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Coffee Party Position Paper: Reforming a System That is Broken

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NOTE:  This is a position paper intended to initiate dialog with our community, policymakers, and the rest of America. A big thanks to over a hundred members of the Coffee Party community who contributed to this work.  Click here for Annabel Park's presentation of many of the ideas in this paper on C-SPAN's Washington Journal. 

Executive Summary

Three years after the 2008 financial crisis and months after the debt-ceiling crisis, the American people are finally awakening and speaking out loudly and clearly about the cycle of corruption afflicting our financial and political system. By exercising our First Amendment rights, we are taking a critical first step toward reclaiming our democracy from the powerful special interests that control Washington.

Our purpose is to confront the political crisis that we face head on, but in a spirit of collaboration and unity. We love our country, but government dysfunction has hurt our lives. That is why we are saying “enough is enough” and bringing our call for change directly to Washington.

Coffee Party USA has three primary legislative goals to break the cycle of corruption in our political system:

  • Reform our campaign finance laws to limit the impact of special interest money on policy-making;
  • Reform banking and Wall Street oversight laws to protect everyday Americans;
  • Transform our tax code to reduce our debt and enable lasting economic growth.

What is the Coffee Party?

Coffee Party USA is a grassroots, non-partisan movement that aims to restore the principles and spirit of democracy in America. It  started on Facebook as a popular fan page in January 2010 and has since blossomed into a national non-profit organization with a network of over half a million people and dozens of local chapters.

Our path to restoring democracy in America includes:

  • Identifying and advocating for legislative fixes to reform campaign finance laws, Wall Street regulations, and the tax code;
  • Promoting cultural changes to address political disengagement, polarization and widespread misinformation.

Our activities often center around encouraging inclusive, civil, fact-based, solution-oriented dialogue — online and in public places such as coffee houses — in which we meet, talk, become informed and engaged as fellow Americans, rather than as members of political parties.

We believe that we share common goals as a people. We all want to live in safe communities with access to well-paid jobs that will allow us to provide for our families, help us secure a decent education for our children, and allow us to access adequate health care. We call upon the American people to transcend the hyper-partisanship that is so common today and move toward organizing communities around the mutual desire for ongoing, responsible civic engagement.

We understand that we must act boldly to not only break the cycle of corruption, but also recommit to the concept of a government of, by and for the people. We are the government. The government is us. We want to fix the problems in our government, not turn against the idea of government.

We need more – in quantity and quality – direct engagement with our government officials and with one another. Participating in our democracy should not be about just voting every 2 to 4 years – relying only on what appears in mainstream media and in campaign ads – and then hoping for the best. We need to engage the government in a way that promotes accountability to the public, transparency, and the spirit of E Pluribus Unum (out of many voices, one).

We need to create effective civic engagement opportunities by:

  • Demanding more officially sanctioned activities such as town hall meetings with officials and public reviews of policies with an invitation for public comments;
  • Organizing informal community meetings in which we invite fellow Americans to exchange ideas.
  • Encouraging the use of Internet communications, social networking and polling technologies to more effectively inform and involve the broad public community in interactive debate.

We operate entirely independently of political parties and we do not endorse candidates.

What ails our democracy and how can we cure it?

Powerful special interests have overtaken our government, using money, influence and power to manipulate our legal, legislative and political systems. Influence is for sale in Washington in large part because it is so expensive to run political campaigns and win elections.  Members of Congress are forced to spend the majority of their time fundraising if they want to stay in office.  

The state of “permanent campaigning” has replaced governing in Congress because there is no longer time or incentive for the deliberative process. One tragic outcome of this situation is the impoverishment of the national dialogue and policies that do not serve the people of this country. The national debate on policies is often shaped by popular media that feeds on conflict, seeking to entertain rather than inform; and a media industry that profits from political theater and permanent campaigning. It is no wonder we end up with policies that do not serve the common good.

The voices of the wealthy are heard in Congress and the voices of the angry are heard on the evening news; but the rest of us are ignored. Ordinary people and their needs have become marginalized in the legislative process.

With influence bought by those who can afford it and the ordinary people marginalized, Washington has enacted policies over the past 30 years that have led to the largest economic imbalance since the Great Depression. While wealth is hoarded by multinational corporations and family dynasties with international ties, there is not enough demand for products here at home to create jobs and expand our economy.

In the years since the financial crisis and the Citizens United Supreme Court ruling, we have seen a dramatic weakening of our democracy and economic security. We are trapped in a cycle of corruption in which money = power = policies = more money = more power = more policies and so on. Unless we stop this cycle, we are hurtling toward a profound political crisis – a crisis that calls into question the legitimacy of our government.

