Month: February 2017

NAFTA’s Legacy: Expanding Corporate Power To Attack Public Interests Laws And Outsource Jobs

At the heart of the North American Free Trade Agreement (NAFTA) is a stunning corporate power grab: NAFTA grants rights to thousands of multinational corporations to bypass domestic courts and directly “sue” the U.S., Canadian and Mexican governments before a panel of three corporate lawyers.

These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits. These corporations need only convince the lawyers that a domestic law, safety regulation or court ruling – that we rely on for a clean environment, essential services and healthy communities – violates the new rights and privileges NAFTA grants to them. The corporate lawyers’ decisions are not subject to outside appeal.

How could multinational corporations attack domestic health, environmental and financial protections on which we all rely and that local companies have to follow?

NAFTA and other corporate-rigged deals include terms formally known as Investor-State Dispute Settlement (ISDS). ISDS gives multinational corporations stunning powers, including the ability to challenge new policies – from Wall Street regulations to climate change protections – if corporations claim these policies violate their NAFTA rights and frustrate the corporations’ “expectations” of how they should be treated.

If an ISDS tribunal of three corporate lawyers rules against a challenged policy, there is no limit to the amount of taxpayer money a government can be ordered to pay a corporation. The amount is based on the “expected future profits” the tribunal surmises that the firm would have earned in the absence of the policy it is attacking. The number of ISDS attacks launched each year has exploded in recent years and the variety of policies being attacked is expanding.

Conflicts of Interest

NAFTA allows the lawyers on these tribunals to rotate between serving as “judges” and bringing cases for corporations against governments – a conflict of interest that would be forbidden as highly unethical under most legal systems. These “tribunalists,” as the three private sector attorneys are formally called, are not bound by precedent or the opinions of governments about what an agreement means. And there is no outside appeal to their rulings. If governments do not pay, the corporations can seize government property or assets directly to make up the ordered amount.

If that were not sufficiently outrageous, these special protections for multinational corporations also incentivize job offshoring. These corporate rights and powers eliminate many of the usual costs and risks that make firms think twice about moving to low-wage countries, literally incentivizing corporations to launch a new wave of job offshoring.

While this shadow legal system for multinational corporations has been around since the 1950s, just 50 known cases were launched in the regime’s first three decades combined. In contrast, corporations have launched approximately 50 claims in each of the last six years. ISDS is now so controversial that some governments have begun terminating their treaties that include ISDS.

NAFTA Cases Target Health and Environmental Policies

More than $392 million in compensation has already been paid out to corporations in a series of investor-state cases under NAFTA. This includes attacks on oil, gas, water and timber policies, toxics bans, health and safety measures, and more. In fact, of the 11 claims (for more than $36 billion) currently pending under NAFTA, nearly all relate to environmental, energy, financial, public health, land use and transportation policies – not traditional trade issues.

Here are just some examples of the overreach of the ISDS system under NAFTA.

The Investor Wins Taxpayer Compensation via Tribunal Order

Bilcon v. Canada: A NAFTA ISDS tribunal ruled in favor of a company that planned to blast a basalt quarry and marine terminal in an environmentally-sensitive area in Nova Scotia, deciding that the impact assessment that had been ordered by Canada’s Department of Fisheries and Oceans was a violation of the company’s NAFTA rights. A dissenting tribunalist called the decision “a remarkable step backwards in environmental protection.” But the Canadian government was ordered to pay more than $100 million to the firm.

Mobil / Murphy Oil v. Canada: A NAFTA ISDS tribunal ruled in favor of U.S. oil corporations Mobil (of ExxonMobil) and Murphy Oil, deeming a Canadian province’s requirement that any firm—domestic or foreign— obtaining a drilling license must contribute a small share of oil revenue to fund research and development in Newfoundland and Labrador – one of Canada’s poorest provinces. The tribunal ruled this was a NAFTA-barred performance requirement and ordered the Canadian government to pay the firms $19 million.

Metalclad v. Mexico: A Mexican municipality’s refusal to grant U.S. firm Metalclad a construction permit, which it had also denied to the contaminated facility’s previous Mexican owner (until and unless the site was cleaned up), resulted in $15.6 million in compensation being paid by Mexico to the firm after one of NAFTA’s first ISDS rulings.

