Welcome David Cay Johnston (DavidCayJohnston.com) (DemocracyNow! interview) and Host Dean Baker (Center for Economic and Policy Research – CEPR.net)

The Fine Print: How Big Companies Use “Plain English” and Other Tricks to Rob You Blind

David Cay Johnston latest book, The Fine Print: How Big Companies Use ‘Plain English’ to Rob You Blind is another outstanding compilation of corporate abuses. While the book covers a lot of ground, the parts I find most fascinating are the discussions of sectors of the economy in which competition has virtually been eliminated due to growing concentration. Some of these sectors I have familiarity with in my daily life, such as phone and Internet companies (okay, those are the same companies). Others, like freight railroads, I have less occasion to deal with.

The discussion of railroads is especially interesting for two reasons. First, lack of competition in the railroad industry was one of the main causes of the original push for anti-monopoly regulations. In the 19th century the populist movement was propelled in large part by the price gouging by the railroad companies. Of course this mattered much more when close to half the population was living off of agriculture compared to today; but as Johnston points out, the higher fees charged for hauling grain, coal and other products will all eventually come out of consumers’ pocketbooks.

The other reason why the story of railroad concentration and anti-competitive practices is so interesting is that Warren Buffett, everyone’s favorite capitalist, plays a starring role as a villain. It turns out that Buffett’s foray into the railroad business was not about rebuilding a central cog in the nation’s infrastructure, but rather seeing a great profitmaking opportunity in an industry where many routes had near monopoly pricing power with little government regulation.

Buffett appears at several points in Johnston’s book, perhaps most notably as a reference point in the bailout of Goldman Sachs in 2008. Both Buffett and the Treasury Department invested in Goldman at the peak of the financial crisis, but Buffett’s return was more than twice as high as was the Treasury got on its investment. Of course, the Treasury bailout also helped to secure Buffett’s own stake.

Certainly Buffett does not stand out as an especially evil businessperson. My guess is that Johnston is simply trying to set the record straight on an extremely successful investor who has been incredibly effective in manipulating his media image. Buffett invests to make money. Sometimes this has all the positive benefits that we identify with a thriving business – jobs, better products, rising living standards –but sometimes Buffett makes his money from tax schemes and anti-competitive practices. That’s capitalism in America today: get used to it.

Having been a victim (like everyone else) of the billing practices of credit card companies, banks, etc., I found Johnston’s discussion here quite interesting. People will find the ways in which these companies have managed to maximize monthly payments fascinating. Everyone should read it.

The basic point is straightforward. These companies have you as a largely captive customer. This is especially true with a telephone or Internet company where they may be little or no effective competition. But even in the case of banking, where there may be many options, few people want to go through all the hassles associated with changing accounts, especially in a world where you may have a variety of direct deposit/withdrawal arrangements, all of which would have to be changed with a new account. And there is no guarantee that a new bank would be any better. As a result, companies can engage in a wide variety of practices that could be regarded as abusive.

Johnston has his own remedies for the problems he identifies at the end of his book, but I want to conclude with one of my own. As it currently stands there is an enormous asymmetry between consumers and corporations when it comes to paying bills properly. As Johnston points out, consumers can face large fees for everything from paying a bill a day late or overdrawing their checking account by a dollar. The company basically sets the rules.

But what happens when the mistake is on the other side? What happens when the credit card company charges you a late fee that you don’t owe or the phone company charges you for a service they didn’t provide? After you spend an hour fighting with their computer answering system and then going through sales clerks and supervisors, you will likely get the charge removed. You don’t get to impose a penalty.

I don’t know if any companies deliberately issue false charges, but this is clearly a no lose proposition for them. If the customer doesn’t catch the charge, it’s free money. If the customer does notice the mistake and takes the time to pursue it, then the company is no worse off as a result of its mistake.

Suppose we made the risks here a bit more balanced? For example, we could require that companies have to pay their customers a 20 percent surcharge in addition to removing any incorrect charges. This would give companies a real incentive to get things right. Given that they have expensive and sophisticated computer systems, this should not be very hard for them to do.

Above all, as an economist I can’t wait to hear the argument against a measure like this. Will the Chamber of Commerce come out with a study showing that a regulation like this would cost their members trillions of dollars? I can hardly wait.

Anyhow, that’s a digression. Johnston has given us another great book full of fascinating accounts of how corporations profit not by delivering a better product or being a more efficient producer but by gaming the system. This is not a pretty picture.

 

[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. - bev]

107 Responses to “FDL Book Salon Welcomes David Cay Johnston: The Fine Print: How Big Companies Use “Plain English” and Other Tricks to Rob You Blind”

BevW October 6th, 2012 at 1:48 pm

David, Dean, Welcome back to the Lake.

Dean, Thank you for Hosting today’s Book Salon.

For our new readers/commenters:

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David Cay Johnston October 6th, 2012 at 2:01 pm

Hi everyone

dakine01 October 6th, 2012 at 2:03 pm

Good afternoon David and Dean and welcome back to FDL this afternoon.

David I have not read your book so forgive me if you address this in there but IIRC didn’t the large business groups/lobbyists fight the “plain English” requirements or was that just all a smoke screen?

Elliott October 6th, 2012 at 2:04 pm

Welcome to the Lake

THANK YOU for this book, one of the most maddening things of all is being powerless against lying cheating thieving businesses.

Do you report on companies that do do it right?

David Cay Johnston October 6th, 2012 at 2:04 pm

That is not an issue I address, but, you are correct that business has never supported the idea tax forms should be understandable to mere mortals

David Cay Johnston October 6th, 2012 at 2:06 pm
In response to dakine01 @ 3

Hope that answered your question

David Cay Johnston October 6th, 2012 at 2:07 pm
In response to Elliott @ 4

Most of what I write about in terms of doing it right has to do with municipals and nonprofits that compete, charge less, provide better service.

dakine01 October 6th, 2012 at 2:08 pm

As a technical issue, there is a “Reply” button in the lower right hand of each comment. Pressing “Reply” will pre-fill the commenter name and comment number being replied to and makes it easier for folks to follow the conversation.

Note: Some browsers do not like to let the “Reply” function correctly if it is pressed after a hard page refresh and the page has not completed loading.

