The Shaky Case Against Wealth Taxation

Associated Press

We have the means to tax the assets of the super-rich, and it is high time we did so, especially when faced with inequality that rivals the Gilded Age.

Ever since Senator Elizabeth Warren (D-MA) introduced her proposed wealth tax, there has been a storm of criticism against it not just from predictable sources like the Tax Foundation or Fortune magazine, but also from Democrats like former Secretary of the Treasury Larry Summers. This criticism is misguided and should not prevent other Democrats from supporting Senator Warren’s proposal.

Under Warren’s wealth tax plan, the richest 75,000 American households would pay an annual 2 percent tax on all assets—net worth—above $50 million, and a 3 percent tax on every dollar of net worth above $1 billion. University of California, Berkeley, economists Gabriel Zucman and Emmanuel Saez, who study wealth inequality, say Warren’s tax would raise around $2.75 trillion over ten years. The revenue would be used to fund, among other things, universal child care for every child age zero to five, free tuition and fees for all public colleges, and forgiveness of 95 percent of student debt.

There are four major lines of criticism of the Warren proposal, and they are all wrong.

First, opponents have argued that based on the U.S. experience with the estate tax and European experiences with wealth taxes, the revenue estimates are too high. But the estate tax is notoriously loophole-ridden, whereas Senator Warren’s wealth tax has robust anti-avoidance features (and assumes a 15 percent avoidance rate). As for Europe, under European Union law European countries cannot prevent their rich citizens from moving themselves or their wealth to other European countries. The U.S. has taxed such expatriations since 2008, and because of tough laws enacted in 2010, is in a much better position to discover its rich citizens’ offshore assets than any other country.

Second, opponents have argued that some assets are too hard to value and track down. But the largest asset of the ultrarich in today’s society is not real estate or artworks, but stock in publicly traded corporations, often corporations that they have founded. Just taxing Messrs. Bezos, Brin, Page, and Zuckerberg on the untaxed value of their stock will bring in billions every year. The vast majority of wealth subject to the tax is in such financial assets; the owners of those assets are known to the SEC. One overdue, complementary reform would require identification of true beneficial owners of stock and prohibit the use of straws as illegal tax evasion. The tax would bring in trillions even if it completely exempts art or real estate.

Third, opponents have argued that a wealth tax is unconstitutional because it is a “direct” tax (which the federal government may not levy). Alexander Hamilton would have disagreed, since he imposed the first federal wealth tax on carriages and saw it upheld in 1796 by a unanimous Supreme Court, all of whose members were drafters of the Constitution. Whatever a “direct” tax is, it does not preclude taxing wealth.

Finally, opponents say that lesser measures such as raising the capital gains rate and eliminating tax-free transfers of property at death would have the same effect. But as long as we do not tax all increases in value as they occur (a much harder task than taxing wealth), we cannot raise the capital gains rate too much or we will deter sales. As for eliminating tax-free transfers, death by definition only happens once, whereas a wealth tax would be imposed every year. The super-rich all envisage shifting their wealth to tax-free foundations before they die, which is why we should tax them now while they are young. Besides, there is no reason why we should not have both a wealth tax and an improved income tax with no tax-free transfers at death.

The income tax was adopted over a century ago because state property taxes could not reach intangible assets like stocks and bonds, and federal consumption taxes (tariffs) were regressive. Today, we have the means to tax the super-rich on these assets, and it is high time we did so, especially when faced with inequality that rivals the Gilded Age and a president who cuts taxes on the rich and imposes tariffs on the poor. Senator Warren’s plan should be adopted, even if it fails to tax those Rembrandts.

Don’t Blame Mental Illness for Mass Shootings

Elaine Thompson/AP Photo

By all means, let’s keep making progress on the prevention and treatment of mental illness. But let’s not kid ourselves. Mass gun violence is its own malady.

In addressing the spate of mass shootings, President Trump and the gun lobby have tried to deflect attention from our gun-crazy society and lax gun laws to the issue of mental health. After the El Paso Walmart killings, President Trump referred to mass shooters as “mentally ill monsters.” While this ploy may help bring needed resources to prevention and treatment of mental illness, it’s a totally bogus story when it comes to explaining mass gun murder.

If you think about what has changed in the past several decades, there is no evidence that mental illness is on the rise. And other rates of violent crime have been declining for decades.

Rather, four things have changed, three of them having to do with guns. First, gun control laws are weaker; second, military-style weapons are more lethal and readily available; and third, magazines can carry more rounds of ammunition so that a killer can pull the trigger and just keep shooting.

One other thing has changed. The president of the United States identifies with violence and hatred.

On the mental health front, there is actually good news. Not only is serious mental illness more treatable and preventable than ever, but studies show little correlation between mental illness and mass shootings. 

Dr. Richard A. Friedman, writing in The New York Times, summarized the major studies. One comprehensive piece of research found that some 80 percent of mass killers had no diagnosable mental illness. An FBI study found that just 5 percent of mass shooters could be considered psychotic.

A better diagnosis would be that they are haters. Were military-style guns not available, they could go right on hating, but not killing.

Stand-your-ground laws, meanwhile, make it all too easy for people to gun each other down in fits of rage over parking spaces. Without guns, they might scream at each other and resort to fists.

Modern life has far too much stress from multiple sources—the stress of not being able to earn a decent living; the stress of figuring out how to juggle kids and work; the stress of navigating an intimate relationship. But most stress isn’t serious mental illness though it can indeed trigger violence.

Meanwhile, advances in the early diagnosis and treatment of mental illness are remarkable.  One of the most impressive is the Portland Identification and Early Referral (PIER) program pioneered by psychiatrist William McFarlane in Maine in 2000, and now extended to several cities and states. (Disclosure: Dr. McFarlane is a cherished friend.)

The basic clinical insight of PIER is that if incipient major mental illness can be detected early, then young people at risk of a psychotic break can be spared that trauma and go on to live a normal life. PIER researchers found that it was the psychotic break more than the underlying risk of illness that was life-destroying.

After PIER was instituted in Portland, the incidence of major mental illness declined by 34 percent between 2001 and 2007.

The federal Substance Abuse and Mental Health Administration is now funding preventive services based on the PIER model in 21 locations across the country.

The strategy enjoys bipartisan support because Democrats think it’s humane policy, and Republicans like the distraction from gun control.

By all means, let’s keep making progress on the prevention and treatment of mental illness. But let’s not kid ourselves. Mass gun violence is its own malady. It will decline only when we get serious about banning military weapons—and ending the preaching of hatred from the Hater-in-Chief in the Oval Office.

Poverty Doesn’t Sell, but We Wrote About It Anyway

M. Spencer Green/Associated Press

Those living on the edge can testify to the inadequacy of public benefits and the stinginess of the so-called welfare state for millions of Americans, many of them children.

For the past two years as a Prospect writing fellow, I’ve carved out a beat on poverty and inequality, writing about marginalized populations and overlooked issues. Stories on inequality are depressing. They don’t sell ads. But in an era where the chasm between rich and poor is only widening, and wages have stagnated for decades, this is the stuff we need to talk about.

Thanks to the Prospect for letting me—a person from the working class—write about issues close to me, and issues I think are important. Here are ten of my favorite stories I’ve written, either because of the people I spoke with or the topics that were highlighted.


Could California End Childhood Poverty?