S.D. Myers v. Canada: A NAFTA ISDS tribunal ordered Canadian taxpayers to pay $5.6 million for a temporary Canadian ban on the export of a hazardous waste called polychlorinated biphenyls (PCB). Though the ban complied with a multilateral environmental treaty encouraging domestic treatment of toxic waste, the tribunal deemed it to be discriminatory and a violation of the corporation’s NAFTA right to a “minimum standard of treatment.”

The Investor Extracts Payment Through a Settlement

Ethyl v. Canada: The U.S. Ethyl Corporation used NAFTA’s investor-state system in the late 1990s to reverse a Canadian environmental ban of the carcinogenic gasoline additive MMT, also banned by numerous U.S. states, while also obtaining $13 million in compensation from the Canadian government to pay for revenue lost during the ban. Canada also was required to post advertisements in newspapers claiming the chemical was safe.

AbitibiBowater v. Canada: AbitibiBowater, a paper corporation, extracted a $123 million ISDS settlement after challenging the decision of Newfoundland and Labrador, a Canadian province, to take back various timber and water rights held by AbitibiBowater after the corporation closed a paper mill. The provincial government argued that under the terms of an agreement the firm had made with the province, which was working to save the mill that employed 800 people in a rural area, AbitibiBowater’s control of the forest lands and water rights were contingent on the company’s continued operation of the paper mill.

Pending Cases With Health and Environmental Implications

TransCanada v. United States: In June 2016, the TransCanada Corporation launched a NAFTA ISDS claim demanding $15 billion in compensation because the Canadian corporation’s bid to build a pipeline was rejected by the U.S. government. The company said it had invested $3 billion, but demanded the larger sum to pay for the future expected profits it would lose if the pipeline was not allowed to operate. The U.S. government decision not to approve the pipeline, because it was not in the national interest and would exacerbate climate change, came after years of government studies. Tens of thousands of citizens in the states that would be affected and environmental activists nationwide had worked for years to demonstrate that the pipeline would pose serious health and environmental risks. Even after President Trump announced he would reverse the Obama administration decision and allow the pipeline to proceed, TransCanada is proceeding with its ISDS case. Under NAFTA rules, it could be compensated for lost revenues and costs that resulted from a delay in the pipeline’s completion.

Lone Pine v. Canada In September 2013, Lone Pine Resources, a U.S.-based oil and gas exploration and production company, launched a $109 million NAFTA ISDS claim against Canada under NAFTA to challenge Quebec’s suspension of oil and gas exploration permits for deposits under the St. Lawrence River. The decision was part of a wider moratorium on the controversial practice of hydraulic fracturing, or fracking. The provincial government had declared a moratorium in 2011 so as to conduct an environmental impact assessment of the extraction method widely known for leaching chemicals and gases into groundwater and the air.

Eli Lilly v. Canada In September 2013, U.S. pharmaceutical giant Eli Lilly and Company, launched a $483 million NAFTA ISDS challenge after Canadian courts invalidated the firm’s patents for Strattera and Zyprexa, drugs used to treat attention deficit hyperactivity disorder, schizophrenia and bipolar disorder. In a case that greatly expands the scope of ISDS attacks, the firm is challenging Canada’s standard for issuing patents. Canadian federal courts ruled that Eli Lilly failed to meet the standards required to obtain a patent under Canadian law. Namely, the firm had failed to demonstrate or soundly predict that the drugs would provide the benefits that the firm promised when applying for the patents’ monopoly protection rights. The court’s decision paved the way for generic drug producers to make less expensive versions of the drugs. Eli Lilly is asking a NAFTA ISDS tribunal to second-guess not only the courts’ decisions, but Canada’s entire standard for issuing patents and determining their ongoing validity.

