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Amazon’s Worst Bargain Yet

The retail behemoth wants your local government’s business, but there’s a hidden cost to low prices: Local businesses get shut out.

By Katie Parker | July 30, 2018

The billions in tax breaks cities are offering Amazon to host its “HQ2,” Amazon’s bare-knuckled push to squash a business tax in Seattle, and recent strikes for better working conditions in Amazon facilities have all fueled a growing conversation about the retail behemoth’s toll on communities.

But one element of Amazon’s business strategy has fallen under the radar, and this one could really bite where you live: its bid to dominate local government purchasing.

In January 2017, Amazon won a contract with U.S. Communities, a purchasing cooperative made up of government agencies, school districts, and other public or nonprofit agencies. The cooperative wields the heft of its more than 55,000 members to negotiate better prices. With this contract, they can now opt to buy their goods through Amazon Business, which advertises greater product selection, free shipping, and pricing discounts.

While the contract is a big boon for Amazon — a potential for $5.5 billion in sales over 11 years — recent analysis from the Institute for Local Self Reliance (ILSR) seriously questions how good a deal the public is getting out of this.

For one thing, the Amazon contract lacks the pricing protections that are usually standard in public procurement. Rather than relying on a catalog of fixed prices, governments are at the whim of Amazon’s dynamic pricing model, much like the “surge pricing” of ride-sharing services.

The Amazon contract also makes it harder for agencies to buy from local vendors. ILSR notes that while local businesses can join Amazon’s Marketplace to compete for U.S. Communities contracting opportunities, Amazon takes a 15 percent cut. That’s enough, given the already thin margins of public procurement, to push many local businesses out of the running.

For the 1,500 members that have signed onto this contract so far, that means a significant missed opportunity to help their local economies thrive. The good news is that a growing number of governments and nonprofits are realizing that getting the lowest bid isn’t the same as getting the best deal.

Local governments spend money every day. They can use that spending to build up local businesses, create jobs for residents, and grow their tax base, something impossible to do with Amazon’s virtual footprint. This purchasing strategy is more efficient, too: Dollars spent at independent local businesses recirculate at a greater rate than money spent at national chains, creating a multiplier effect.

By shifting their everyday spending, city governments from Phoenix to New Orleans are joining hospitals, universities, and other anchor institutions to spark inclusive economic growth.

Cleveland, Ohio is a great example. There, local anchor institutions like the Cleveland Clinic and University Hospitals helped launch Evergreen Cooperatives, a network of worker-owned businesses established to provide some of the goods and services these institutions routinely need, such as laundry services and food.

The businesses have an explicit goal of hiring local residents facing barriers to employment, and the cooperative structure gives these workers opportunities to participate in decision-making and build wealth through profit-sharing. Evergreen Cooperatives employs more 220 residents and is growing.

Local governments weighing whether to sign on to Amazon’s marketplace should consider this growing movement around inclusive, local procurement. Instead of being lured by Amazon’s come-on of lowest-price promises, stewards of local tax dollars should ask what would bring the best value for their communities.

Instead of going into Amazon CEO Jeff Bezos’ deepening pockets, the money they spend on goods and services should help everyday residents build wealth.

Katie Parker is a research associate at the Democracy Collaborative with a specialty in how health care institutions can support inclusive economic development. Distributed by OtherWords.org.

How to Turn Back a Giant

Lancaster, Pennsylvania residents kept a private prison giant out of their community. It’s an inspiring example for others.

By Negin Owliaei | August 1, 2018

What’s the best way to push profit-seeking corporations out of the public sphere? Don’t let them take over in the first place.

Residents of Lancaster County, Pennsylvania were thrilled to learn this lesson with their recent victory against Geo Group, a giant of the private prison industry.

Geo turned into a household name for profiting off the youth and family detention centers that have become hallmarks of President Donald Trump’s inhumane immigration policies. But the company’s shady practices go way back. Geo Group has misspent millions in federal funds, only to manage facilities that one federal judge called “a cesspool of unconstitutional and inhuman acts and conditions.”

Despite its abhorrent track record, Geo has raked in hundreds of millions of dollars in federal government contracts in the last year, with a staggering $9.7 million lining the pockets of CEO George Zoley in 2017.

In Lancaster County, Geo was bidding to take over the reentry services the county provided to formerly incarcerated people as they left the prison system.

But Lancaster County already had an established reentry program. A coalition of nonprofits known as the Reentry Management Organization had been providing community-led reintegration services with proven success.

Those nonprofits were left in the dust when the county decided to change the funding process to a bidding-style competition. A whirlwind of changing standards and opaque processes left the nonprofits confused. Meanwhile, Geo Group capitalized, putting forward the only bid to provide parolee services.

Lancaster residents were surprised and angry to learn that local nonprofits might be replaced by prison profiteers. They leapt into action, planning town halls and packing prison board meetings. Religious leaders, nonprofit leaders, and formerly incarcerated citizens turned the normally empty gatherings into standing-room-only events.

“I don’t think [county officials] expected such a community response — or, as they called it, a distraction,” Michelle Hines, an organizer with Lancaster Stands Up, told me.