California, as far as I know, is the only state whose department of human services convened a task force to come up with solutions to end childhood poverty. And the Prospect, as far as I know, is the only outlet outside of California that covered this groundbreaking commitment to low-income kids. The state recently passed what’s pretty much the first guaranteed income for low-income families with children in the country—though they intentionally left out families with undocumented parents.

Benefits on the Line

So much of my work has been explaining how complicated policies affect the most marginalized people. Sometimes these policies are designed to be complex so that, unless you have a Ph.D. in economics, they go over our heads. This story attempts to explain one.

Building Worker Solidarity Across Borders

American consumers have tended to ignore the labor conditions of workers internationally—cheap stuff wins out. But the Communications Workers of America has, for the past few years, slowly built relationships with call center workers in the Philippines. I wrote a follow-up story, here, in which I interviewed via Skype a Filipino worker who had been fired for organizing.

Reproductive Rights at Risk With or Without Roe

There was a lot of panic for the future of Roe when Trump appointed two new Supreme Court justices. Rightly so, but abortion has never been easy to access, especially if you’re a person of color, have low income, or you live in a rural area. This story also saw me on C-SPAN … eek!

Who Cares for the Care Workers?

I interviewed two care workers who are also organizing their colleagues in their respective cities in the South. Home care workers are a “hidden” workforce, laboring away, typically alone, in buildings you unknowingly pass on the street.

The Idle Poor and the Idle Rich

This is an essay about societal expectations and how we think about who is deserving of government assistance. It is also a song in the 1968 musical film Finian’s Rainbow.

Scott Walker and the Failure of Trickle Down

Two states, two directions, widely different outcomes. Governor Scott Walker, national disgrace, threw Wisconsin into disarray by a commitment to trickle-down economics, and by cutting welfare and gutting unions. Minnesota, which did the opposite, is doing much better on nearly all counts.

West Virginia Teachers Won Their Strike. Now, They’re Rebuilding the Local Economy.

Possibly my favorite story: I traveled to McDowell County in southern West Virginia, the poorest county in a struggling state, to report on an anti-poverty initiative led by the American Federation of Teachers. This project is a throwback to the days when labor unions provided community resources and support—but in a region that knows how quickly do-gooders will drop one project for the next, the initiative has had a rocky start.

Food Stamps Aren’t a Substitute for Work. They’re How Low-Wage Workers Avoid Hunger.

For this piece, I interviewed a woman who used to receive SNAP to learn about her experience with the program, and held onto the interview for a few months until I came upon a report from the Center on Budget and Policy Priorities that perfectly explained her difficulties. In contrast to the stereotype, Sarah used the program when she needed it most—when she was in between unstable jobs—not so that she wouldn’t have to work.

The Poverty on Disney’s Doorstep

The Prospect isn’t known for publishing movie reviews, which is why I loved writing this piece about how indie movie The Florida Project depicted not just childhood poverty, but childhood itself.

Using College Athletes as Concussion Test Subjects Makes Nobody Safer

Ed Reinke/AP Photo

Florida quarterback Tim Tebow lies on the turf after being sacked during an NCAA college football game, September 26, 2009. He received a concussion on the play that put him in the hospital for a night. 

Since the mid-1990s, American universities have routinely obtained millions of dollars in annual government funding by using athletes, primarily those involved in high-risk collision sports such as football, as research subjects. A significant amount of the brain injury research comes from sports medicine and relies on the college athlete population.

In 2014, the National Collegiate Athletic Association (NCAA) and the U.S. Department of Defense (DoD) signed a cooperative research and development agreement (CRADA) to jointly fund concussion research using the college population, with an ostensible mission to “enhance the health and safety of NCAA student-athletes and service members.” Dubbed the “CARE Consortium,” the ongoing project includes as study subjects college athletes from various sports among 30 universities and service academies across the country.

To date, the CARE Consortium has received millions in DoD funding. The claimed benefit to service members is critical for the NCAA to obtain DoD funding for this research. Military funding for the CARE Consortium occurs through the Psychological Health and Traumatic Brain Injury Research Program (PH/TBIRP), a congressionally directed medical research program (CDMRP). The key requirement to obtain funding through this program is that the research must “benefit Service members, veterans, and other beneficiaries of the military health system.”

The benefit for the population of collegiate athletes is another matter. The preferred end state would be fewer individuals with concussions, not more. There’s no reason the research grant should affect measures to make collegiate athletics safer, even though funding relies on a stream of test subjects with concussions. But the existence of the financial benefit and the potential for that entering into thinking about policies to prevent concussions should worry athletes and their families.

But the bigger question lies in whether this research carries any benefit to concussion research for military subjects.

According to NCAA Chief Medical Officer Brian Hainline, the justification for extrapolating results from concussion research using college athletes, who constitute the majority of CARE Consortium study subjects, to the military is that college sports is a much more controlled environment than the military theater and the two populations are “similar in age, athleticism, risk taking and pushing to the edge of excellence.”

Not only has the NCAA produced scant evidence to support such claims, but its own CARE Consortium research shows just the opposite. Recent research from the CARE Consortium has acknowledged that military cadets are a unique population and that findings likely cannot be generalized beyond NCAA Division I athletes. Another study using football players observed that not only were results unlikely to generalize to other settings; they were unlikely to generalize even to other sports.

Service members can be placed at great risk if results from a noncomparable population are applied to them and used to make medical-care decisions. One standard medical-care component of return-to-activity following a brain injury involves comparing pre-injury (baseline) tests to post-injury. When an individual’s post-injury scores approach their pre-injury baseline (e.g., 95 percent), then a gradual return to activity can proceed.

However, individual testing, as required by the 2008 National Defense Authorization Act, is expensive. As a result, the military has explored the cost-benefit trade-offs of other alternatives. One such alternative is reliance on “normative” baseline average scores from a similar population of individuals. The problem with comparing service members’ post-injury test scores to normative baselines from college athletes rather than military-specific normative data is that college athletes are not a similar population.

For example, individuals with learning disabilities and attention deficit disorder (LD/ADHD) have lower baseline scores on neurocognitive tests. LD/ADHD are prevalent among college athletes. At one university, over 39 percent of tested incoming athletes in some sports were diagnosed with LD/ADHD. One CARE Consortium study found approximately 27 percent of football players at a member university were diagnosed with LD/ADHD.

Further, use of stimulant medication (e.g., Adderall or Ritalin) is known to affect neurocognitive test scores and is common among college athletes. It is noteworthy that the use of such medications is an exclusionary criterion for military enlistment.

The characteristic differences between the military and college athlete population were discussed in some detail in a 2018 Ph.D. dissertation of Kathryn Van Pelt (née O’Connor), whose committee included various CARE Consortium researchers. Dr. Van Pelt offered strong evidence that the cadet population was “substantially different” from the traditional NCAA athlete.

Service members can be placed at great risk if results from noncomparable populations are applied to them and used to make medical-care decisions. When comparison benchmarks are set too low, injured service members can be prematurely declared ready for return to activity and still be symptomatic. In other words, this can have a negative impact on clinical decision-making.

Where does that leave us? It is clear that the CARE Consortium involves three different populations: college athletes, service academy cadets, and enlisted service members. The differences among them mean that the college athlete population cannot, and should not, be used to produce normative baseline data for service members. The solution that best protects military personnel is for the DoD to focus research efforts on its service member population instead.