NAFTA ISDS Attacks Force Costly Defense of U.S. Policies

The U.S. government has spent tens of millions in legal costs to defend against NAFTA investor-state cases. But, thanks in part to technical errors by lawyers representing corporations in several cases, the United States has thus far dodged the bullet and avoided paying compensation. There have been 14 ISDS cases against U.S. policies–all by Canadian firms under NAFTA. A Columbia University Law School study shows that we have only narrowly escaped liability in some of these cases. For example, in the Loewen case, a NAFTA tribunal concluded that a Mississippi state Supreme Court decision that a Canadian funeral home conglomerate must follow normal civil procedure rules and post bond to appeal a contract dispute it had lost with a U.S. firm, violated NAFTA investor protections. Luckily for U.S. taxpayers, before compensation was ordered, the Canadian firm’s lawyers reincorporated the firm as a U.S. corporation under bankruptcy protection. This eliminated Loewen’s status (and privileges) as a foreign investor.

When U.S. state laws are challenged under the investor-state system, state governments have no standing and must rely on the federal government to defend their laws. If states are invited by federal officials to participate, they must pay their own legal expenses. California has incurred millions of dollars in legal costs helping to defend two state environmental laws – a toxics ban and a mining reclamation policy – that were challenged under NAFTA.

As corporations and law firms become emboldened and more creative, it is likely only a matter of time before U.S. taxpayers are on the hook, given that as long as NAFTA is in effect, more than 8,500 corporate subsidiaries from Canada and Mexico are empowered to use ISDS to challenge our policies.

The Solutions Project

The Solutions Project has mapped out a course by which the United States and the world could be powered by 80% renewable energy in the year 2030 and 100% renewable by the year 2050. Their graphic displaying this movement is included below.




Healthcare Polling Data

Opinions of the Affordable Care Act (also known as Obamacare) have fluctuated since it was first signed into law in 2010.

It has been the topic of many high-profile court cases and was a key issue in the 2016 Presidential campaign. For the most part, at least a plurality of the American public has disapproved of the ACA since its passage into law. The two outliers are during 2012, which coincides with the 2012 presidential election, and right now. In fact, more Americans approve of the ACA right now (54%) than they ever have.



When asked what they would like Congress to do with the law, almost six in ten (58%) Americans want to either keep the law as it is (7%) or keep the law and improve it (51%). In contrast, four in ten (39%) Americans would like to either repeal and replace the law (31%) or repeal with no replacement (8%).



Ultimately, over half (56%) of Americans are satisfied with the cost they pay for insurance. However, the type of insurance is a strong determinant of satisfaction – seven in ten (69%) of individuals on the government programs Medicare and Medicade are satisfied with the cost they pay for insurance, while half (52%) those on private insurance are satisfied and only three in ten (31%) of those without insurance are satisfied.



Opininons about whether healthcare coverage is the government responsibility have fluctuated over the years: from 2000 to 2008, a majority of Americans believed that healthcare coverage is the government’s responsibility. Between 2009 and 2016 opinions fluctuated. However, since 2016 there has  been a sharp spike in the number of individuals who think it is the government’s responsibility (60% currently).



When asked to elaborate about how the government should or should not provide health care coverage, Americans are divided. When looking at those who said that healthcare coverage is the government’s responsibility, Americans are divided half and half. 28% of Americans think that the government should provide healthcare through a single payer system while 29% think that the government should provide healthcare through a mix of private insurance companies and government programs. In contrast, when we look at those who think that it is not the government’s responsibility to provide health care (38%), most want to maintain current programs like Medicaid and Medicare (32% of Americans). In fact, only 5% of Americans would think that the government should not be responsible for healthcare at all.


Why Millenials Will Reject Trump

In the US, pundits remain fixated on traditional party divides, and not on the deeper demographic changes that are underway. Today’s millennial generation, with its members’ future-oriented perspective, will soon dominate American politics, and the country will become increasingly liberal and economically just as a result.

The key political divide in the United States is not between parties or states; it is between generations. The millennial generation (those aged 18-35) voted heavily against Donald Trump and will form the backbone of resistance to his policies. Older Americans are divided, but Trump’s base lies among those above the age of 45. On issue after issue, younger voters will reject Trump, viewing him as a politician of the past, not the future.