Dean Baker October 6th, 2012 at 2:08 pm
In response to Elliott @ 4

I don’t think there is much material there :)

dakine01 October 6th, 2012 at 2:08 pm

Yes, thank you

Dean Baker October 6th, 2012 at 2:09 pm

okay David,

if no one else has a question just now, let me ask you why you said bad things about Warren Buffett?

David Cay Johnston October 6th, 2012 at 2:10 pm
In response to Elliott @ 4

I also show how the laws and regulations are being rewritten to encourage vicious, rather than virtuous, conduct, which is to say how to get the rules right

David Cay Johnston October 6th, 2012 at 2:12 pm
In response to Dean Baker @ 11

Buffett is the richest businessman in Americam an investor whose hand is in many industries and he is often portrayed, as in the CNBC profiles, as this kindly and jovial grandfather. He is in fact as sharp a dealmaker as the world has ever seen, which is why his cimmense skill has produced such rich returns.
But those deals often rely on bad economics in terms of society.

Buffett is a huge advocate of monopolies…..he recommends them. And I show how he leverages his monopoly railroad against his monopoly electric utility — and also how he got a law repealed that required his utility, at least in Oregon, to pay over to government the income taxes embedded in its rates or give them back to customers. That law was adopted in response to my work at The New York Times

David Cay Johnston October 6th, 2012 at 2:13 pm
In response to Dean Baker @ 11

So Buffett provides a powerful example of how the very very rich game the system, as he did in getting what is tantamount to a $5 billion gift from taxpayers in one investment (or Uncle Sam wasting $5 billion), as oyu noted in your review.

Elliott October 6th, 2012 at 2:16 pm
In response to Dean Baker @ 9

oh dear. :(

It’s sad that this is now the “American Way”

David Cay Johnston October 6th, 2012 at 2:17 pm

Broadly, what THE FINE PRINT does is report on all sorts of issues that have not been in the news, or only in trade papers, that I think should have all been Page One or at least section cover stories.

I tell about companies getting rules of business, some of which date back thousands of years, rewritten or repealed so they can escape the rigors of the competitive market, quash competitors, provide low grade service and quite literally put your life at risk.

And then I show how we can solve these problems and give examples, including one from my own neighborhood, of successes in fixing problems.

But the first step is knowledge and on that level the news media have performed disgracefully.

You will not find what is in THE FINE PRINT by doing a Google search.

tuezday October 6th, 2012 at 2:17 pm

David, great book!! It should be required reading.

How is it that companies are getting away with keeping their employees state income taxes in this economy? I’d think the states in which this occurs would be throwing a fit.

Dean Baker October 6th, 2012 at 2:18 pm

I was really struck by the railroad story. Buffett got great press at the time and I actually believed much of it. I really thought that he had grand plans to rebuild the railroads. The account in the book, that he just recognized an opportunity for monopoly profits makes much more sense. remarkably (actually, maybe not), I don’t hear anyone in politics even talking about this. Is it more of an issue in the western states?

David Cay Johnston October 6th, 2012 at 2:18 pm
In response to Elliott @ 15

It is, but if you watch TV or read the newspapers and news magazines you would not have any idea of what I report on in THE FINE PRINT.

Fofr example, did you know that since 1913 you have had a legal right to a telephone at your home and business — and that five states have repealed this law and that the AT&T/Verizon duopoly is trying everywhere to get it repealed?

Five states have repealed this law and there was exactly zero news coverage.

BevW October 6th, 2012 at 2:19 pm

Thinking about something someone said to me Thursday night – noticing the size of a famous brand of beer is now 14oz instead of 16oz – and costing the same/more.

Is this one of the ways companies are profiting on the public not noticing the changes-or not worth the effort to fight?

David Cay Johnston October 6th, 2012 at 2:20 pm
In response to tuezday @ 17

Companies get to pocket their workers state income taxes — 2,700 companies in 19 states — because no one knows about it.

I am almost alone in writing about it (a few local newspapers have written about bits and pieces of this, largely without context).

The workers do NOT know because they are treated as having paid their taxes.

So if no one knows, why would anyone raise questions? Its the perfect backdoor deal between corporatist politicians and corporations to rob you blind

And if we don’t get on this I predict it will spread to at least 20 more states.

dakine01 October 6th, 2012 at 2:22 pm

David, Dean mentions in the intro about banks, specifically the hassles we have trying to change from Bank A to Bank B with little guarantee of any better treatment. Since most all of the commercial banks seem to operate from the same limited set of “rules” and “guidelines” could a functioning DoJ go after them for collusion since it does seem they (perhaps) unofficially seemingly make the same changes to fees and such all at about the same time. I’m reminded how Major League Baseball got caught with collusion back in the ’80s and paid some coin. Sure does seem a bit more than a coincidence when all the businesses in the same field all “independently” decide to start charging for something or increase their fees at the same time.

David Cay Johnston October 6th, 2012 at 2:23 pm
In response to Dean Baker @ 18

It was, as you note din your review, abuses by railroads that got Congress to enact the first price regulations in America. The railroads were not competitive.
Today the ownership of Class I railroads is more heavily concentrated than it was in 1887 when the Interstate Commerce Commission was created.

And this is really bizarre — we had competitive railroads until we enacted the Staggers Act to promote competition. In fact it was a law designed to end competition, which in every sphere of business is a major goal of big businesses, as Adam Smith taught in 1776 in his book The Wealth of Nations.

David Cay Johnston October 6th, 2012 at 2:24 pm
In response to BevW @ 20

Higher prices for smaller contents – from cerel to candy bars to beer — is a long-standing practice. Consumers Union points out examples on the inside back cover of Consumer Reports most months.

Dean Baker October 6th, 2012 at 2:24 pm

This actually reminds me of a point that i had planned to raise in my opening comment. Laws or regulations had often been structured to require cross-subsidization. We deliberately charged people more on long-distance service to subsidize local services. The same was true with bank accounts where we limited interest payments to depositors with the idea of letting the banks get a larger margin to cover the cost of ordinary checking accounts.

Train, plane and bus routes also subsidized less travel routes by charging more than necessary on highly traveled routes. Part of the story of the last 4 decades is the breakdown of this cross-subsidization. This has led to big price increases for more moderate income users, but substantial savings for many higher income people.