Stephen Casper is currently retained in concussion litigation pending against the NCAA in multiple cases as an expert witness in history. The authors were not paid for this piece.

With the Volcker Rule Now Dead, Democrats Need to Bring Back Glass-Steagall

Richard Drew/Associated Press

It’s clear that overabundant trading with cheap funds backed by public guarantees now represents the major break in the firewall of our financial regulatory apparatus. 

In 2017, when Obamacare looked to be a vote or two away from oblivion, a popular argument in left circles went like this: The Rube Goldberg contraption that is the Affordable Care Act represented a compromise from the easier and cleaner way to do universal health care, and if Republicans and the medical industry couldn’t even stomach that, the next time Democrats take power they might as well go to full single-payer. If Democrats are going to be called socialists either way, the left theorized, they should choose the best policy instead of a half measure in the faint hope of winning bipartisan support.

Democrats now have another example of this in financial reform. Trump’s regulators have finally eviscerated the compromise version of a structural separation between deposit-taking banks and trading institutions, known as the Volcker Rule. The financial sector could not allow even minor constraints on its practices of betting prodigious sums with other people’s money. Well, fine. Then I guess when Democrats retain control they should just go back to the gold standard in this department, the firewall between commercial and investment banks passed in 1933 as the Glass-Steagall Act.

The Volcker Rule was a poor man’s version of Glass-Steagall. Part of the 2010 Dodd-Frank financial reform, it was intended to stop deposit-taking banks from what is commonly called proprietary trading, which amounts to speculative buying and selling of securities or derivatives on its own accounts. The idea here is that bank deposits are some of the cheapest funding there is. Most checking accounts pay either next to nothing or nothing at all in interest. We want banks taking deposits to make loans, but using that cheap funding to gamble adds no productive value to the economy, while increasing risks. And the government backs up that risk with deposit insurance and the prospect of bailouts. So banks get to privatize profits while socializing losses.

Senators Jeff Merkley (D-OR) and Carl Levin (D-MI) wrote the Volcker Rule, and it made its way into Dodd-Frank after a series of struggles. But it was battered along the way. Initially, the rule prevented commercial banks from owning or investing in hedge funds or private equity funds, but then-Senator Scott Brown (R-MA) forced in a loophole that allowed 3 percent of bank capital to be put toward such investments. A number of other types of trading instruments, like Treasury bonds, municipal bonds, and securities issued by government-sponsored mortgage giants Fannie Mae and Freddie Mac, were also exempted. Finally, there were exceptions for so-called “market-making” or hedging strategies. If a bank traded certain financial products and claimed that they offset potential losses on other parts of their business, it would be allowed under the rule.

After the legislation passed, regulators kept making concessions to Wall Street, delaying key pieces of the rule repeatedly and buying time for lobbyists to continue to chip away at it. That paid off last week, when the Federal Deposit Insurance Corporation approved a revamped version of the Volcker Rule. The Office of the Comptroller of the Currency also signaled support; other regulators with jurisdiction over the rule are expected to follow suit in the coming weeks.

The new version expands the market-making and hedging exemptions to cover a large number of possible bank trades. It eases the “covered funds” provision, allowing banks to invest more in hedge funds and private equity. If a bank holds a financial instrument for more than 60 days, it’s presumed not to be proprietary trading under the rule, forcing regulators to rebut that.

Perhaps most important, an “accounting test” that would help regulators identify speculative trades was dropped, in favor of what amounts to self-policing. There is a “presumption of compliance” for certain activities, and an exemption for all trades within “risk limits” that the banks themselves have created.

All you need to know about what’s left of the Volcker Rule can be summed up by Tyler Gellasch of the organization Healthy Markets, who wrote on Twitter: “After tens of millions of dollars and a decade of lobbying, the #VolckerRule is a shadow of the original idea and simply no longer works for anyone—it certainly cannot protect the public from another disaster.” Gellasch is no ordinary financial-reform advocate: He co-wrote the Volcker Rule, while serving as a top staffer to then-Senator Levin. If Gellasch says it’s over, it’s over.

So where does that leave us? With the rewritten rule, there is effectively no structural separation, direct or indirect, between commercial and investment banks. Regulatory authorities the world over, from the Liikanen report in the EU to the Vickers report in the U.K., have recognized the need to “ring-fence” risky assets and prevent governments from subsidizing investment banks with public money. We shouldn’t want ordinary Americans’ savings entangled with, and indeed funding, high-stakes casino gambling. Banks shouldn’t be staking hedge funds and private equity firms to make their reigns of terror more robust and predatory, either.

So how can we stop this now? A half measure, the Volcker Rule, was nicked to death and finally sent off to its resting place. The alternative is to move forward with the thing that the Volcker Rule stood in for: Glass-Steagall. It’s clear that overabundant trading with cheap funds backed by public guarantees now represents the major break in the firewall of our financial regulatory apparatus. That leak can be plugged simply, by separating commercial from investment banks. We tried it the Rube Goldberg way, and Republicans at the behest of the industry revolted. The next step is a direct restoration of the real thing.

Financial regulation has played no role whatsoever in the Democratic presidential primary. Elizabeth Warren has a long-standing bill restoring Glass-Steagall, and Bernie Sanders ran on the idea in 2016. Everybody else has been silent. You can certainly go further than Glass-Steagall, by banning unproductive trading activities, reducing conflicts of interest, and eliminating financial intermediaries with no value for the economy.

But we should at least hear something from would-be Democratic standard-bearers. We’re at the scariest point on the pendulum between financial implosion, re-regulation of the system, and then relaxation of those rules. The Trump administration is laying the groundwork for the next financial crisis, and we need to know what candidates would do to reverse that trend before we have another crash.

The simplest way to attack the most dangerous facet of the financial system, its extreme interconnectedness that enables problems in one section to cascade everywhere, is to just separate out the activities. The Volcker Rule was the end-around version of this, and Wall Street killed it. The time for half steps that financial lobbyists treat like Armageddon anyway has ended.

Ending the BigLaw Racket: A Conversation With Brian Fallon

Dana Verkouteren/AP Photo

Civil rights lawyer Debo Adegbile speaks in front of the Supreme Court in 2009. Five years later, President Obama put forward Adegbile as a DOJ nominee but then withdrew the nomination amid controversy. 

In a provocative essay for The Atlantic, Brian Fallon and Christopher Kang, the co-founders of the new court-focused group Demand Justice, put out a declaration that the next Democratic president should not nominate federal judges who spent time at corporate law firms. The audacity of the proposal is even more striking given who it was coming from. Kang was the leading White House lawyer for judicial nominations during the Obama presidency; Fallon served as a spokesman for Chuck Schumer in the Senate for six years, and then in the Justice Department under Eric Holder, and as national press secretary for Hillary Clinton’s 2016 campaign.

These are not résumé items you would typically associate with people who want to burn down the dominant frameworks for judicial nominations. But Fallon and Kang capture the problem with the status quo: A BigLaw pedigree serving corporate clients is an entryway into an elite club that can advance careers, while lawyers at public defender’s offices or advocacy groups get left behind. This tilts the federal bench in favor of corporate interests, which has been a major trend in the courts over the past few decades. Republicans put up ideologues for judgeships, while Democrats take corporate lawyers, and this imbalance must stop, Fallon and Kang argue.

I talked with Fallon on Friday about the proposal, how judicial nominations work among Democrats, and why diversity needs to be about life experience and professional status as well as race and gender. A lightly edited transcript follows.