Of course, these are averages, not absolutes. Yet the numbers confirm the generational divide. According to exit polls, Trump received 53% of the votes of those 45 and older, 42% of those 30-44, and just 37% of voters 18-29. In a 2014 survey, 31% of millennials identified as liberals, compared with 21% of baby boomers (aged 50-68 in the survey) and only 18% of the silent generation (69 and above).

The point is not that today’s young liberals will become tomorrow’s older conservatives. The millennial generation is far more liberal than the baby boomers and silent generation were in their younger years. They are also decidedly less partisan, and will support politicians who address their values and needs, including third-party aspirants.

There are at least three big differences in the politics of the young and old. First, the young are more socially liberal than the older generations. For them, America’s growing racial, religious, and sexual plurality is no big deal. A diverse society of whites, African-Americans, Hispanics, and Asians, and of the native-born and immigrants, is the country they’ve always known, not some dramatic change from the past. They accept sexual and gender categories – lesbian, gay, trans, bi, inter, pan, and others – that were essentially taboo for – or unknown to – their grandparents’ (Trump’s) generation.

Second, the young are facing the unprecedented economic challenges of the information revolution. They are entering the labor market at a time when market returns are rapidly shifting toward capital (robots, artificial intelligence, and smart machines generally) and away from labor. The elderly rich, by contrast, are enjoying a stock market boom caused by the same technological revolution.

Trump is peddling cuts in corporate taxes and estate taxes that would further benefit the elderly rich (who are amply represented in Trump’s cabinet), at the expense of larger budget deficits that further burden the young. Indeed, the young need the opposite policy: higher taxes on the wealth of the older generation in order to finance post-secondary education, job training, renewable-energy infrastructure, and other investments in America’s future.

Third, compared to their parents and grandparents, the young are much more aware of climate change and its threats. While Trump is enticing the older generation with one last fling with fossil fuels, the young will have none of it. They want clean energy and will fight against the destruction of the Earth that they and their own children will inherit.

Part of the generational divide over global warming is due to the sheer ignorance of many older Americans, including Trump, about climate change and its causes. Older Americans didn’t learn about climate change in school. They were never introduced to the basic science of greenhouse gases. That is why they are ready to put their own short-term financial interests ahead of the dire threats to their grandchildren’s generation.

In a June 2015 survey, 60% of 18-29 year-olds said that human activity was causing global warming, compared with just 31% of those 65 and older. A survey released in January found that 38% of American survey respondents 65 and older favored fossil-fuel expansion over renewable energy, compared with only 19% of those 18-29.

Trump’s economic policies are geared to this older, whiter, native-born America. He favors tax cuts for the older rich, which would burden the young with higher debt. He is indifferent to the $1 trillion overhang of student debt. He is reprising the 1990s NAFTA debate over free trade, rather than facing the far more important twenty-first-century jobs challenge posed by robotics and artificial intelligence. And he is obsessed with squeezing a few more years of profit out of America’s coal, oil, and gas reserves at the cost of a future environmental catastrophe.

One might attribute Trump’s backward-looking mindset to his age. At 70, Trump is the oldest person ever to become president (Ronald Reagan was slightly younger when he took office in 1981). Yet age is hardly the sole or even the main factor here. Bernie Sanders, certainly the freshest mind of all the 2016 presidential candidates and the hero of millennial voters, is 75. The young are enchanted with Pope Francis, 80, because he puts their concerns – whether about poverty, employment difficulties, or vulnerability to global warming – within a moral framework, rather than dismissing them with the crass cynicism of Trump and his ilk.

The main issue here is mindset and political orientation, not chronological age. Trump has the shortest time horizon (and attention span) of any president in historical memory. And he is utterly out of touch with the real challenges facing the young generation as they grapple with new technologies, shifting labor markets, and crushing student debt. A trade war with Mexico and China, or a tragically misconceived ban on Muslim migrants, will hardly meet their real needs.

Trump’s political success is a blip, not a turning point. Today’s millennials, with their future-oriented perspective, will soon dominate American politics. America will be multiethnic, socially liberal, climate conscious, and much fairer in sharing the economic benefits of new technology.