Using myself as an example, I am frequent long-distance user (widely separated family). I pay less in real terms for my service today than I did 20 years ago even though it also included wireless and Internet.

The point here is that there have been some winners in this story and not just the stockholders of the companies and their CEOs. They do tend to be more affluent than the losers, but I think that explains why some of the issues raised in the book don’t arouse more political response.

David Cay Johnston October 6th, 2012 at 2:28 pm

On railroads — most of us give them little thought. But here are a few reasons you should care:

1. Railroads are far more deadly than trucks relative to miles traveled. In Europe almost no one dies from their car getting hit by a train at a RR crossing, unlike America.

2. When two supposedly competing railroads run parallel from the mouth of a coal mine to an electric power plant you would expect competitive pricing. But if just one mile, the last mile, is served by only one RR then it gets to charge a monopoly price for the whole distance, a story I tell in the book.

I show that in one city the monopoly price is the equivalent of raising local property taxes by 10 percent. That is, if the price for coal hauling was competitive then the town could cut property taxes 10 percent.

3. The rise of unit trains is encouraging manufacturers to leave America and move to China to get better rail service. This is yet another reason our manufacturing capability is being hollowed out to our long-run detriment.

Dean Baker October 6th, 2012 at 2:31 pm

David,

have you looked at all into the rise in the spread in recent months between the interest rates on MBS and the 30-year mortgage rate? It’s on the order of 50 basis points. I haven’t heard any good explanations so far.

David Cay Johnston October 6th, 2012 at 2:34 pm
In response to dakine01 @ 22

The TBTF banks have actually increased their share of deposits since the melt down. That is what being shielded from the rigors of market competition does, it lets bad players grow at the expense of efficient and honest ones who do not get such favors from government and, thus, taxpayers.

Community banks are doing just fine, though we have gone from about 14k to 7k in the last three decades since Reaganism began and the New Deal was being wiped away. We had virtually no big bank failures from the end of WW2 until 1980, shortly after the first assaults on the principles of Glass-Steagall and sound banking began.

I also show in the book tremendous price gouging. In retail the markup from wholesale to retail is usually 100%, known as keystone. A store buys shoes for $50, retails them at $100.

I show from official records that in 1978 the markup on bounced checks was 2,000 percent. I show how it is now between 360,000% and 470,000%. And I am referring here not to when you overdraw your account, but when you deposit a check from someone else that bounces.

And how do you get a 470,000% markup?

When checks were on paper it cost 30-cents in 1978 to bounce a check, court documents show. In the digital era it costs less than a penny. But if the bank gets $47 that is a markup of 470,000% on a penny.

We used to have a doctrine in law — I teach the history and principles of business law from Hammurabi’s Code to now — called the doctrine of UNconscionability.

Our Supreme Court is hostile to the idea that any price could be unconscionable, though the Framers and Founders clearly believed in that idea.

MayDaze October 6th, 2012 at 2:35 pm

David, I enjoyed Free Lunch and eagerly anticipate reading The Fine Print.

If you had to choose one, which business practice did you find most egregious?

tuezday October 6th, 2012 at 2:35 pm

I thought the story of your town’s trash collecting issues to be a brilliant, and easily understood, example of what is good about socialism and actually paying taxes. Any idiot can see from your example that we are, in fact, better off collectively than individually.

David Cay Johnston October 6th, 2012 at 2:37 pm
In response to Dean Baker @ 25

Exactly right, Dean, though I would put it a bit differently.

We used to have rules that encouraged universal service and we have replaced them with rules that instead shift the costs and benefits in ways that favor higher income people.

Interestingly, our economic competitors still believe in and apply universal service and I show in various areas that the result is we get large areas with no service, like our Internet that has fallen from first place because we invented it to 29th, with the highest price sin the world.

Today I did a radio show in Pakistan and the host talked about how people can call the US from Pakistan faster and cheaper than Americans can call there…..

Last summer when I was in SOuth Korea I spoke with a young man who laughed at the TimeWarner cable TV ads he had seen in America that promoted a “blazing fast” Internet using the cartoon characters Wile E. Coyote and RoadRunner.

Dean Baker October 6th, 2012 at 2:38 pm

It is striking that the industry folks always justify their size by claiming there are economies of scale. But if you can seriously claim that there are economies of scale when you have reached the size of a JP Morgan or in telephones, AT&T, then you are talking about an industry with a natural monopoly. Of course the textbook solution for a natural monopoly is to allow a single firm to operate, but then to closely regulate its prices to ensure that it doesn’t take advantage of the lack of competition.

For some reason, we seem to have thrown away the textbook here, allowing firms to gain monopolies in many markets, but doing nothing to prevent the abuses that economic theory would predict and that you document in the book.

tuezday October 6th, 2012 at 2:39 pm

And did I read that line correctly that we are 190th in the world when it comes to exports? We truly export nothing? Except war.

Elliott October 6th, 2012 at 2:39 pm

No, I didn’t know that. What a racket. I was aware of how South Dakota essentially ended protections from usury laws. 23%+ interest rates are downright immoral.

hpschd October 6th, 2012 at 2:40 pm

I have not been able to get my hands on your book (weeks on reserve from the library),
but I have read interviews you have done – Truthout – Mind-bending!

You mentioned that searching on Google does not produce these results – you did years of research. This type of journalistic investigation is becoming rare.

What do say to an aspirer who wants to do this? How do you dig this stuff up (and pay the bills too)?

David Cay Johnston October 6th, 2012 at 2:41 pm
In response to Dean Baker @ 27

I did not look into this in the book, but the interest rate benchmarks are easily gamed, with LIBOR — the London InterBank Overnight Rate — we know know that bankers posted false interest charges to manipulate the rate. Many loan rates, including some mortgages and auto loan rates, are tied directly or implicitly to LIBOR.

Prosecutions? Yeah, right.

We had 3,000 felony convictions in the S&L scandals, as I report in the book, and more than a thousand of those were of banking insiders. The Obama Administration has let the crooks go and the statute of limitations is fast running out.

The 2008 meltdown was 175 times the size of the S&L crisis.