David Dayen: This declaration feels like you exposed a secret that a lot of people knew about but weren’t telling. So why do it now, so far out from the presidential election?

Brian Fallon: The problem that we’re specifically seeking to address is important for its own sake, and that’s the lack of diversity on the court. The courts in general are an issue that only a select group of people pay attention to. Among that group, there’s a widespread recognition of the lack of professional diversity. But when you express a general desire to change this, people nod their head, politicians say yes, and nothing changes. And then political networks of big donors call up politicians and put in a good word for corporate donors. We felt the need to get a little bit more intense about it, and put it in starker terms. If you want to put the onus on people to look at different types of nominees, you need to put firmer point on it. You need to say, we should rule out corporate lawyers for the next presidential term. It’s a purposeful mission to elevate other types of people, like public defenders or academics or lawyers from advocacy groups like the ACLU.

This is going to be a provocative and controversial idea, so we need to start socializing the concept now, and we need to rally progressive activists to think about caring about this now, so when a Democratic president puts forward names in February, March, April of 2021, they need to know that people are watching what type of nominee they pick.

Our overall mission is not to get any one person nominated. It’s to get judicial issues more into the marrow of Democratic activists. People must center the courts as a needed element of the movement’s activities and goals. One faction of the base that’s been absent from the issue space has been the economic progressives. The courts have been contested around reproductive rights, and more recently around democracy issues, like campaign finance and voting rights. What’s gone unnoticed is this raft of rulings, like cases on the Federal Arbitration Act, the impact of the Janus ruling and previous ones that set that up. So if you are a Bernie Sanders or Elizabeth Warren Democrat, and you believe the campaign finance system hijacked, if you believe antitrust and economic concentration is a big problem, you should care about judicial nominations, because the courts are a theater where this war is being contested and there’s no one on the battlefield. It’s a place to advance the interests as well. If this leads to one AOC equivalent of a federal judge, like a young labor lawyer, or an academic like Tim Wu who has written interesting stuff about corporate power, if you get them on the bench and write opinions, I mean, I would love all the people at the Open Markets Institute [the leading organization fighting economic concentration], the people who are working on primaries of centrist Democrats, I would love them to think, let’s put our shoulders behind this.

It’s interesting how you use the word “diversity.” I think often that gets put into a certain context, but you’re talking about diversity of experience and professional development, just with a broader lens than the way it normally gets discussed.

I would say that in the Obama era, there was a decided effort mounted to increase the ranks of judges from the standpoint of racial and gender diversity. That was very necessary, from the standpoint of LGBT individuals, for the woman/man split on the bench. That was a crucial project. And that has been set back by Trump’s predominantly white and male picks. I think the next president—it should be a given that we’re going to look for racially diverse people. That should be a floor. When Sotomayor was nominated, she had a background as a corporate litigator. That was a compromise worth making. And it worked out. The next time, we can be more picky.

So what are the goals of this kind of blanket prohibition on corporate lawyers for the federal bench?

The first goal is to change the types of judges on the bench. The second goal is to increase the muscle memory of the left. If we’re against having Wall Street bankers in high-ranking roles in the administration, if we’re against people doing high-dollar fundraisers in the living rooms of corporate executives, let’s add to the list the people who represent them in a legal context being the preferred picks for judges. The third goal, there are young progressives right now going to law school having this existential debate within themselves, wondering how can I contribute to opposing Trump’s vision of America. This idealistic sense, they want to get involved to stand up against what Trump represents. And a position at a corporate law firm is very lucrative, and it’s a very safe, politically viable place to make your career, if you want to be relevant to making a difference in future. It puts you in close proximity to movers and shakers, people who can further your career. People serving at the ACLU, or as a public defender, they won’t be in that close proximity, they won’t have people to weigh in on their behalf. And if you’re at the ACLU, you might be viewed as a net negative, because Republicans will get their backs up if we nominate this guy. We need to start changing the incentives. If we make it disadvantageous to be just another Yale Law grad working at [corporate law firm] Paul, Weiss, and make advantageous the Tiffany Caban version of a judicial candidate, suddenly young people don’t have to choose between their vision and their career.

Republicans nominate movement conservatives who work their entire careers on long-term pet projects all the time. They don’t just ask conservatives to be anti-Roe, they get the ones who work the cases at litigation factories in the south. They got Stuart Duncan onto the 5th circuit; he argued the Hobby Lobby case. We don’t have to shy away from our champions, our advocates, in favor of corporate lawyers.

When you worked in the Senate, when a nominee came up with a BigLaw pedigree, what did that signify to Senators?

That they’re not an ideologue. It was seen as a neutral credential. If anything, [it was] viewed as a neutral credential, never a net negative. It wouldn’t signify that the nominee is too close to corporate interests. It might be seen as positive, that this is not a liberal ideologue. Consider the context: Who are some of the most controversial nominees on the Democratic side in the last few years? Debo Adegbile, he was put up to run the civil rights division of the Justice Department, and he even had [Senator] Chris Coons oppose him, because as a pro bono lawyer he worked for Mumia Abu-Jamal in Philadelphia. That was so controversial in the media market that Coons had to take a walk. On the left, there’s this is the whole principle since John Adams that you separate the lawyer from the client, but the pressure on the right was so intense, this is a cop killer defender. And then you had Goodwin Liu: He was seen as too liberal and had to withdraw. So if you put up a corporate lawyer, it’s considered that Republicans can’t resist, because they’re supported by the Chamber of Commerce or whatever. So Sri Srinivasan, is quote-unquote “respected” on both sides of the aisle, because he made a career out of representing corporate clients. And in fact without our statement, he would be on the Democratic short list for the next Supreme Court vacancy.

It seems like BigLaw’s influence within Washington goes beyond the judiciary, and into Congress, and the executive branch? I mean there’s one law firm, Arnold & Porter, that puts practically everyone onto the key antitrust agencies through the revolving door. It’s a broader problem, right?

Yes. I have gotten some comments, you think all corporate lawyers are compromised and can’t be progressive judges. I’m not saying that. I’m saying that when you reside in certain political and social circles, you let your guard down on certain things. As an example, you see good progressives lending their names to people they know will be awful on the bench. Why? Because they went to school with them, or were partners at the same law firm. It’s the ultimate elitist move. These people want a judiciary that’s fair and respectful, but they’re willing to suspend that to vouch for their buddy, because they carpool together to an upper Northwest Washington school that kids both attend. If you’re elevating a public defender, that day-to-day life is not influenced in that way. There’s real value in that, from both sides. There’s value in guaranteeing that we have that vantage point represented. And there’s value in de-emphasizing more of the same backscratching network, the network that joins each other on briefs at corporate clients, and get talked up as the crème de la crème among the legal community.

You’re in this interesting position, given who you’ve worked for and where you are now. Do you see a transformation in your thinking about these issues?

