David Cay Johnston, Pulitzer Prize-winning journalist who writes about tax issues. He is a former New York Times reporter and author of several books, including, most recently, The Fine Print: How Big Companies Use "Plain English" to Rob You Blind.
In part two of our interview with David Cay Johnston, we discuss his new book, The Fine Print: How Big Companies Use 'Plain English' to Rob You Blind. Johnston writes, "No other modern country gives corporations the unfettered power found in America to gouge customers, shortchange workers, and erect barriers to fair play. A big reason is that so little of the news ... addresses the private, government-approved mechanisms by which price gouging is employed to redistribute income upward."
AMY GOODMAN: We continue our conversation with the Pulitzer Prize-winning journalist David Cay Johnston. His book is called The Fine Print: How Big Companies Use "Plain English" to Rob You Blind.
David Cay Johnston, thank you so much for staying with us. So, talk about the reasons you started to investigate the fine print and what most surprised you as you did your research over these past four years, David.
DAVID CAY JOHNSTON: Well, Amy, this is the third book in a series of all original reporting that you wouldn’t know but for my work. I wrote a book seven years ago called—I’m sorry, eight years ago, called Perfectly Legal, about the tax system and how it really is a subsidy system for the super rich in America and how they’ve rigged the tax game on their behalf. Then I did a book called Free Lunch, and it’s about all the taxes you pay that do not go to the government but instead are diverted to various companies, and I show companies and industries that get all of their profits from the taxpayers through these hidden subsidies.
The Fine Print carries this a step further now to how big businesses have been trying to escape the rigors of competitive markets. They have gotten government to pass rules that raise prices, take away your rights as a consumer, literally put your life in danger, and allow them to, in various ways, insulate themselves from market forces, damaging the economy, making you worse off and explaining why, while wages have been flat for years, corporate profits have gone through the roof.
AMY GOODMAN: You start off with taxes—you know, they’re not for everyone. But explain how that happened, how that evolved, David.
DAVID CAY JOHNSTON: Well, let me give you one example. Twenty years ago, we were told we were going to get something magical called "the information superhighway." And we paid over a half-trillion dollars in rate increases to telephone companies and cable companies to get this high-speed internet with fiber-optic service, where all the books in the Library of Congress and all the images in them, 22 million volumes, in the blink of an eye could literally be moved around the world. Well, we paid for it, but we don’t have it. Verizon is only going to build it out for 16 million people in this country, of 300 million people. AT&T doesn’t actually have that kind of system. Their U-verse, at the end, still uses copper wire, and there are homes that have copper wire in them from the 1800s that people still speak on the telephone with. What they did was take that money, I believe, and use it to build a cellphone system. But they got these rate increases, and we now have gone from inventing the internet to 29th in the world. We’re way behind Moldavia, and it’s damaging our economy. But the more they retard the internet, the more profit Verizon and AT&T make. So their interests are contrary to the interests of the American people.
AMY GOODMAN: What is Mr. Kellogg’s favorite loophole?
DAVID CAY JOHNSTON: Well, that’s from an earlier book of mine. His was one where he put $8,000 a year of business into an offshore company and made a half-a-billion dollars of profit, tax-free. And after I exposed that, he stopped doing it. And I will say, he had the decency to say I had done a good job of exposing what he was doing.
AMY GOODMAN: What most surprised you as you researched your book?
DAVID CAY JOHNSTON: Oh, I was flabbergasted that all of these laws and rules have been passed, especially in state capitols, that there has been literally no coverage of at all. I mean, we have so shrunken the news media in this country and so intimidated news organizations, because, trust me, as somebody who was in the forefront of this, if you’re writing tough stuff, there’s a whole list of people who want to get rid of you and shut you down.
So, for example, Americans have had the right, absolute right, since 1913 to a landline telephone at any address. As long as you pay the bill, you’re entitled a telephone. Five states have now repealed that law, and not a single article appeared in any news organization in those five states. I’m the only journalist who’s written about that, and there are a lot of other stuff I write about that nobody else has written about. But basically, lobbyists, corporate lobbyists, have been getting—quietly getting laws and rules rewritten to favor business, destroy competition and act against consumers by taking away your rights.
AMY GOODMAN: Can you talk about America’s coming infrastructure disaster, a piece you just wrote about?