NY AG Eric Schneiderman is trying to prosecute some of these folks, but the coverage in the WSJ has been hostile and the editorial page derisive of his efforts to enforce the law.

tuezday October 6th, 2012 at 2:42 pm
In response to Elliott @ 34

You truly need to read the book. The corruption David discusses is stunning. If I weren’t such a cynic, my blood would have been boiling and I’d have been spittin’ nails before I was halfway through.

David Cay Johnston October 6th, 2012 at 2:43 pm
In response to MayDaze @ 29

This is like going along on a dress shopping trip with my wife and she tries on 27 dresses and asks which is the favorite…I wish we could buy most of them.

I start with the price gouging on phone, cable and Internet because America now has one of the worst Internets in the modern world, but it also has by far the highest prices….

David Cay Johnston October 6th, 2012 at 2:44 pm
In response to Elliott @ 34

Usury laws, as a practical matter, are history. Loan sharks I have known as a reporter who went to jail for charging 2 points a week, or 104% NOMINAL interest, must be shocked that TV ads now show 99.5% interest rates and some payday lenders charge hundreds of percent.

David Cay Johnston October 6th, 2012 at 2:46 pm
In response to hpschd @ 35

Read, think critically, ask what is going on underneath.

My life changed when I was 24, had won a fellowship to the Chicago School to study, and a professor dressed me down for asking him about the mechanics of an issue. Said Paul Peterson, visiting from Harvard at the time:

If you study the principles the mechanics will become clear to you.

Dean Baker October 6th, 2012 at 2:48 pm

David,

In fairness there are a number of states that have effectively outlawed payday lending by setting caps on interest rates usually in the neighborhood of 35 percent. Some lenders find ways around them and many states give payday lenders free rein, but there have been some successful efforts to limit the damage they cause.

David Cay Johnston October 6th, 2012 at 2:48 pm
In response to tuezday @ 33

We are a huge net loser in the world market because we now import far more than reimport. We were told that a bilateral trade deal with China would run a $1 b/yr deficit. It is now more than $1b/DAY

Our trade with countries with which we do not have so-called Free Trade agreements is growing faster than those with such deals. The fine print of these deals reveals they are one-sided against us and favor foreign manufacturers over Americans. But to a global capitalist who can play both sides of the game it is fabulous — you push down wages in the US, get low wages and no rules overseas and you earn larger profits on both sides.

BevW October 6th, 2012 at 2:49 pm

I start with the price gouging on phone, cable and Internet because America now has one of the worst Internets in the modern world, but it also has by far the highest prices….

Sounds like our health care system.

David Cay Johnston October 6th, 2012 at 2:50 pm
In response to Dean Baker @ 41

Quite right, Dean. Indeed banking is one area where we have made some remarkable reforms, but the banking industry is determined to undo those reforms. Stopping Elizabeth Warren, whom I first interviewed more than two decades ago, is a key part of that. Watch the next Congress and see how TBTF banking money exercises power.

The PayDay lenders, by the way, are mostly extended arms of Wall Street…..

David Cay Johnston October 6th, 2012 at 2:51 pm

@hpschd, do you mind saying which library? My last two books ended up on lists of the longest waiting times for borrowing…..

This book has gotten almost zero coverage in the big newspapers — indeed not a word yet in the NYT, WaPo, USAToday, LATimes, etc. I believe I am the only two-time WSJ bestseller since 2004 whose books the WSJ has totally ignored.

Elliott October 6th, 2012 at 2:52 pm
In response to tuezday @ 37

I will, altho I prolly shouldn’t for health reasons, if you know what I mean.

Elliott October 6th, 2012 at 2:53 pm

I’d say it was criminal but obviously not anymore.

Dean Baker October 6th, 2012 at 2:53 pm

That’s pretty bad that the NYT has ignored the book. Did they review your prior books? I forget the timing, were both published when you were still at the NYT?

David Cay Johnston October 6th, 2012 at 2:54 pm
In response to BevW @ 43

Our health care system is really a nonsystem sick care system. And it is very costly.

A little funw ith numbers:

We spend 18% of our economy now (the data will show later) on healthcare. The French, with the best system and one that is universal with almost no out-of-pocket costs, spend 12% of their economy.

In 2010 the federal income tax came to 6.3% of GDP.

Thus, all else being equal, adopting the French system in 2010 would have been the equivalent of wiping out the need for the individual federal income tax…..

And we would not five people dying every hour just because they lack health coverage — our system, is immoral and again and again I have written that no politician who claims to be religious can support our existing system, which is, in my view, immoral.

tuezday October 6th, 2012 at 2:57 pm

Orlando library system has 12 of your books ordered. I found out about your book from FDL but I’ve got a couple of friends who have bought it also. Not sure where they found out about it. Word of mouth seems to be helping you greatly.

Dean Baker October 6th, 2012 at 2:58 pm

btw, with health care, one of the scams that my wife encountered from a major medical testing lab was that they would routinely send her improper bills. The bill would list a charge for a test of $700 or $800, then say that our insurer had paid $200, that she had made a $10 co-pay, therefore we owed the lab the difference.

We would check with our insurer who always told us that their contract was that the insurer accepted the insurer’s payment as the full fee. The lab company would then back down when we confronted them with this information.

This struck me as likely a deliberate policy. People who get lots of medical tests are generally not in good health and often not in a situation to review bills closely and put up an argument if the bills are wrong. If they just send in the check, this is free money for the lab.

My guess is that they get lots of profits through this technique.

meepmeep09 October 6th, 2012 at 3:01 pm

I agree that major media doesn’t cover these issues like it should, but on those rare instances that they do, do they get many readers? I’m thinking there is some negative reinforcement for media in this regard.

Many dog owners amuse themselves by shouting ‘SQUIRREL!’ and watching the pooch go nuts, but aren’t so many folks the same damned way, when it comes to issues that are difficult, complex, but critical (i.e., boring and hard work), versus following the latest sexy, exciting glittery (figurative) bauble?

Beyond that, participatory democracy, including the fabrication and advancement of legislation – especially on economic/financial policy – is gosh darn hard work, and often a long slog. It’s hard for even diligent and well intentioned working folks to follow it, and if media isn’t doing the job, or worse yet is in the tank for the forces of darkness (think Enron and the business media leaders and journalists Ken Lay bought off or intimidated), then the problem is so much the worse.