I worked in the Senate for six years, and when I worked there, judicial nominations were an unsexy topic. If I was sitting in a meeting about what we’re doing this week, and I heard that we’re doing three judicial nominations, I would just tune out, because nothing in this meeting was worth paying attention to. The crisis in the judiciary is acute now. The complacency on our side, and I’m guilty of it as well, is not acceptable. I may be coming to it a little sooner than others. But I think a lot of people will have this epiphany. Unfortunately, the real world will get worse, which will make my job easier. The Republicans have five votes on all these issues. They have a very good infrastructure, built to inundate the federal judiciary with test cases, get them up to the Supreme Court on quick timelines, and vindicate long-held priorities. This term, there will definitely be a ruling on the impact of the Civil Rights Act on LGBT individuals. We’re not in a good position to win based on the composition of the court. I would expect an adverse DACA ruling. There’s the ACA case from Texas. The smart money is that Roberts upheld Obamacare twice and won’t break this time. But think of the insanity that we’re still dealing with this years later based on fringe theories. The Louisiana abortion law may be decided this term on the merits.

And beyond all of that stuff, there will surely be all these corporate cases where the Court will side with the pro-corporate side, and some of those might be 7-2 or 8-1. That’s the whole point, right, that the Court is really tilted on the corporate side?

That’s going to remain true. The differentiating factor is there will be things that will grab headlines. I don’t think I’ll be a voice in the wilderness anymore. There will be an understanding after the DACA ruling that DREAMers can’t just be immigration advocates, but court reform advocates. The Sunrise Movement kids might not just be climate activists, they need to become court reform activists. So we want to get judicial politics infused into the bloodstream of activists that are powerful on their issues. The courts as seen as a rival issue in polls. Sometimes you’ll see internal polling on what voters are interested in, which will put the courts in with health care and immigration, as if it’s its own issue. The courts are not a rival issue to any of those; it is all those issues. The courts have been for a long time the province of the elite, and the elite like it that way. They like to think of themselves as brain surgeons, and only other brain surgeons can read their opinions. They think of themselves as above politics, having these arguments that nobody below them can comprehend. My point to these people is fuck that. Let’s break through the fourth wall.

Republicans have broken through that wall. They’re now getting candidates to put out lists of who they’re going to pick for judicial nominations. And our side is saying is: you can’t politicize the courts. There’s an interest in keeping the universe of people working on the courts very closed off. It’s better off for them if the Sunrise Movement doesn’t mention the courts. It’s better if Justice Democrats, who are doing all this work on the Henry Cuellar race and others, doesn’t pay attention to who Amy Klobuchar is recommending for an open seat on the 8th Circuit.

You teased on Twitter that you’re going to go into the selection committees used to vet judicial nominees for senators who have a say in who gets nominated in their states. Could you explain that to me?

Institutionally, one of the ways the system works is that most of these Senators themselves—some of them know personally people that they want to put on the bench. That starts to run out fast. After that, if they’re in the position to nominate someone, they’re reliant on recommendations from people in the local bar who tell them this is a good young person. Some offices have taken that process to a formal level. There’s an actual selection committee. There’s no rule that they have to do this that way. In Pennsylvania, they have a bipartisan nominating commission. So between [Senators Bob] Casey and [Pat] Toomey, one gets one pick, and next time, it will be known that the other senator gets the pick. And there’s a bipartisan committee that puts in names. In other states, the senior senator will have precedence, and they will have this committee doing the vetting. So if you’re angling for a nomination, you have to talk to this group of people that’s never publicized anywhere.

My thought was, let’s get enough people talking about this who are aware of the process to create a database. Or you ask the senators that are willing to tell you who they’re talking to. That can shame the ones not talking to you, but even if the senators do publicize it, they’re telling on themselves about the lack of professional diversity. They might think it’s a diverse committee because it’s bipartisan, but they’re all corporate lawyers.

Wow, I never knew about any of that.

In the last three days I’ve had non-corporate lawyer types reach out to me on LinkedIn, saying, “I’ve been wanting to be considered for a federal judgeship and I didn’t know who to raise my hand for. Are you going to put a database together?” So it can be really powerful.

Progressives Shouldn’t Be Interested in John Hickenlooper for Senate

Kristopher Radder/Brattleboro Reformer/Associated Press

Democratic presidential hopeful and former Colorado Governor John Hickenlooper spoke at a town hall gathering in New Hampshire earlier this year.

Last week, former Colorado governor and short-lived presidential candidate John Hickenlooper announced a Senate bid in his home state of Colorado. For many, the decision was met with the relief that finally, viable Senate candidates with no shot at the presidency were seeing the light, and shifting their efforts to where they could actually make a difference. Hickenlooper pulled out of the presidential race a few weeks ago after failing to broach the 2 percent mark in polling; already he’s being declared a heavy favorite to win the Senate seat currently held by Republican Cory Gardner.

But the excitement over Hickenlooper’s candidacy—informed at least partially by the hope that a certain former Texas congressman with similarly low poll numbers in the presidential primary and a vulnerable Republican Senate seat at home awaiting a Democratic challenge might take that same hint—is misplaced. If anything, Hickenlooper’s candidacy may prove to be a setback for progressives hoping to make gains in or even flip the Senate in 2020, as they hope to put some legislative power behind a possible Democratic president.

The bulk of Hickenlooper’s appeal, which he sounded repeatedly during his time as a presidential candidate, is based on the fact that he won as a Democratic gubernatorial candidate in the purple political arena of Colorado. He’s touted his ability to reach across the aisle and strike good-faith accords with intransigent Republicans, evinced by his partnership with former Ohio Governor John Kasich on everything from Affordable Care Act reform to defending the sanctity of NAFTA.

The problem is, Hickenlooper is now running for a chamber of government where that sort of bipartisanship doesn’t exist. Even if Democrats were able to claw back a Senate majority, the No Labels approach that Hickenlooper is championing would simply mean conceding to a Republican Party that has built its entire style of governance on a summary refusal to compromise on anything.

Furthermore, the purple Colorado Hickenlooper claims to have broken through in doesn’t even exist anymore. Colorado has gone Democratic for three straight presidential campaigns. It’s got a liberal Democratic governor, a Democratic majority in both houses of the state legislature, and a majority of its representatives are Democrats as well. They’ve passed sweeping new regulations for the oil and gas industry, enhanced gun control, and established free, full-day kindergarten.

Gardner’s seat, which he only narrowly won in 2014, is widely considered to be the most flippable Republican Senate seat in the 2020 cycle. Democrats romped in Colorado in 2018, with youth and Latino turnout changing the makeup of the electorate to the point that these gains would seem to be lasting. President Trump is extremely unpopular there, which means whichever Democrat gets the nomination will see a presidential cycle turnout boost. And Gardner, despite positioning himself as a moderate, has voted with Trump nearly 90 percent of the time, more than double what would be expected given his constituency.

Beyond that, a January poll found Gardner trailing a generic Democrat 38 percent to 46 percent. And the presidential cycle bump will be non-negligible as well: Every state that had a Senate race in 2016 voted for the same party in both the presidential and Senate election. All that means that Gardner is extremely likely to lose his seat to a Democrat, any Democrat. The question is whether that Democrat should be John Hickenlooper.

Beyond his avowal of bipartisanship, it’s worth scrutinizing his record to see what Hickenlooper would bring to the chamber. While governor, Hickenlooper famously ushered in the fracking revolution in Colorado, earning the nickname “Frackenlooper” while fossil fuel production in the state soared. With him at the helm, oil production went from 2.7 million barrels a month in 2011 to an average of nearly 14 million by 2018, more than a fivefold increase. He fought off regulations for oil companies, threw support behind a controversial coal mine, and famously bragged about drinking a glass of Halliburton fracking fluid to prove its safety. Despite the rising popularity of ambitious climate-related policies, there’s no reason to believe Hickenlooper would be anything but an obstacle for Democrats’ green policy proposals.