Coffee Party USA has identified some key policies, although by no means an exhaustive list, that would put the brakes on the vicious cycle and lay the groundwork for restoring self-governance and economic security for all Americans.  We believe that these policies are both politically viable and financially feasible.

Without addressing these structural problems, we will continue to see instability in the economy, gridlock in Washington and social unrest on the streets. We have a choice to make as a nation. Either we acknowledge the structural deficiencies in our system and work together to fix them; or, we avoid dealing with them by bickering with and blaming others, thus ensuring our continued political and economic regression.
 

Campaign Finance Reform – The root cause of our broken system

Almost two years ago, the U.S. Supreme Court’s 5-4 ruling in Citizens United v. FEC reversed a century of jurisprudence by permitting corporations to spend unlimited amounts of anonymous money to influence elections. The ruling worsened an already corrupt system in which corporations, trade organizations and individuals with vast wealth have greater influence and access to our democracy than ordinary people.

In his dissenting opinion, Justice John Paul Stevens warned that “The legal structure of corporations allows them to amass and deploy financial resources on a scale few natural persons can match” and are not “themselves members of ‘We the People’ by whom and for whom our Constitution was established.”  

The result of that decision has been the following[1]:

  • Spending by outside groups in the 2010 election cycle was four times higher than in the 2006 elections (the most recent midterm cycle), jumping from $68.9 million to $294.2 million. More than 3/4 of the money spent in the 2010 elections was by groups that either accepted contributions that exceeded previous limits or concealed the sources of their money altogether.
  • Nearly half of the money spent was by just 10 groups. The top spending groups were the “Crossroads” entities (American Crossroads and Crossroads GPS) coordinated by GOP operatives Karl Rove and Ed Gillespie; the U.S. Chamber of Commerce; and the anonymously funded “American Action Network,” whose leadership included former Sen. Norm Coleman (R‐MN).
  • Of the $294.2 million spent by outside groups, 46 percent was spent by groups that did not reveal where their money came from; 7 of the 10 biggest spending groups concealed their donors’ identities.

This is not a partisan issue. Polls have consistently confirmed that Americans across the ideological spectrum disagree with Citizens United. For example:

  • A Washington Post‐ABC poll found the 80 percent of those queried, including 76 percent of Republicans, oppose the opinion.[2]
  • Survey USA found that 79 percent of Democrats and 67 percent Republicans think Congress should be able to limit the amount of money corporations spend to influence elections.[3]
  • 95 percent of respondents told Hart Research Associates that corporations spend money on politics in order to buy influence.[4]
     

Legislative Actions on Campaign Finance Reform

There are a number of legislative bills that can have a positive impact on reforming our campaign finance system.  Coffee Party USA supports the following bills and initiatives:

  • Fair Elections Now – The Fair Elections Now Act (S. 750 and H.R. 1404) was re-introduced in 2011 in the Senate by Sen. Dick Durbin (D-IL) and in the House of Representatives by Reps. John Larson (D-Conn.), Walter Jones, Jr. (R-NC), and Chellie Pingree (D-Maine). The bill would allow federal candidates to choose to run for office without relying on large contributions, big money bundlers, or donations from lobbyists, and be freed from constant fundraising in order to focus on what people in their communities want.  It offers qualified congressional candidates a viable alternative that encourages small donations and provides competitive grants.
  • Democracy Is Strengthened by Casting Light On Spending in Elections (DISCLOSE) Act – The DISCLOSE Act (H.R. 5175) was introduced in the House by Rep. Christopher Van Hollen (D-MD).  The bill would amend the Federal Election Campaign Act of 1971 to prohibit foreign influence in Federal elections, to prohibit government contractors from making expenditures with respect to such elections, and to establish additional disclosure requirements with respect to spending in such elections, and for other purposes. The senate version was introduced by Sen. Chuck Schumer (D-NY).  On June 24, 2010, the House passed H.R. 5175 by a 219-206 vote. The Senate fell one vote short of breaking a filibuster of the bill on September 23, with a vote of 59-39. The bill needs to be reintroduced in the House and the Senate as a clean bill with no exemptions.  
  • Amendment(s) to reverse Citizens United – There’s a growing consensus among legal scholars and the public that a constitutional amendment is needed to reverse the impact of the Citizens United ruling. Rep. Donna Edwards (D-MD) has introduced in the current session, H.J.Res.78, a constitutional amendment that states "nothing in the U.S. Constitution shall prohibit Congress and the states from imposing content-neutral regulations and restrictions on the expenditure of funds for political activity by any corporation, limited liability company, or other corporate entity, including but not limited to contributions in support of, or in opposition to, a candidate for public office.” We support this amendment. It would clearly establish the authority of Congress to regulate campaign spending. However, we believe that we need the following additional amendments [5] to fully address the legal implications of the Citizens United ruling:
  • Rejecting the notion that corporations are "persons" that deserve the protection of the First Amendment;
  • Rejecting the notion that campaign donations are to be regarded as speech;
  • Establishing clear limits on campaign spending by any individual or entity.