David Cay Johnston October 6th, 2012 at 3:01 pm
In response to Dean Baker @ 48

The NYT, when I was working there, ran a review of my last book FREE LUNCH which never told readers what it was about, falsely said I hate corporations (I want proper rules to control corporations so we get the benefits from them) and was read by people who called me when it came out as indicating I was part of a faction of Democrats in Washington. I had to look up the two factions because I pay no attention to such stuff.
Strange is the newspaper that lets a reviewer basically accuse one of its reporters of being part of apolitical party operation or faction. It was also absurd. I am a registered Republican, Teddy Roosevelt style.

In the 2004 campaign John Kerry stopped his campaign to read my book PERFECTLY LEGAL. It was in the press pool report, but not one major newspaper mentioned this. The Times said it was self-promoting. Contrast that with the many many references to the book on the 2008 Wall Street Meltdown, Too Big to Fail, by ANdrew Ross Sorkin. It got multiple mentions on some days.

At a tekkie website in California last month, after the San Jose Mercury did an interview with me (I was its youngest staff writer at age 19 in 1968), several people posted that they did not expect to hear a word about my book in the MSM because my reporting so contradicted what you read every day.

I have already made my money from this book, which required twice the time period I anticipated because the research was much more complex and hard to do than I anticipated, so I have no financial interest in sales unless the book suddenly sells in the millions of copies.

My interest is in getting through the walls of silence and egregious economic errors in the press every day so we have a debate about these issues. If we do not then one thing is certain — our economy will not be nearly as robust as it could be and we will continue to fall behind.

Dean Baker October 6th, 2012 at 3:01 pm
In response to Dean Baker @ 51

Since i have no reason to protect them, the lab in question is Labcorp, which is by far the largest chain of medical labs in the country.

David Cay Johnston October 6th, 2012 at 3:03 pm
In response to Dean Baker @ 48

NYT may yet review it. We will see. But the last review was so hostile and, yes, I was still on staff there. I took a buyout shortly after.
But enough of my grousing here — the point is that THE FINE PRINT is chock full of significant news that you will not know unless you read it.
If you do PLEASE tell others and encourage them to read. Nothing gets people to read a book like word of mouth.

And it is not just price gouging. I also show how your life, and the lives of children, are literally put in danger under rules no one knows about.

hpschd October 6th, 2012 at 3:05 pm

I’m in Toronto, Canada.

The system here has 19 copies and I’ve had a hold on a copy for a month.

Currently a copy is “in transit” to my local branch (one of 96 in the city). It will probably arrive on Tuesday – perfect timing – (Monday is Thanksgiving here)

I’m looking forward to every word of it.

I want to find the same stuff here in Canada and fight it.

We are clearly dying the death of a thousand cuts.

Dean Baker October 6th, 2012 at 3:05 pm
In response to meepmeep09 @ 52

I haven’t seen good data on what spurs readership, but I recall the series that Bartlett and Steele did for the Philadelphia Inquirer two decades ago got huge readership. They did special reprints and then turned the series into a book, which I believe was a best seller. I don’t think the lack of coverage of these issues is due to a concern about readers.

David Cay Johnston October 6th, 2012 at 3:05 pm
In response to meepmeep09 @ 52

I am also president of the 4,200-member Investigative Reporters and Editors (IRE) and see marvelous work in individual papers and on local stations across the country — and people read news that tells them what they do not know.

Readership is so enhanced with real news that Gannett, which for years did cheap fluff, has hired first rate reporters and editors to dig, dig and dig and they are finding it is helping them keep their audience in many cities.

David Cay Johnston October 6th, 2012 at 3:06 pm

Thanks, hpschd

Dean Baker October 6th, 2012 at 3:09 pm

To amplify my prior comment (and I doubt David will disagree), newspapers are run for their advertisers. Airlines don’t want to run ads on news shows that have stories about plane crashes. The same applied to the sorts of things that David writes about. There is also the issue that paper’s top management and major shareholders may be friends with top executives and shareholders at the companies whose abusive practices David exposes.

meepmeep09 October 6th, 2012 at 3:09 pm

Thank you both for the answers at #57 and #58; it’s at least reassuring to know that lack of readership isn’t the problem. Which suggests media ownership is the bigger issue.

David Cay Johnston October 6th, 2012 at 3:10 pm

Here is another policy few know about that I explain in the book — one big industry arranged to get a rule adopted that forces you to pay them their corporate income tax, which is embedded in their monopoly pricing.

Why do you care?
That industry is EXEMPT from the corporate income tax!

The machinations done to force you to pay this tax reveal how the system really works. I also show that in California three people just asked to speak about this at a public hearing, after reading an item I wrote for State Tax Notes two years ago, and that killed the state-levek proposal to make customers pay the nonexistent tax.

People can make a difference, but they have to know…..

Phoenix Woman October 6th, 2012 at 3:12 pm

Yup, and the telcos work hard to keep it that way, lobbying state legislatures to outlaw publicly-owned telephone and internet companies because those companies wouldn’t gouge customers so they could pay their top execs $25 million a year or more.

David Cay Johnston October 6th, 2012 at 3:14 pm
In response to Dean Baker @ 60

I disagree. Newspapers are run to make a profit. MOST owners have a deep sense of community duty. And in 46 years no advertiser ever set foot in any newspaper newsroom I worked in (SJMerc, Detroit Free Press, LATimes, Philly Inquirer, NYTimes).

But the profit comes from bringing sellers and buyers together, especially in those hugely profitable classified ads for help wanted and cars and homes that have shriveled with the Internet.

The last issue you describe, though is right. Newspapers used to connect with the common man. My New Yorker has a Ken Auletta piece about how in India selling papers to the masses is very profitable and the news reflects mass concerns.

Advertisers wanted to focus on upper income readers and as a result the attitudes shifted about what is news.

As I put it in the book, we cover banks from the POV of bank owners (shareholders) rather than customers, casinos from the POV of owners rather than players.

We need a mass media that covers issues with the perspective of most people, who are not rich enough to buy a new Mercedes, or even a Ford, every two years and never will be.

David Cay Johnston October 6th, 2012 at 3:16 pm
In response to Phoenix Woman @ 63

AT&T has 120 lobbyists in Sacramento where there are 120 state legislators. in Kentucky AT&T has 36 or 37 lobbyists (memory not perfect) and other telcos have 14 or 15 more.