There’s an electability argument to be made as well. Evidence shows his presidential campaign may have hurt his standing in his home state. Despite his speckled environmental record, Hickenlooper left office fairly popular, with 49 percent approval of his job performance in his last three months, while 30 percent disapproved. However, recent polling found that only 41 percent of Coloradans had a favorable opinion of him, with his unfavorable rating now up to 37 percent. Perhaps the most lasting moment of his presidential campaign came when he was booed mercilessly at the California Democratic convention while proclaiming his opposition to the Green New Deal, saying, “We should not try to attack climate change by guaranteeing everyone in America a government job.”

Despite the enthusiasm for Hickenlooper’s pivot from senators like Tim Kaine and Kamala Harris, Colorado-based Democrats and progressives have been far less sanguine about his entering the race, as well. Already, there are 11 candidates in the running, with organizers having laid the groundwork for a number of challengers, largely to Hickenlooper’s left. And those candidates have refused to cede ground to his candidacy: Former state House Speaker Andrew Romanoff has said he wouldn’t bow out were Hickenlooper to enter the race, while state Senator Angela Williams even released a statement discouraging him from running. “If he’s going to switch gears and run for the senate, he has a lot to explain to Colorado voters. This won’t be a coronation.”

Most formidable among those candidates are Obama-era former Deputy Assistant Secretary of State Dan Baer and state Senator Mike Johnston, who’s pacing the group in terms of fundraising. So far, he’s pulled in $3.4 million since announcing in January, including $1.6 million in the second quarter, more than the $1.1 million Hickenlooper banked over the same period as a presidential candidate. Johnston is a supporter of the Green New Deal.

If his presidential campaign is any indication, Hickenlooper is content to make a reputation for himself as more spoilsport than ally. His debate contributions were overwhelmingly focused on frustrating the emerging Democratic agenda rather than advancing it. That mentality, combined with a fading star of electability, is not a winning recipe. It may not be what Chuck Schumer wants, but there are better options out there for Colorado.

Life-and-Death Decisions: Why Some States Vote to Block Health Care Reform

Kimberlee Kruesi/Associated Press

A floral funeral wreath was placed outside the Idaho state Senate chambers in March 2016 to protest the body's failure to pass a Medicaid expansion bill.

The Open Mind explores the world of ideas across politics, media, science, technology, and the arts. The American Prospect is re-publishing this conversation.

In his new Basic Books book “Dying of Whiteness: How the Politics of Racial Resentment is Killing America’s Heartland,” Jonathan Metzl reveals how the backlash policies against a multicultural America have mortal consequences even for the people they promise to help. Metzl is professor of sociology and psychiatry at Vanderbilt University where he also directs the Center for Medicine, Health and Society. He is research director of the Safe Tennessee Project, a nonpartisan volunteer-based organization concerned with gun-related injuries and fatalities.

Alexander Heffner: What did you discover about these resentments and over what period was this?

Jonathan Metzl: My research for the actual book itself started in about 2010. I was doing research in the south in Tennessee and talking to people who themselves would have benefited from the Affordable Care Act. They didn’t want the Affordable Care Act and were on the frontlines of saying they didn’t want Medicaid expansion. And it was just a really eye-opening experience for me because these were people who were very often medically ill and really would have benefited from what was coming down the pike everybody thought with the Affordable Care Act, better access to physicians, help with medical bankruptcies, help paying people’s prescriptions. We started focus groups in the south around that time—2010, 2011 before Trump was a blip on the horizon in terms of the presidency. Probably the most powerful stories that we heard were people who were literally on death’s doorstep, chronic medical illness, liver failure, kidney failure, things like that who would tell me and my colleagues, we’re not going to sign up for this program because even though it might help us, and these were often white working class Americans who we were talking to, they said, we don’t want to sign up for a program that might help immigrants or minorities.

Heffner: So you’re based in Tennessee. You explore the issues in Kansas and Missouri, any other states?

Metzl: Tennessee and Kentucky were a kind of comparison because Tennessee rejected the expansion and the Affordable Care Act and Kentucky accepted it. So it was a kind of Kentucky, Tennessee comparison and then Missouri, Kansas and then looking more nationally at the end.

Heffner: If you look at how people are voting and want to make the correlation between how they responded to your questions and how they behave politically, are they lower income, are they wealthy, because the Republican Party is the party of the 2017 tax reform. It’s a party that benefits from continued support from high-income people.

Metzl: On the practical level, there’s a lot of data and information and history in my book about the mortal consequences for working class white people of GOP policies. On one hand my book it shows that the policies that claim to make white America great again for working class white Americans end up making working class white lives and in particular and many other kinds of lives, harder, sicker and literally shorter. So that part of my argument shows how policies from blocking healthcare reform, letting anyone buy a gun and carry it around, even 18 year olds carry AR-15s, massive tax cuts that undercut schools that those policies are as dangerous for working class people of every, all working class people, including working class white Americans, they’re as dangerous as asbestos or secondhand smoke or not wearing seatbelts in your cars. They literally become disease risk factors that shorten people’s lives. That the story of what’s happening from a medical perspective is that working class white GOP voters are being asked to lay their bodies down on the train tracks to support an agenda that in many ways from a material sense is going to benefit people far higher up the economic chain from them.

Heffner: Let me put it quite plainly, there are rich racist people in this country too.

Metzl: I talked to many, many people. I talked to people in cities; I talked to people in rural areas. I talked to people all across the economic spectrum. And so part of the reason I talk about this as a conversation about whiteness is part of what I highlight in the book are some of the narrative strains that connected people across socioeconomic levels. Even though as I said a moment ago, the real health effects were definitely the worst for people at the lower end of this.

Heffner: Those people who are concerned about not in my backyard. I don’t want policies that are going to advance the lives of people in the city or Mexican Americans or immigrants are those people cognizant of insurance companies who actually benefited from windfall profits of the Affordable Care Act?

Metzl: The answer is yes. I’m not trying to in any way skirt around this question. People were incredibly well informed. I mean, shockingly well informed and I invite people to read the book and the healthcare section. The people who were rejecting the Affordable Care Act knew much more about what the Act actually did than many of my friends in coastal cities who are actually getting healthcare from the Affordable Care Act. So there was no illusion about what was happening with the Affordable Care Act.

Heffner: If you were to assign this book to the governors from Tennessee, Kentucky, Missouri, and Kansas. What would they say?

Metzl: I would love for governors to read this. Honestly, I would love for this to be part of a conversation about politics. I think part of the story here is about the despair that’s resulting from policies in many southern and midwestern states. I wrote this book because I live in Tennessee, I’m from Kansas City, and I saw a lot of people suffering from politics that were problematic, but they were also being manipulated. And so if a governor read this book, I would want them to feel bad about what’s happening on the ground to people. That would be number one. Number two, there’s just a lot of data that shows that the policies that many governors are implementing are shortening life spans. And so I would think if I was an elected official, I would find that alarming to think about how can we make policies that might bolster people’s life spans and not shorten their life spans.


As It Cultivates a Socially Responsible Image, Juul Sends Lobbyist to ALEC’s Annual Meeting

Seth Wenig/Associated Press

Vape manufacturer Juul and the company’s part-owner Altria sent lobbyists and government affairs employees to ALEC’s annual meeting. Their attendance coincides with a federal effort to undermine anti-tobacco regulation in the states.