DAVID CAY JOHNSTON: Yes. That was an excerpt that appeared in Newsweek. Our big utility companies are being hollowed out, even as they’re raising prices tremendously. If you live in—half the states restructured their electric industry. Well, the utilities were allowed to pocket tens of billions of dollars of tax money that had already been paid, because nobody paid attention to the accounting on this. And then, Pacific Gas and Electric in Northern California got rate increases so that they could replace their telephone—their electric power poles on a 50-year cycle. They’re actually replacing them on a 750-year cycle. Well, that means eventually we’re going to have a crisis. The government is now giving safety waivers — they call them "special permits" — to high-pressure natural gas lines, saying, "You don’t have to inspect these lines." Some of these lines run underneath and past schools. And school principals get a brochure that, if they don’t read through about how wonderful the natural gas industry is, on the fifth page it says, "You received this notice because your school is in a high-consequence area." It then tells you nothing about what to do. And, by the way, "high-consequence area" is a euphemism for "zone of certain death." We need to be investing in rebuilding these utilities, not stripping them of money so that the current owners can make bigger profits than a market economy would allow.
AMY GOODMAN: David Cay Johnston, talk about the gas pipeline that blew up in the San Francisco suburb of San Bruno.
DAVID CAY JOHNSTON: Well, all across America, pipelines that were laid when Truman was president are now in areas that were open fields back then, and now they’re developed with housing. And this pipeline blew up an entire city block. It sent flames hundreds of feet into the air. It turns out it was put in the ground with a faulty weld. The mayor of San Bruno tells how after this happened, the city discovered there was a second pipeline running through the city, only because it was going to put a building up on a little tot lot for small children, and the gas company notified them that this 30-inch pipe underneath it was running there. They had no idea.
There’s a lawyer I write about who tried to get the—what are the safety protocols in the event one of these pipelines blows up somewhere? And there’s nothing in the file. The gas pipeline companies have virtually no plans, no "here’s the people to call, here are the resources available to fight a fire." We’ve had several of these explosions where it’s taken an hour to shut off the flow of gas or oil. We almost lost Bellingham, Washington. But for two little boys playing with a butane cigarette lighter who set off an explosion, Bellingham, Washington, would—downtown would be gone. And we need to recognize that we are not running these businesses in a way that respects public safety and reasonable profits. They are being stripped of money, and they are not being maintained, so the current owners can make outsized profits.
AMY GOODMAN: Talk overall, David Cay Johnston, about the issue of deregulation. The whole issue of regulation is one that the Republican presidential candidate raises continually about, you know, unfettered business, free enterprise, capitalism being allowed to work in this country.
DAVID CAY JOHNSTON: There is no such thing as deregulation. This is a really important issue about how the news media have not covered this well. There is only new regulation. And what we’ve done is taken rules, some of which date back thousands of years—and I teach the law of the ancient world at Syracuse University’s law school and graduate business school. We’re stripping these rules away, and we are putting in rules that say you don’t have to have any regard for your neighbor or your employees or your customers; you can do whatever will maximize your profit; it doesn’t matter that you’re putting people’s lives in danger, that you’re not supplying the services you promise, that you’re driving up prices artificially. And nobody has written about these laws. I mean, I had to spend four years reading through the most unbelievably boring material, but it was astonishing how these laws were passed with, in many cases, little or no public hearing, no journalists in the room. Sometimes even the trade press of the various industries I write about didn’t even write about these things.
AMY GOODMAN: When you’re talking about the fine print, just go through example after example, as you did your research over these years, of how people are robbed blind and how you can fight back. But give the specifics, David.
DAVID CAY JOHNSTON: OK. Well, and indeed, one of the things I do in this book is show various ways that you can fight back about this. The pipeline industry, let me go back to them. During the Bush administration, they got an administrative rule passed. They created something that didn’t exist in the law in terms of hearings, so they could have one-sided contact with the commissioners—the industry could—that allows the pipeline industry to collect from their customers—and they’re all captive customers—the corporate income tax. But pipelines don’t pay the corporate income tax, because they’re partnerships. And there’s a court case that shows this increases their profits as much as 75 cents on the dollar. So if you’re going to earn a dollar, you actually get a dollar and 75 cents in your pocket at the end of the day if you own one of these.
Well, the—I wrote a piece in a little publication called State Tax Notes. They were going to try and do this on the state level in California with something called the SFPP pipeline, which is a descendant of the old octopus that strangled California, the railroad operations, in the late 1800s. And three citizens went to the California Public Utilities Commission and said, "We’d like to speak about this," and it killed it right there. The government no longer imposed that rule on the state level in California. This particular tax costs the average family a couple of pennies a day. Nobody’s going to fight with somebody over being robbed of a couple of pennies a day, but if you can get a penny a day from every single person in America, at the end of the year you’ve got $1.1 billion. These companies are collecting several billion dollars a year this way, and they shouldn’t. They’re collecting a tax they don’t pay to the government.