But where people have found out what the telcos are doing they have not succeeded in rigging the game in their favor.

Dean Baker October 6th, 2012 at 3:16 pm
In response to Phoenix Woman @ 63

the examples of successful publicly owned utilities is something that should be more widely known. There is a widely held view, even among many people who consider themselves liberal, that anything run by the government will be run poorly. Certainly there are examples of failed government industries, but there are many success stories that offer quality services at lower rates than private companies. We should be studying them closely to see what they have done right and the extent to which the models can replicated.

meepmeep09 October 6th, 2012 at 3:17 pm

Well it looks like non-major media will have to continue doing the good journalism. It’s a shame so many of you folks doing the honest and honorable journalism have to (I assume) take a big hit in your personal finances, while your colleagues who sell their souls are well rewarded for it.

David Cay Johnston October 6th, 2012 at 3:18 pm
In response to meepmeep09 @ 61

The laws under which business operates have been so undone, under Chicago School theories, that we need a tremendous amount of reporting.

Dean’s blog every day shows how uninformed reporters just assume various facts and treat them as not needing attribution. Many of the examples he points to are ludicrously ill-informed.

I find that lawmakers I interview have been so lobbied and indoctrinated that many do not understand basic economics and assume that what business wants must be good for the economy, when often the exact opposite is true.

David Cay Johnston October 6th, 2012 at 3:22 pm
In response to meepmeep09 @ 67

My NYT editor, one of the best, used to ask me why I did not quit TheTimes and work inventing tax shelters like the ones I demolished in my stories…he meant it in the best way, as a reminder that life is not all about money.

As with my eight now grown kids, I would not have had one less if it made me rich for the real riches are in the joy and lessons they brought to my life and those of others.

Our nation was not created to make people rich. But if people think that is its purpose we are doomed. I cite the preamble to our Constitution and its six noble purposes as a guide — form amore perfect union, establish Justice, provide a common Defence, insure domestic Tranquility, promote the general Welfare and provide Liberty for us and those who follow us, capital sin the original.

Dean Baker October 6th, 2012 at 3:22 pm

Along these lines I was always struck by how they got Montana to deregulate its electricity. The story here is that Montana had the lowest cost electricity in the country (hydropower), which meant that its rate could only rise if it started selling its power on a deregulated national market.

i talked to someone from the state and the story was very much as David describes. The state has a part-time legislature with no regular staff. The industry sent high-powered lobbyists to explain how rates would fall if they deregulated. Since there was little organized opposition, most of the legislators went along, presumably expecting electricity prices to fall as a result of the wonders of competition. If I recall correctly, they more than doubled.

hpschd October 6th, 2012 at 3:26 pm

Mark Karlin in the Truthout interview asked you about Romney’s 47% comments. Senator Simpson is tired of small people.

So much deep contempt is disturbing.

Productivity goes – up wages stagnate. The increased income from the difference was loaned back in the form of sub-prime mortgages which were re-packaged and killed the economy. The big people got bailed out. We starve in the cold and the dark.

Fees, penalties, surcharges, interest inflation, etc.
bleed us dry.

Why do they hate us?

David Cay Johnston October 6th, 2012 at 3:26 pm
In response to Dean Baker @ 70

In the half of the states that did what Montana did prices have risen about eight times more than in those that stayed with the traditional system, a story I tell in THE FINE PRINT.

I also show how the states let the industry pocket tens of billions of dollars of taxes they collected that will never get to government. I tell about one lawyer, Dan Sponseller, who is trying to fight this and the hostility he encounters from judges, utility regulators and how the news media ignore his case. Interestingly, the company he has focused on, PSE&G in New Jersey, has never denied his charges. They just say it is too late to do anything.

One theme throughout my book is how your tax dollars go to private gain rather than public benefit.

Dean Baker October 6th, 2012 at 3:28 pm

btw, I want to quickly share my favorite David Cay Johnston and the power of the press story. Back in 2000 (won’t swear by the year), the Clinton administration, at the urging of Congress, had a plan to put in place a system where IRS auditors would themselves be subject to audits. The idea was that someone would randomly review their treatment of investigations. They could face discipline and possibly even firing if their auditors determined that they had been abusive.

Needless to say this policy would have been a serious disincentive to enforce the tax code. After all, these are career people who are trying to do their job. If you tell them you can get in trouble and possibly even fired for giving a bad time to someone who is trying to rip off the government, then many will just decide to take it easy on the tax cheats. of course many auditors would quit.

Anyhow, David wrote a nice piece on this policy on a Monday. On Friday he wrote another piece on how the IRS decided to reverse the policy and not audit the auditors.

David Cay Johnston October 6th, 2012 at 3:28 pm
In response to hpschd @ 71

Start bundling campaign donations and politicians will at least like you…..

I show solutions to these issues in this book, as I did somewhat in Free Lunch, my previous book.

BTW, I also explain in plain English what a corporation is and what it is not….I am sure most readers will be surprised by what I wrote, though no business professor would dispute it.

tuezday October 6th, 2012 at 3:30 pm
In response to Dean Baker @ 66

Exactly. We get our utilities through a publicly owned company and, sit down for this…. have had a 9% rate decrease this year.

David Cay Johnston October 6th, 2012 at 3:30 pm
In response to Dean Baker @ 73

Thanks, Dean., and in THE FINE PRINT I show ways that you and everyone at this forum can get change. It is often just a matter of casting a spotlight, asking to speak up or, as in my neighborhood in Rochester NY, creating a refuse collection district that cut our costs of garbage collection by about 60% — which means for each extra dollar i pay in taxes I have close to $2 more in my pocket.

When did you hear any politician acknowledge that paying higher taxes can put more money in your pocket? It absolutely can and I show it, but the mantra today is “tax bad, less tax good, no tax on the investments of the already rich excellent.”

dakine01 October 6th, 2012 at 3:33 pm

(Dean’s blog is one of my first morning stops to see if he has taken apart Robert Samuelson yet again – that way I don’t have to add my meager attempts to rebut his stoopidity)

David Cay Johnston October 6th, 2012 at 3:34 pm
In response to tuezday @ 75

Overall public power costs a third less than corporate power.
And al ot of public power gets given away to industries.