Sludge produces investigative journalism on lobbying and money in politics. The American Prospect is re-publishing this article.

Juul, the Silicon Valley vape start-up that is popular among millennials, is participating in a secretive right-wing group that helps corporations and interest groups push their agendas in the states.

The company sent lobbyist Mark Bordas to the American Legislative Exchange Council’s (ALEC) annual meeting that was held last week in Austin, Texas, according to a list of attendees obtained and published by investigative news site Documented. At the meeting, lobbyists like Bordas drafted and voted on model bills that they will ask state legislators who are members of ALEC to introduce as legislation in upcoming legislative sessions.

Juul says its mission is to improve people’s lives by eliminating cigarettes and that making “a meaningful, positive impact on our communities” is one of its core values. Yet by participating in ALEC’s annual meeting, it is working with a group that has promoted the tobacco industry for decades and helped corporate interests influence state legislatures and win policies in their favor, often against public interest group opposition.

In recent years, more than a hundred corporations have cut ties with ALEC following outrage over the group’s support for “Stand Your Ground” gun laws, denial of climate science, and affiliation with figures like David Horowitz, an anti-Muslim activist who the Southern Poverty Law Center describes as “a driving force of the anti-Muslim, anti-immigrant and anti-black movements.”

Several of ALEC’s leaders and members have espoused racist and extremist views without rebuke from the organization. Washington State Chair Rep. Matt Shea was referred to the FBI in 2018 for circulating a manifesto calling for the killing of all males who do not obey Biblical law or agree to end all abortions and same-sex marriages. Member David Stringer, a former Arizona representative, last year said that “there aren’t enough white kids to go around,” adding that “immigration today represents an existential threat to the United States.”

Juul’s participation in ALEC’s annual meeting comes as the company is building relationships with communities of color and minority groups. According to a report from the Daily Beast, Juul has recently donated to the Congressional Black Caucus and the Congressional Hispanic Caucus, hired lobbyists and consultants with deep ties to lawmakers of color, lobbied civil rights leaders on health and criminal justice issues, and worked to promote its products in the LGBTQ community.

In addition to Bordas, Juul’s part owner, Altria, sent seven lobbyists and government affairs employees to the meeting. Their attendance coincides with a federal effort that critics say would help the company undermine anti-tobacco regulation in the states, including bans on flavored products that appeal to children and teens.

In March, Juul confirmed to the New York Times that it had donated to ALEC Action, ALEC’s 501(c)(4) advocacy partner.

Sludge asked Juul about its participation in the ALEC meeting, but did not hear back as of this writing.

Juul is supporting a bill in the U.S. Congress from Mitch McConnell (R-Ky.) that pairs an increase in the tobacco age from 18 to 21 and requires states to update their tobacco laws in order to continue receiving Substance Abuse Prevention and Treatment Block Grant funds.

Sens. Brian Schatz (D-Hawaii) and Dick Durbin (D-Ill.) see the Juul-backed McConnell bill as a way for tobacco lobbyists to influence state laws.

“Forcing state action creates a dangerous loophole that gives the tobacco industry an opening to intensify their efforts at the state level to undermine strong anti-tobacco proposals, such as regulations on flavored tobacco products,” Schatz and Durbin said in a statement. “Big Tobacco’s fingerprints should be nowhere near this effort.”

Several state legislative bodies have recently passed industry-backed tobacco legislation. In Arizona, for example, a bill written in part by a vape-industry lobbyist that would raise the tobacco age to 21 while pre-empting tougher local laws on smoking and vaping has advanced, while a “clean” bill to raise the tobacco age to 21 stalled. The lawmaker who sponsored the industry-backed bill, Republican Rep. John Allen, attended the ALEC meeting last week. In Arkansas, a bill pre-empting localities from passing laws regulating tobacco sales, passed in April, was co-sponsored by ALEC meeting attendee Republican Sen. Missy Irvin.

ALEC has a long history of working with the tobacco industry. Since the 1980s, ALEC has helped tobacco companies including Philip Morris and R.J. Reynolds draft legislation and lobby lawmakers and other public officials. ALEC has helped the tobacco industry oppose the Food and Drug Administration’s regulation of tobacco in the 1990s, promote “youth smoking prevention” programs designed to defuse public anger, and pass state legislation that preempts cities and towns from passing tougher laws.

More recently, ALEC has helped the tobacco industry oppose tobacco taxes and push back against research showing that vaping products pose health risks. In 2015, ALEC published an article criticizing a study by the Harvard T.H. Chan School of Public Health that found that chemicals in vape flavoring liquids pose respiratory health risks, saying that the authors did not study a wide enough variety of the flavors available on the market.

The Dialysis Duopoly Spends Big to Protect Profits in California

Kristoffer Tripplaar/Sipa USA/Associated Press

Outpatient clinics owned by DaVita and Fresenius serve the majority of U.S. dialysis patients, and the two companies have a lot to lose if states pass legislation limiting reimbursements from private insurance plans.

Two companies dominate the American outpatient kidney dialysis market: Denver-based DaVita and German-owned Fresenius. But their stranglehold on this sector is currently being challenged by an obscure bill in the California legislature, one they’ve poured a whopping $100 million into lobbying operations to oppose. The bill would crack down on a scam the dialysis duopoly has routinely engaged in, using a shadow charity called the American Kidney Fund to significantly juice their reimbursement rates from private insurance plans.

The situation could well presage how medical providers might react to a Medicare for All single-payer system, finding loopholes and work-arounds to profit outside the established market. In fact, dialysis is a great test case for this, because, thanks to a federal law nearly 50 years old, kidneys are the one American body part already governed under single-payer.

Dialysis, which involves the filtering of blood through an external machine to balance minerals and extract toxins when the kidneys are unable, is an extremely expensive medical procedure, in terms of time, energy, and especially cost. Often, it runs as high as $90,000 a year. In the days before the Affordable Care Act, that would have precluded most of the nearly 500,000 dialysis patients in the U.S. from obtaining insurance, cutting off their access to this lifesaving procedure.

That’s why, in 1972, the federal government passed a law extending Medicare coverage for all dialysis patients, regardless of age. That arrangement is great for dialysis patients, who are more likely to be from minority backgrounds and often unable to work due to the frequent, time-intensive nature of the treatment. It’s not, however, such a coup for outpatient dialysis clinics. Because Medicare has such a broad user base and can negotiate rates, Medicare-covered dialysis patients are much less lucrative customers for clinics than those with private insurance.

This is a particular problem for DaVita and Fresenius, which serve over 70 percent of all dialysis patients at their 4,000 outpatient clinics. Yet somehow, despite claiming to lose money on Medicare patients, the dialysis duopoly is quite lucrative, netting some $4 billion in combined annual profits. Here’s how.

DaVita’s own presentation at the 2018 J.P. Morgan Healthcare Conference tells the story. While 90 percent of treatments come from patients on government plans, accounting for 60 to 70 percent of revenue, a startling 115 percent of its profits come from patients with private insurance, which companies like DaVita and Fresenius can bill for four times as much. DaVita even claims to lose 10 to 15 percent on Medicare patients, though that assessment is hotly contested.

It should come as no surprise, then, that these providers are desperate to migrate their patients over to private insurance plans, which underwrite the entire operation of these hugely profitable, billion-dollar companies. And they’ve come to rely on one of the country’s largest philanthropic entities—the American Kidney Fund—to do it.