We join Dylan Ratigan in calling for a national dialogue to fully review the Citizens United ruling and to consider the best language for an amendment(s). ​Constitutional amendment requires a two-thirds vote in both chambers of Congress and must be ratified by three-quarters of the states. If an amendment reversing the Citizens United ruling fails to pass, we see no choice other than to join Lawrence Lessig in calling for an Article 5 Constitutional Convention.

  • Shareholders Protection Act – (H.R. 2517, S. 1360) In July, 2011, Rep. Michael Capuano (D-MA) and Senator Robert Menendez, introduced this bill in the House and the Senate, respectively, to amend the Securities Exchange Act of 1934 to require shareholder authorization before a public company may make certain political expenditures.  This will require shareholders to provide majority approval for corporate political expenditures, including expenditures for campaign ads, electioneering communications, issue advocacy and ballot measure campaigns at the state and federal levels. This will “stop activist CEOs from using shareholder money to further their own political agendas.” [6]
     

Wall Street Reform – End too-big-to-fail; Protect consumers

The economic downturn that began in 2007 affected all sectors of the economy due to a combination of bad policy decisions and rational investment behavior by banks in response to this bad policy.  In response to the Great Depression, Congress passed the Banking Act of 1933 to separate investment banking from commercial banking.  In 1999, the act was repealed, a step which many think contributed to the collapse of financial markets.  The net effect of this policy is that the public assumes the risk of investment banking and guarantees against bank failures, while the financial benefits of taking the risk go to private corporations.  This is unsustainable public policy that amounts to transferring America's wealth to multi-national corporations and powerful individuals.

In addition to the $700 billion in bailout money, $9 trillion was disbursed by the Federal Reserve in loans to major banks and Wall Street firms, including foreign banks, during the financial crisis.  Our government bailed out the banks and big corporations with a goal of helping Americans keep their homes and jobs, but that money has not filtered down to the American people.

Despite bailing out large banks, in 2010, approximately 1.2 million homes were foreclosed, as compared to 2004, before the housing bubble, when 100,000 homes were foreclosed upon. The foreclosure crisis is growing and the sheer scale of the problem is staggering. Of the 55 million homes in the US with a mortgage, 10.4 million of them are expected to default. [8]  If we are going to accomplish the goal of keeping people in their homes, then banks need to be encouraged through public policies to work with homeowners to avoid foreclosures, which not only affect homeowners, but also hurt the overall economy by keeping the housing market depressed.

Many in Washington prioritize reducing the national debt above all else and are willing to slash social programs, often maligned as “entitlements,” that help the most needy, even while they continue to bail out large companies. [9]  They appear to be unwilling to look at increasing tax revenues from wealthy individuals or corporations by ending corporate welfare and tax loopholes as ways of balancing the budget.

Polls show that reforming our financial system has broad support and should not be marginalized as a partisan issue. A majority of Americans strongly support Wall Street reform.  A poll conducted by Lake Research Partners for AARP, the Center for Responsible Lending and Americans for Financial Reform found that 63% of voters, including 61% of independents, want more government oversight of financial companies. [10]
 

Legislative Actions on Wall Street Reform

It’s time to recognize that the system is broken – we need to invest in our work force to get our economy moving again.  Coffee Party USA supports the following bills and initiatives:

  • Support and Strengthen the Consumer Financial Protection Bureau (CFPB) – Elizabeth Warren helped establish the CFPB in July 2010 as part of the Dodd-Frank financial reform legislation. For this agency to be effective, it must be strong and independent. [11] The bureau's goals include watching for major violations of mortgage disclosure laws and other infractions at the firms that could cause consumers to unwittingly sign up for risky loans and credit cards. It also scrutinizes whether credit card forms issued by big banks are misleading.  In the AARP survey, 74% of voters support a single agency with the mission of protecting consumers from financial companies.  The CFPB should be strengthened by including a broad consumer education effort to inform consumers of the risks of taking on large consumer debt that are heavily marketed to them by the private financial industry which benefit greatly from the credit card industry.  These consumer education efforts should include alternative approaches to debt, which include saving and self-financing of large consumer purchases as alternatives to taking on debt.
  • End too-big-to-fail  – As a society, we must commit to the principle that no company should be too big to fail. Former Federal Reserve Chairman, Alan Greenspan, once a staunch defender of deregulated markets pointed out in 2009 that “if a company is too big to fail, it’s too big. Failure is an integral part, a necessary part of a market system.” Taxpayers should not be forced to subsidize big risks taken by financial institutions. Even today, our largest banks have over $60 billion in exposure to European debt as reported by Bloomberg News and that number doesn’t include the potentially toxic credit default swaps they have written.  This is a repeat of 2008. Perhaps investors can do what legislators failed to do in the Dodd-Frank financial reform bill which passed in 2010 – overhaul the system by breaking up the big banks.
  • Restore the Glass Steagall ActFrom 2007 to the present day, America has paid the price of repealing the Glass-Steagall Act in 1999. Rep. Maurice Hinchey (D-NY) introduced a bill in 2009, the Glass Steagall Restoration Act, which would again separate investment banking from commercial banking and break over-sized banks deemed too big to fail. During the financial reform debate of 2010, the Cantwell-McCain amendment which would have restored much of Glass Steagall was dropped in favor of the weaker Volcker rule. Without full restoration of Glass Steagall, taxpayers will end up subsidizing the losses of high-risk investments. By any measure, this is not a sustainable public policy.

     

Tax Code – Our government is broke because our tax code is broken

Much of the debate in Washington in the past two and half years has focused around the need to reduce  the deficit and manage the growing debt. We agree that we must steadfastly commit to balancing the budget and reducing spending. However, we believe that balance is needed in producing a viable financial plan for the nation. That is, we need to manage our finances by balancing spending and revenue; short-term budget needs and long-term investment needs. There is no way to avoid it. If we are serious about reducing the deficit, managing the debt and regaining a path to prosperity, we must reform our tax code and increase revenue.

Rep. Jim DeMint (R-SC) said that “The federal tax code, with its 44,000 pages, 5.5 million words and 721 different forms, is a patchwork maze of complexity and a testament to confusion over common sense.” There is wide agreement in Washington and around the country that our tax code must be revamped. [12]

Our tax code, riddled with loopholes, is a byproduct of special interest politics. It neither reflects our nation’s values nor meets the financial needs of its people. We are going broke as a country because our tax code is broken.

As billionaire financier Warren Buffett famously pointed out, his secretary pays a higher percentage of her income in taxes than he does.  And he is no exception to the rule.  Americans, including the top 1/%, want to pay their fair share. [13]

We need a simple and fair tax code that levels the playing field and enables us to get our economic house in order while also meeting our obligations to those still struggling, our ailing infrastructure, and our nation’s defense.

The human cost of our broken tax code and our government’s inability to meet the needs of the post-financial crisis economy is devastating. The Census Bureau’s release of 2010 data on income, poverty and health insurance in the U.S. paints a bleak picture of America’s economic realities. According to the data, the poverty rate rose to 15.1 percent, its highest level since 1993. [14] That translates to 42.6 million people living below the poverty line.  Today, 44 million Americans are on food stamps and 25% of our nation’s children live in poverty.

A recent report from ABC News found that the top 1% earn on average $1.1 million per year, while the bottom 90% (approximately 100 million people) earn $31,000 per year. [15] Since the end of the recession, the top 1% has seen their income rise by .44% while the bottom 99% has seen their income decline by .45%.

Without a commitment to tax code reform and accepting the need for increasing revenue, there can be no viable plan to restore economic prosperity in America.

Legislation Actions on Tax Code Reform

It is time to address the income inequality and the debt problem that is fostered by our tax code.  Coffee Party USA supports the following initiatives:

  • Support a Financial Transaction Tax –  This was proposed in 1971 by Nobel Laureate economist James Tobin “to throw some sand in the gears of our excessively efficient money markets.” This proposal would apply a sales tax on Wall Street transactions and serve as a brake on high frequency computer trading that significantly increases market volatility.  According to a recent New York Times article, a tax of just .5 % could raise up to $175 billion in revenue a year, even if the total number of transactions were reduced by half. [16] European Commission will be implementing a financial transaction tax starting in 2014 and is angry at the US for refusing to do the same. [17]
  • Close the “Carried Interest” Loophole in the Capital Gains Tax – This loophole allows managers of financial partnerships, such as hedge funds, private equity funds, venture capital funds and real estate funds to pay tax on bonuses at just 15 % rather than the personal income rate of 35%.  Closing the loophole would raise $20 billion over the next decade.
  • End tax breaks to oil & gas companies – It’s time to end the tax breaks and subsidies for big oil companies. The big five oil companies have made more than $1 trillion the last decade as gas prices for the consumer have risen.  It’s estimated that eliminating subsidies could reduce the debt by up to $122 billion over a decade. There is bipartisan support for this from Republicans in the Senate — Sen. Susan Collins and Sen. Olympia Snowe joined Democrats in voting for it in May, 2011 — and in the House, including Rep. Paul Ryan. Ryan rightly regards these tax breaks as corporate welfare. [18] Moreover, ending tax breaks to oil companies will set an important precedent for ending other cases of corporate welfare.
  • Revisit the Simpson-Bowles Plan to start a national dialogue on comprehensive tax reform. The Simpson-Bowles Plan states “America’s tax code is broken and must be reformed.” [19]  In the quarter century since the last comprehensive tax reform, Washington has riddled the system with countless tax expenditures, which are simply spending by another name.  These tax earmarks – amounting to $1.1 trillion a year of spending in the tax code – not only increase the deficit, but cause tax rates to be too high.  Instead of promoting economic growth and competitiveness, our current code drives up health care costs and provides special treatment to special interests.  The code presents individuals and businesses with perverse economic incentives instead of a level playing field.”  We support re-opening the Simpson-Bowles plan for tax reform as a starting point in a national dialogue to arrive at a fair tax system that incentivizes economic prosperity for all Americans.
     

Conclusion

America is at a crossroads. The American people are ready to stand up against a political system that allows powerful special interests and party ideologues to have more influence with our elected Representatives than average people.  That is why Americans across the nation are saying enough is enough.  We are not going away. The challenges we face as a country are many. We believe that we must focus the national dialogue on the root causes of the problems and address them head on together as Americans. We must reform our campaign finance system, transform our tax code, and revamp the way Wall Street does business. Our inability to achieve these reforms cripples our economy and democracy, and ultimately, hurts all of us. For months we've listened as the politicians have argued and done nothing. Now it's time for them to listen to us and get to work.

We invite all Americans to join our civil dialogue on solutions, and commit to working together as neighbors, friends, and fellow Americans for the good of the country. 


[1] Public Citizen:  Citizens United:  One Year Later and After Citizens United:  A Look into the Pro-Corporate Players in American Politics.
[2] Dan Eggen, “Large Majorities Opposes Supreme Court Decision on Campaign Financing,” Washington Post (Feb. 17, 2010)
[3] Survey USA, “Americans Broadly in Favor of Limiting What Corporations Can Spend in Elections” (Feb. 2‐9, 2010)
[4] Hart Research Associates, “Protecting Democracy from Unlimited Corporate Spending” (June 6‐7, 2010)
[5] PR Watch review and analysis of proposed amendments to reverse Citizens United. http://www.prwatch.org/news/2011/04/10686/colvin-comparing-constitutional-amendments-proposed-after-citizens-united
[6] Public Citizen: http://www.citizen.org/Page.aspx?pid=4803
[7] Congressional Budget Office Report: Budget and Economic Outlook August 2011
[8] Testimony of Laurie S. Goodman, Amherst Securities Group to the Senate subcommittee on Housing, Transportation and Community Development (Sep. 20, 2011)
[9] Center for American Progress,  “Infographic: Tax Breaks vs. Budget Cuts” (Feb 22,2011)
[10] Lake Research Partners “Wall Street Reform: One Year Anniversary: Findings from a Survey of Likely November 2012 Voters” (July 2011)
[11] Elizabeth Warren, Real Change: Turning up the heat on non-bank lenders (September 2009)
[12] http://www.truthfactor.org/articles_details.php?Super-Congress-Scrap-the-Tax-Code-1413
[13] Patriotic Millionaires
[14] US Census 2010 See http://2010.census.gov/2010census/
[15] ABC World News with Diane Sawyer, Oct. 10, 2011.
[16] “A Sales Tax on Wall Street Transactions” by Nancy Folbre, New York Times, Aug. 22, 2011.
[17] “Merkel Says Won’t Accept U.S. Balking at Finance Transaction Tax” Bloomberg Businessweek, Oct. 15, 2011.
[18] Paul Ryan’s interview with ABC’s Christiane Amanpour, May 1, 2011
[19] The National Commission on Fiscal Responsibility and Reform, December 2010

 

 

 



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