Alcoa gets by far the biggest share of Niagara Falls power on the US side. Its deal is worth the net present value of $5.6 billion, more than ten years or profits. That giveaway saved some jobs, but at three times what those jobs pay.

There are deals like that all over — and that means you pay more and get less from government,

I show in The Fine Print that the average family of four now gets socked with $900 a year for subsidies that local and state governments give to big companies.

The average household with children and both parents takes home less than $900 a week so in effect these families give up more than a week of their earnings to corporate subsidies they know nothing about.

We can stop this but first people have to know about it.

Dean Baker October 6th, 2012 at 3:36 pm
In response to dakine01 @ 77

Thanks — Samuelson usually does give me something to comment on when he writes a column.

David Cay Johnston October 6th, 2012 at 3:36 pm
In response to dakine01 @ 77

I wrote in a British book — Investigative Journalism: Dead or Alive? — that the startlingly uninformed reports on the front pages of the top papers that Dean exposes have me sputtering in my morning coffee and my robe has the coffee stains to prove it.

meepmeep09 October 6th, 2012 at 3:36 pm

I’m a few years younger than you, but we’re both in that Baby Boomer demographic, where there was (once) a certain understanding of the value of a social contract and national commonality of purpose (at least for white men, up through the 60s). We were also comfortably ensconced in a bubble of prosperity, since the rest of the developed world had been knocked flat on its back.

Although a lot of online Boomer bashers go way over the top, I think I understand where their frustrations might come from, since a lot of us of that era came of age with trustworthy institutions, and we have only slowly come to the realization that so many of those institutions are no longer trustworthy (although we’re learning some of that trust wasn’t always justified even back in the day, as it turns out).

You’ve been following this real time, so it doesn’t likely apply to you. But I think that for many of us who were lucky to be born when we were, and to get jobs that were easier to get, and develop careers less susceptible to economic sabotage, it is necessary to listen more to the younger folks, and take a more critical look at institutions that are no longer what they should be. Enron and other outrages should have already jolted us from complacency – and have certainly done so for most folks who read at places like this – but many are still clueless, and actively lied to (e.g., Tea Partiers in our age demographic).

David Cay Johnston October 6th, 2012 at 3:39 pm
In response to Dean Baker @ 79

Attribution is a key to journalism. The fact stated may not be true, but it was attributed to the person or document that said it.

A saying taught young reporters, at least when I was one in the late 1960s, was that you don’t need a source to report that the sun rose in the East (but you better have a darn good one if you say it rose in the West), but you need to attribute just about everything else.

Samuelson is among the worst, although he is a columnist, in not attributing and as a result the errors he makes, and they are often and egregious, are his own. The question to ask is why the WaPo and its ombudsman do not act. Likely answer: they know beans about economics.

dakine01 October 6th, 2012 at 3:40 pm
In response to Dean Baker @ 79

Well, you do seem to spend a good bit of most mornings refuting gibberish from multiple sources, Samuelson is just usually the most egregious one

tuezday October 6th, 2012 at 3:40 pm

We need to replace the term privatization with middleman. It’s a simple concept but no one seems to get it.

dakine01 October 6th, 2012 at 3:43 pm

The question to ask is why the WaPo and its ombudsman do not act. Likely answer: they know beans about economics.

That pretty much means they know as much as Samuelson

David Cay Johnston October 6th, 2012 at 3:43 pm
In response to meepmeep09 @ 81

Social contract? You myst be a commie pinko antibusiness idiot. Or, maybe, descended from the colonists, Founders and Framers who all understood and wrote about it before the Chicago School’s nonsense (going there made me an apostate) was co-opted by the oligarchs and their running dogs…..

Grover Norquist has been joyfully noting that every day more of those born in the years before the Cold War die and with them the ideas they grew up believing in — ideas like fair play, that America is a nation not 312 million individuals, that you invest in the future with education and basic research.

But as Herbert Stein once said, a trend can only continue until it cannot. I think the Chicago/monopolist/corporatist school may have reached its zenith. If I can get enough people to read THE FINE PRINT I am sure that will be the case.

Dean Baker October 6th, 2012 at 3:44 pm
In response to meepmeep09 @ 81

Yes, there clearly is a difference in the boomer and post-boomer mentality. It’s not that many boomers thought the system was great. After all, with Vietnam and Watergate, you couldn’t be blind to corruption. However, I believe that most of us felt that these were aberrations and that for the most part the system worked. It certainly is much harder to make that argument today.

tuezday October 6th, 2012 at 3:44 pm

David you stated in The Fine Print that you had collected vast amounts of research that was beyond the confines of the book, are you working on another book?

David Cay Johnston October 6th, 2012 at 3:45 pm
In response to tuezday @ 84

Privitization is often just code for transferring commonwealth to private wealth. I teach this in my Syracuse U law and grad biz courses with stunning examples form the early 19th Century. I wonder if there is a book in the history of this, the rise of corporations through acquiring commonwealth at little or no cost.

Sure is easy to make a profit that way….I like profits, I just like them to be earned in a competitive market.

Dean Baker October 6th, 2012 at 3:47 pm

yes, one of the really fundamental points that David emphasizes in this book and really all his work is that the corporate abuses are not interested in a free market and competition. They want the government to work for them.

This is a fundamentally different view from one where we have the rugged individualist business people who just want to get the government out of their way. The last thing that the villains in David’s book would want is a genuinely free market.

David Cay Johnston October 6th, 2012 at 3:48 pm
In response to tuezday @ 88

I plan to do more books, but first I have to get this one on the bestseller lists, and unlike the last two it is far from there, which is why I was grousing earlier…..and this is, the few reviewers who have read it have said, a much better read than Perfectly Legal and Free Lunch.

But four years of research costs a lot of money — my time, travel, copying documents (though new cell phone apps like TurboScan make that easier in some cases) and paying copy editors and researchers…..and I mean a lot of money. And I no longer have the NYT picking up the travel tab…

Most books are not expensive to produce. And they also don’t tell you much you do not know or they have a conceit that makes them work. My books are all digging and digging is very expensive.

DWBartoo October 6th, 2012 at 3:49 pm

Late to this Book Salon.

However, after reading the comments, I have no problem in declaring it superlative and I thank David and Dean for a most enlightening and useful experience.