When patients consider their options for kidney dialysis, the American Kidney Fund offers financial assistance to those in need. Sometimes that can include covering the individual contributions still necessary under Medicare. But often, the AKF encourages patients not to stay on public health coverage, but to instead sign up for private insurance plans. The patients will receive the same treatments, often at the same clinics, and at no added cost to them: The AKF generously pays their insurance premiums.

While nothing changes financially for the patient, who may even be convinced that private coverage could be better than Medicare down the road, the financial picture for the dialysis companies changes drastically.

This arrangement, detailed in a 2017 report by the Southern Investigative Reporting Foundation, allows DaVita, Fresenius, and others to bill insurance providers for over $1,000 per treatment, while Medicare only pays $250 for the same procedure. And while there may be little sympathy for the bottom line of insurance companies, those elevated costs get passed down to other patients, in the form of higher premiums, co-pays, etc., as the insurers seek to recoup that money.

Where does the American Kidney Fund, with its annual budget of $250 million, get the money to generously subsidize dialysis treatments for patients? The largest individual contributors to the American Kidney Fund are DaVita and Fresenius, both of which make tax-deductible charitable contributions to the tune of some quarter billion dollars per year ($247 million in 2018). This funding accounts for roughly 80 percent of the AKF’s total donor base, according to an independent audit. It’s a symbiotic relationship: The AKF couldn’t exist without the dialysis companies, and the dialysis companies couldn’t be profitable without the assistance of the AKF.

There’s currently a bill in the California legislature, AB-290, that would curtail this arrangement. Under AB-290, companies like DaVita and Fresenius would be able to continue their charitable impulses by donating to the American Kidney Fund, but the amount of money they’d be able to bill private insurers would be capped at the Medicare reimbursement level. The bill also mandates that third-party providers like the AKF “shall agree not to steer, direct, or advise the patient into or away from a specific coverage program option or health care service plan contract,” while mandating that third-party providers commit to a patient’s coverage for the entire year, unconditionally.

Predictably, this proposal has the outpatient dialysis industry up in arms. With private insurance billing rates the sole source of their profits, AB-290 threatens to shut off the fire hose of cash that the industry bloats itself on. (Though according to Jim Wood, the California assemblyman who wrote the bill, that may not be entirely true. “I had the CEO for DaVita in my office, and he said they make money on Medicare, he said yes we do make money on Medicare,” Wood told me.)

The American Kidney Fund has responded by threatening to depart the state of California entirely, leaving its current recipients on both private insurance and Medicare behind. Meanwhile, the dialysis providers have ginned up an astroturf campaign called Dialysis is Life Support to do public outreach and put pressure on the state’s politicians.

This isn’t the first foray into California politics for dialysis providers, the state where an estimated 20 percent of the duopoly’s profits come from. In 2018, DaVita and Fresenius made Proposition 8, a ballot measure which would have capped dialysis revenue at 15 percent above the cost of care, the most expensive ballot measure in American history. That battle cost a mind-boggling $130 million all-in: $20 million from supporters, and over $111 million from the dialysis industry—$101 million of that ponied up by those same two companies, DaVita and Fresenius, in opposition. The ballot measure failed by nearly 20 percent.

Now, DaVita and Fresenius have trained their considerable financial resources on the state legislative process. Over the course of the past two years, they’ve been funneling money into a lobbying group called Patients & Caregivers to Protect Dialysis Patients, sponsored by the California Dialysis Council, expressly formed to “provide state-wide representation for end-state renal dialysis providers.” That group furnished the $100 million in funding for the ballot measure, and more for the anti–AB-290 coalition Dialysis is Life Support. In the first two quarters of 2019, the California Dialysis Council spent $110,000 in lobbying, according to the Secretary of State's office.

Dialysis is Life Support has waged a multi-tiered campaign, compiling a list of dozens of health, community, business, and veterans groups across the state that purport to oppose AB-290. Nestled at the bottom of that list, beneath the Yuba-Sutter-Colusa Medical Association and the Los Angeles Wellness Station, are DaVita and Fresenius. The American Kidney Fund also appears.

But according to a report put out by Hindenburg Research, an investor group (they do not currently have any position in the stocks of the dialysis companies, long or short), some of those organizations weren’t even aware they’d formally opposed the bill, while others professed no knowledge of the fact that the coalition had been funded by DaVita and others. When I called a handful of listed groups to inquire about their stance, I was met with mostly hang-ups, wrong numbers, and unreturned messages.

Meanwhile, Dialysis is Life Support has used its endowment to run TV ads on CNN and roll out a patient-directed pressure campaign. The American Kidney Fund has simultaneously claimed that a reporting requirement within AB-290 would be in breach of a federally mandated firewall, threatening their charter and ability to exist in all other states. “We will have to withdraw, we’ve been very public about that,” Holly Bode, vice president of government affairs for the American Kidney Fund, told me.

But according to Jim Wood, the California assemblyman who wrote the bill, that’s a scare tactic, rather than a legal imperative. “We got two independent legal opinions that said, ‘No, that’s really not the case,’” he told me. “But the AKF is standing on their own legal opinion saying they’ll pull out of California completely if this bill passes.”

When I asked the American Kidney Fund if they had a statewide withdrawal contingency plan for their patients, some of whom are now on private insurance plans they’d been encouraged to join with the expectation their premiums would be paid, Bode responded that they only “have small grants for that, they’re $100, and we don’t have enough to give everyone.”

Meanwhile, the website for Dialysis is Life Support no longer bears a formal affiliation to the California Dialysis Council—it now says the site is paid for by itself. According to Kathy Fairbanks, a spokesperson for the group, the California Dialysis Council was just sponsoring the first stage of their campaign, an education-based outreach initiative. When the group began its media blitz and television advertising on August 12, they changed the website to its current form (Hindenburg published its report on August 13). Now, said Fairbanks, “the funding is coming from dialysis providers. But that’s not all the support we’re getting, it’s also from the coalition groups. They may not be contributing resources in terms of financial resources, but they’re helping us in terms of lobbying legislators.”

The fate of AB-290 remains uncertain. Already, one California legislative attempt to rein in dialysis pricing, SB 1156, died via veto by then-Governor Jerry Brown despite passing both houses, on the grounds that it was overly vague. But the California legislature will conclude its session on September 13, which means a decision should come soon.

With Medicare for All being discussed in national circles, the situation with the dialysis providers is instructive. Faced with a single-payer system with lower reimbursement rates for their service, the dialysis industry bankrolled a charity to shift people into private insurance and jack up the cost. We don’t know what loopholes might enter the picture under Medicare for All, but the dialysis duopoly scam bears watching as a potential tactic. It speaks to how resourceful medical providers might be in their vigorous opposition to single-payer, and why politicians need to be mindful of their power.

“I feel like it’s an unfair business practice all of us are paying for,” said Wood, who’s hopeful the bill will pass. “For me the bigger part of this is that, we’re trying to make sure we get access to care for as many people as possible, you can’t do that if you can’t contain costs.”

CORRECTION: An earlier version of this article may have led readers to the conclusion that DaVita and Fresenius spent $100 million on lobbying against AB-290. In actuality, the same organization that funded $100 million opposing the Prop 8 ballot measure in 2018 also funded the lobbying effort with leftover or additional funds. We are sorry for any confusion this may have given readers.