Another example of this is arbitration. If you buy a car, buy a television set, open a brokerage account or a bank account, you sign away your right to sue. Well, in most cases it works fine, but when it doesn’t, here’s what happens. A woman in Washington, D.C., a bus driver, was sold a car for three times what it was worth by one of those outfits that runs TV ads all the time about "We’ll help you get a car." And Wells Fargo financed it. She was going to pay almost $30,000 for this $6,000 vehicle, because she doesn’t understand money very well. And when she was put on disability and said, "I want you to take the car back," they wouldn’t take it back. And then they told her — the collection agent from Wells Fargo — "Wells Fargo will take your house." And this single mother was terrified about it. She found some law students, who took up her case. And because of a mistake that actually was made by someone else, they were able to get a judge to rule this was unconscionable, and the woman eventually got out of this deal. But people get abused that way all the time.
Another example is bounced checks. Thirty years ago, Crocker Bank, now a part of Wells Fargo, had to reveal that they were charging a 2,000 percent markup on bounced checks. It costs 30 cents; they were charging $6. You can now pay $35, $39, $47 for a bounced check, not a check that you bounced because there wasn’t money in your account, but where you deposited a check, even if it’s from your employer. And after the bank said it was cleared, they can unclear it later and charge you that much money.
AMY GOODMAN: Talk about healthcare.
DAVID CAY JOHNSTON: Well, you know, healthcare in America is not a—we don’t have a system of healthcare, Amy. What we have is a system—a non-system system of sick care. We spend so much more money than the French, who have the best healthcare system in the world, according to the World Health Organization, that if we simply reduced our costs to those of France, we could eliminate the corporate income—or, the individual income tax. And think about that. Nobody would have to pay individual income tax, and we could have universal healthcare, and all else would be equal in our economy. And yet, at some point during the year, one in four Americans will not have health insurance, and about one in six will go the whole year without health insurance. We have created a—it’s part of how we are creating a privatized set of rules, sponsored by government, to redistribute upward. And that’s the whole scheme here. It is to redistribute income upward in a way that a market economy would never do that, but a corporate socialist economy, where corporations are able to privatize gains and make you pick up their losses, that’s the kind of economy that we’re moving into.
AMY GOODMAN: David, Mitt Romney continually talks about "redistribution" as a bad word—
DAVID CAY JOHNSTON: Right.
AMY GOODMAN: —a code kind of word in talking about President Obama.
DAVID CAY JOHNSTON: And, in fact, we have redistribution in this country, but it is very much upward. You know, the phrase "trickle-down" was invented to mock Ronald Reagan’s tax policies. But the reality is, it’s not trickle-down, it’s Amazon-up, Niagara-up. And all you have to do is look at the data. From 1961 through 2007, the bottom 90 percent of Americans saw their income rise little tiny amount. But if you’re in the top top group of America, the plutocrat class, for every dollar that each person in the bottom 90 percent got after taxes, you got $35.50—$36.50. Your taxes, if you’re in the plutocrat class, fell from a mid-40 percent range down to where Romney is, 15 percent or so. In 2009, we had six people, according to IRS data, who made over $200 million, who paid no income taxes. And we have people who make billion-dollar incomes and can pay no income taxes because of the rules we have that allow people who are hedge fund managers and private equity managers, like Bain & Company, which was the sole property of Mitt Romney, to defer all of their income. Now, how do they live? Just the same way that the guys who create the internet companies, who take a small salary, and the company pays no dividend, are able to afford their private jets and their mansions: they borrow against their untaxed assets. And they get to live a great life, and—
AMY GOODMAN: David—
DAVID CAY JOHNSTON: —you and I pick up the bill.
AMY GOODMAN: I know that you have to leave, and I just want to get one-sentence answers to each of these questions.
DAVID CAY JOHNSTON: OK.
AMY GOODMAN: How did the Yankees and Mets owners grab like, what—collect $1.3 billion in public funds?
DAVID CAY JOHNSTON: They very quietly got the government to put up the money to build their new stadiums, and the news organizations somehow missed covering that.
AMY GOODMAN: Paris Hilton, her grandfather?
DAVID CAY JOHNSTON: Paris Hilton’s grandfather arranged to essentially steal two-thirds of a billion dollars from the starving children of the earth by subverting his father Conrad Hilton’s will. And he got to keep the money until he died, and then it had to go to charity. And so, imagine if you could have $641 million to use for, say, 30 years, and then you had to give it back. That alone would make you rich.
AMY GOODMAN: Homeowner’s title insurance?
DAVID CAY JOHNSTON: About 90 percent of the money people pay for title insurance goes for what are in fact commercial bribes. The actual payments of damages by title insurance companies are so small that if you gave them 1 percent of the value of your house and let them collect the interest for five years, they could give you the money back, and it would cover all their costs.
AMY GOODMAN: Well, you passed the test, David Cay Johnston, and it’s an amazing book. And as you talk about, finally, the fight back, give us one word of hope.
DAVID CAY JOHNSTON: We got rid of slavery. Women got the right to vote. We got child labor laws. We can fix this, but reform begins with you.
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