I would like to ask either or both of you how you imagine that we might actually change things until the underlying exploitation of our economic system, which impacts everything, might be successfully addressed?

DW

David Cay Johnston October 6th, 2012 at 3:50 pm
In response to Dean Baker @ 90

BTW, I am cofounder and chairman of a small corporation, which indicates I do not hate corporations but just want them to not game the system. I don’t make any money from the company, which has 25 employees and mostly is the source of decent paying jobs for two of my sons, but if I had the gifts of capital big companies get we could easily take our idea and expand it to 250 employees, maybe many more.

But like Gander Mountain, the big hunting/fishing chain, we do not take subsidies as a matter of principle.

David Cay Johnston October 6th, 2012 at 3:52 pm
In response to DWBartoo @ 92

In The Fine Print I have a lot of solutions. The first step is to know about the abuses, which means reading the book. Then I show how in some cases just speaking up, just two or three people speaking up, can stop some abuses and organized action can stop others.

My hope is to get enough readers that they form a critical mass that starts changing the game by challenging the presumptions and assumptions that permeate the news and political rhetoric about business. But that means a lot of people knowing the real facts.

tuezday October 6th, 2012 at 3:53 pm

Your books are much appreciated too. I’m more than happy to recommend The Fine Print to everyone I know, and have.

BevW October 6th, 2012 at 3:53 pm

As we come to the end of this great Book Salon discussion,

David, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book, and how our tax dollars go to private gain rather than public benefit.

Dean, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

David’s website (DavidCayJohnston.com) and book (The Fine Print)

Dean’s website (CEPR.net)

Thanks all, Have a great weekend.

Tomorrow: Michael E. Mann (Nobel Peace Prize) / The Hockey Stick and the Climate Wars: Dispatches from the Front Lines; Hosted by Kevin Grandia

If you would like to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

hpschd October 6th, 2012 at 3:54 pm

Perhaps part of the problem is that many of us blame ourselves. The difficulties of the last few decades seemed personal. Wage stagnation, increasing debt can easily be interpreted as personal failings. All the little bites on credit cards, utility bills, fees, etc. were gradual – they snuck up on us. Now we must fight back or starve and I, for one, and very tired of the strain.

But you said to Karlin “We can solve any problem.”

OK, I’ll keep fighting.

meepmeep09 October 6th, 2012 at 3:55 pm

Ha, you’ve outed me. But I hope you and Herbert Stein are correct, and correct sooner rather than later. My fear is that the worse things are allowed to get, the rougher any kind of recovery is going to be – seems to be how it usually goes. Would love to be wrong about that, though…

I will definitely be getting your book. Keep on keepin’ on, doing the important work you do!

David Cay Johnston October 6th, 2012 at 3:56 pm

One more thought, DWBartoo, the whole premise of the US of A is that we can solve any problem.

We got rid of slavery, though ut took more than 638,000 lives.

Women got back the right to cote (which some had in the Colonial era), but it took decades.

We got child labor laws despite ministers who said they were the work of the devil for it was God’s plan that children work in the mills.

We had strong unions, as our economic competitors do to this day except China.

We got environmental laws and remember that Nixon signed many of them and the GOP supported them as good for business — indeed studies show they were very good for profits.

We can get competitive markets, restore our Internet to #1 (now 29th and falling), invest in the future and turn education back into a public good, but it will take time and determination.

Nothing important, not a good marriage, a profitable small business, a new book or a shift in public policy is easy. But success is guaranteed if we work at it.

Dean Baker October 6th, 2012 at 3:57 pm
In response to DWBartoo @ 92

I don’t see any easy routes. We have to try to find winnable battles and build on them. One small, or maybe not so small, battle made an impression on me.

The grassroots outrage over the Stop Online Piracy Act (SOPA) was quite impressive. It was so large that congress people who had sponsored the bill actually went running for cover and disowned the legislation. While the grassroots effort was impressive, it also had the support of some big actors, like Google, who did a huge amount to help the campaign develop.

I like this story because this really was a case of mass outrage, but it also enlisted a huge corporation which stood to be a big loser from the bill. If we are going to make headway on major issues, we will need more than just grassroots at this point — it is hard to organize large numbers of people. It will be essential to be opportunistic and find businesses that stand to gain from the actions in question.

This can be done, but we have to be self conscious about it. Every business has some dirty laundry (I suppose most of us do), but that doesn’t matter. if we can find some big actors who are willing to take the right stand on an important issue, then we have to work with them.

We need many more and much larger SOPA battles.

Dean Baker October 6th, 2012 at 3:58 pm

Thanks David and Bev,

I really enjoyed the discussion.

Dean

tuezday October 6th, 2012 at 3:59 pm
In response to hpschd @ 97

OK, I’ll keep fighting.

I have reason to believe our fighting is working. My 80 y/o fundie, formerly republican mother today asked me who I was voting for, Jill Stein, and said if Jill was on the ballot in NC, she’s going to vote 3rd party too. We may slowly be punching through the wall, if even my mother realizes she’s been had.

DWBartoo October 6th, 2012 at 4:00 pm

Changing consciousness, David, is, of course, fundamental, but the economic system itself is un-democratic, and the means of the corporate class to buy the government is a direct result of their control of capital, of “wealth”, produced NOT by the corporate class, but by the working classes who have NO say in its use or distribution.

Were we to have a effective democratization of the workplace, would that not serve to strengthen democratic practice, in society, and require that the working classes have more control over resources?

The fundamental purpose of an economic system, as I understand it, is to make available those resources necessary to life to the WHOLE of society (and not, if such a system is to be sustainable, an elite ruling class).

DW

clambake October 6th, 2012 at 4:01 pm
In response to Elliott @ 4

If I remember correctly, he did report on Gander Mountain’s rejection of tax subsidies.

DWBartoo October 6th, 2012 at 4:02 pm

My profound thanks to all.

To David.

To Dean.

To Bev, as always.

And to the freedom fighters at FDL.

DW

Elliott October 6th, 2012 at 4:02 pm

Thank you both for coming.

Best of luck with the book sales – and getting coverage for the story.

(and thanks Bev)

BooRadley October 6th, 2012 at 4:24 pm

Tweeted. Recommended.

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