go to achieve real and comprehensive reform in this area — and low-income Americans don’t have time to wait.

The BBC World Business Report recently aired a slightly revised version of this commentary:

America treats its criminals harshly, and not just the worst offenders.
If you get caught selling small amounts of marijuana, or get caught stealing on a couple occasions, you are liable to get a significant jail term.

Once you get out, you may well find you have to pay thousands of dollars in court costs and other fees.

Get placed on probation, and you may have to pay the costs of your probation officer.

You may be deprived of your right to vote. You will find it very hard to get a job.

Everywhere you go — to coach a kids’ baseball team, for example — people ask: Have you been convicted of a crime? When you acknowledge your conviction, you are shunned.

Yes, America treats its criminals harshly … Well, not all criminals.

One class of criminals often is able to avoid conviction altogether — even when caught red handed: Corporate criminals.

Over the last five years, a remarkable trend has emerged: Government prosecutors choose not to prosecute corporate criminals, even when they have the goods on the corporate crooks.

Instead, they cut deals — known as non-prosecution or deferred prosecution agreements — where the corporation agrees to pay a fine and change its ways. If the company abides by the deal, the prosecutor doesn’t file charges, or drops charges already filed.

Prosecutors have cut almost two dozen such deals with big companies over the last five years, according to a recent report from Corporate Crime Reporter. Companies that commit securities crimes or other crimes of fraud now have every reason to expect they will escape conviction.

Perhaps the most notorious involved the accounting and consulting firm KPMG. KPMG promoted a tax scam that looted the U.S. Treasury of at least $2.5 billion. But instead of a prosecution, conviction and sentence, the firm agreed to pay a fine of $456 million and make some changes in its business practices.

A real person who cheated the government on such a scale would spend serious time in the slammer. But KPMG escaped without even the taint of a prosecution. In announcing the deal, the CEO sounded like a child caught with his hand in the cookie jar — but nothing more serious. “We regret the past tax practices,” said the CEO. We’ve “learned much from the experience.” Not exactly the tone of contrition prosecutors, or society, would demand from a small-time thief.

Prosecutors justify the no-prosecution approach on the grounds that innocent parties — a company’s shareholders, or employees, for example — may be hurt by criminal prosecution of corporations. But there are other innocent parties here — namely, the victims of corporate wrongdoing — and the refusal to prosecute corporate crooks means there will be more in the future.

For if there is any group for whom America’s harsh treatment of criminals makes sense, it is corporations. Because corporations coldly calculate risks and benefits, they are most likely to be responsive to hard-hitting penalties.

Instead, there’s a double standard in the United States that dishes out severe treatment for crime in the streets, but offers gentle handling of crime in the suites.

MILITARY LUNACY: HOW ABOUT A BIT OF COMMON SENSE?

By Russell Mokhiber and Robert Weissman

[original post on corp-focus, 3/9/06]

In a crazy place, even the most modest steps toward sanity can seem radical.

Thus, in Washington, the Common Sense Budget Act, introduced this week by Representative Lynn Woolsey of California, seems like a far-reaching move.
In fact, it might be better titled the “How About Just a Bit of Common Sense Act.”

The legislation would divert $60 billion from the Pentagon budget, and allocate it to social investment, renewable energy and humanitarian aid. Fifteen other members of the Progressive Caucus, of which Woolsey is co-chair, are co-sponsoring the bill.

Sixty billion dollars obviously goes a long way when it comes to people’s needs, and the legislation promises to do a lot. Among the programs that would benefit:

* $10 billion annually would go to provide health care coverage for millions of uninsured children.

* $10 billion a year would be spent on modernizing schools.

* $10 billion would be invested annually in renewable energy.

* $13 billion would be spent every year on humanitarian foreign aid.

Yes, $60 billion is a tremendous amount of money.

But not for the Department of Defense. The Pentagon is seeking $463 billion for the next fiscal year. That figure excludes the amount Rumsfeld and friends will request to fight the wars in Iraq and Afghanistan (and anywhere else they might start fights). For war-fighting, the administration is expected to seek an additional $115 billion in 2006. So we’re approaching $600 billion a year in defense/war spending.

The proposed cuts for the Pentagon follows recommendations from Reagan Assistant Defense Secretary Lawrence J. Korb. In a report issued in conjunction with the introduction of the Common Sense Budget Act, Korb writes that, “without diminishing America’s ability to fight extremists, America can save $60 billion mostly by eliminating Cold War-era weapons systems designed to thwart the former Soviet Union — weapons and programs that are not useful in defending our country from extremists or the other threats we now face.” Most of the proposed savings come from reducing the size of the U.S. nuclear arsenal, cutting most spending for the missile defense program, and scaling back or eliminating support for weapons designed to fight perceived threats from the Soviet Union.

In other words, these are no-brainer cost savings. They aim to stop spending on Cold War weaponry, but don’t threaten the prevailing war-fighting ideology at the Pentagon. The proposed cuts would upset particular defense contractors and agencies, to be sure, but they don’t pose a fundamental challenge to the Pentagon’s vice grip over the federal budget and inside-the-beltway politics and culture.

By way of perspective, consider this: global military expenditures soared past the $1 trillion mark in 2004, according to data compiled by the Stockholm International Peace Research Institute (SIPRI) and published in the Institute’s 2005 Yearbook. In inflation-adjusted terms, military spending is now rivaling the record total achieved during the peak of Cold War expenditures in 1988-1989, according to SIPRI.

Since 1998, government military spending has jumped almost 6 percent annually in real terms. “The major determinant of the world trend in military expenditure is the change in the USA, which makes up 47 percent of the world total,” according to SIPRI’s 2005 Yearbook.

By 2007, U.S. spending is expected to constitute more than half the total global military expenditure.

There are roughly 300 million people living in the United States. There are about 6.5 billion people on the planet, meaning the U.S. population is about 4.6 percent of the global total.

One half the world’s military spending. Under 5 percent of the world’s population.

Crazy.

Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime Reporter, . Robert Weissman is editor of the Washington, D.C.-based Multinational Monitor, . Mokhiber and Weissman are co-authors of On the Rampage: Corporate Predators and the Destruction of Democracy (Monroe, Maine: Common Courage Press).

(c) Russell Mokhiber and Robert Weissman

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