Too many observers remain fixated on the traditional party divides in the US Congress, not on the deeper demographic changes that will soon be decisive. Sanders nearly captured the Democratic nomination (and would likely have triumphed in the general election) with a platform appealing powerfully to the millennials. Their time is coming, most likely with a president they support in 2020.

Who Pays If We Raise The Social Security Payroll Tax Cap?

Most Americans know that their earnings are subject to the Social Security payroll tax. Not as many are aware that the amount of earnings subject to the tax, while subject to change, is capped at the same level for everyone, regardless of total earnings. This year, the maximum wage earnings subject to the payroll tax is $127,200.

The cap on the Social Security payroll tax means that those with the highest earnings pay a lower rate. People who earn a million dollars a year pay this tax on about an eighth of their earnings. People who earn a quarter of a million dollars pay the tax on just over half of their earnings. It is important to note that this just applies to wage earnings, not other forms of income. If an individual earning $250,000 a year makes another $250,000 from investments, then they end up paying the Social Security income tax on about a fourth of their income. The vast majority of workers fall below the $127,200 cap and have significantly less stock or other income, if any. As a result, all — or the majority — of their income is typically subject to the payroll tax.

The Social Security payroll tax essentially finances what is commonly called Social Security, the Old-Age, Survivors, and Disability Insurance program (OASDI). The contributions from the tax (6.2 percent paid by employees and employers, 12.4 percent by the self-employed) are held by the Social Security Trust Fund as Treasury bonds and are the source of Social Security benefits for retirees.

The latest Social Security Trustees report showed the Trust Fund at $2.8 trillion. This is enough to pay full benefits to retirees through 2034. At that point, the fund will still be able to pay just under 80 percent of full benefits for the next 75 years. Over this period of time, the gap between full benefits and payable benefits comes out to roughly one percent of GDP over this period.

There are a number of ways this gap can be eliminated to not only ensure that full benefits are paid beyond 2034, but expanded to provide additional retirement security for millions of workers. Proposals to raise or totally eliminate the payroll tax cap would have a significant impact on benefit payments and the program’s projected shortfall after 2034. Such proposals ensure that high-income earners pay as much, or closer to, the same rate as everyone else, thus addressing the regressive nature of the tax.

Raising the cap also addresses the impact of rising wage inequality on financing Social Security benefits. While wages for the top 1 percent of wage earners have continued to grow at a strong pace over the past few decades, they have slowed considerably for low- and moderate-income earners.4 As of 2013, this rising inequality in earnings was responsible for 43.5 percent5 of the projected 75- year shortfall in Social Security funding.

A number of bills were authored in the 114th Congress to shore up and strengthen Social Security —several looked, at least in part, at the Social Security payroll tax cap. Senator Bernie Sanders authored legislation similar to a bill he introduced the previous year and featured it in his 2016 presidential campaign platform that would have applied the payroll tax cap to earnings above $250,000. According to an analysis from the Social Security office of the Chief Actuary, this would have eliminated 80 percent of the projected Trust Fund shortfall. Other legislation by Senator Richard Blumenthal and Representative John Larson would have lifted the cap for those earning more than $400,000. Another bill, sponsored by Senator Patty Murray, would have imposed a 2.0 percent surtax on employers and employees if the employee’s earnings were above $400,000 and a surtax of 4.0 percent if an individual were self-employed.

Using Census Bureau data from the latest American Community Survey (ACS), this issue brief updates previous CEPR research to determine how many people would be affected if the payroll tax cap were raised or eliminated. Based on this data, the vast majority of workers would not be impacted. Roughly 1 in 18 people, or 5.4 percent of workers, earn more than the current cap and would be affected if it were eliminated (Figure 1). If workers who earn over $250,000 in wages paid the tax, the top 1.6 percent of workers would be affected. If the cap applied to people who earn over $400,000 in wages, only the top 0.7 percent would be affected.



The effects of eliminating or raising the Social Security payroll tax cap vary widely when looking at race, gender, age, and state of residence. For instance, about 1 in 53 black and Latino workers would pay more if the cap were completely scrapped. A little more than 1 in 35 women would pay additional taxes if the cap were eliminated.