“It’s a bad company,” Hines added of Geo Group, citing her concerns over for-profit prisons in general, and Geo’s contract to build controversial immigrant family detention centers in particular. “I know I’ve lived in Lancaster my whole life and I don’t want them in my county.”

Neither did many people in Lancaster. Ultimately, the county was swayed, rejecting the company’s bid. Hines and other members of the community are now pushing the county to let the local nonprofits maintain control over the reentry program.

“These big corporations over and over again come into our communities, buy people off, and then are able to perpetrate harm against everybody here,” Hines said. “For a really long time I’d been watching this happen and it just felt like an impossible thing to fight back against, and I feel so empowered to be in a position to have enough people power in our community to be able to fight back.”

Lancaster Stands Up has been organizing in southern Pennsylvania for two years now. The collective came together in the wake of Donald Trump’s election, and has since put pressure on elected officials across the political spectrum in an effort to recast established politics into something that works for people in their community.

“To do work to try to make sure that the people — the regular, everyday working people — have a voice, and to see that actually come to fruition in such a concrete way,” Hines said, “is really incredible.”

Hines hopes the victory against Geo will help other communities railing against what often feel like insurmountable odds. “I hope we can provide some inspiration to other groups that are fighting and feel like they’re up against an impossible system and incredible power, to know to keep at it.”

Negin Owliaei co-edits Inequality.org, where a longer version of this piece appeared, for the Institute for Policy Studies. Distributed by OtherWords.org.

If You Take a Charitable Tax Deduction, You Should Actually Give to Charity

Wealthy donors are hoarding money in shady “charity” accounts in the face of urgent community needs.

By Helen Flannery, Chuck Collins | July 26, 2018

In every community, there are nonprofit charities that serve real needs: local food pantries, programs addressing the opioid crisis, the Red Cross chapters that come to our aid after a storm. Charities provide vital services to the people and places they serve.

These organizations lean heavily on volunteers, fundraisers, and donors. And most ordinary donors give without consideration of a tax break — people give their time, treasure, and talent without keeping score.

For many ultra-wealthy donors, however, charity can be motivated not just by generosity, but also by tax avoidance.

A case in point is the surge of donor-advised funds, or DAFs, created in recent years by wealthy donors. We studied these accounts in Warehousing Wealth, a new report for the Institute for Policy Studies.

A DAF is like a mini-foundation, a holding account for giving — but with substantially greater benefits and conveniences for the donors.

When donors contribute to a DAF, they take a tax deduction — often a big one. But those funds can then sit in the DAF for years, even generations, before they’re granted out to charities working to meet real social needs.

Originally created by community foundations, DAFs have been recently adopted by for-profit Wall Street firms like Fidelity Investments, Goldman Sachs, and Charles Schwab.

These firms created charitable DAFs to serve their wealthy clients’ philanthropic goals, while happily charging fees to keep funds under management. They have no legal incentive to see funds move in a timely way to active charities, so corporate-affiliated DAFs have been growing exponentially in recent years.

A decade ago, the biggest donation recipients in the United States were the United Way, the Red Cross, and the American Cancer Society. Today, it’s the Fidelity Charitable Gift Fund. In fact, six of the ten largest charity recipients are DAFs.

Donations to DAFs grew by 66 percent over the past five years, compared to just 15 percent for charitable giving by individual donors. Donations to Fidelity Charitable grew over 400 percent over seven years, to nearly $7 billion last year.

Our tax code provides incentives for people to give to charity through the charitable tax deduction. The ultra-wealthy are the biggest beneficiaries of this deduction, which comes at a cost to the rest of us.

For every dollar a millionaire gives to charity, the public subsidizes 37 to 57 cents of that donation through diminished tax revenue. By giving to their own selected charities, millionaires are paying less for public services like infrastructure, national defense, veteran care, and parks.

So there’s a natural public interest in making sure DAF donations at least move quickly to active charities. But there’s no legal requirement for DAFs to pay out quickly — or ever.

DAFs also open up loopholes for donors and private foundations to get around tax restrictions, and have little transparency and accountability.

Simple reforms could prevent these abuses.

Lawmakers could require the distribution of DAF donations within a fixed number of years. They could delay the tax deduction until funds are paid out to a public charity.

They could also ban DAFs from giving to private foundations, and vice versa — closing loopholes that further delay giving to active charities. And they could bring greater scrutiny to gifts of appreciated assets.

We don’t want to discourage charitable giving, but the current system poses significant risks to nonprofits, the people they serve, and taxpayers. As a society, we can’t condone hoarding wealth at a time of urgent social needs.

Chuck Collins and Helen Flannery are co-authors, with Josh Hoxie, of the Institute for Policy Studies report Warehousing Wealth. Distributed by OtherWords.org.

Rural America Stands up for Immigrants

I’m sick of politicians who exploit the suffering of rural white communities like mine to justify atrocities against immigrants.

By Justin Vest | July 30, 2018

This summer, people gathered in cities throughout the country to protest our government’s separation and incarceration of immigrant families. In Alabama, hundreds of local residents came together in Birmingham, Montgomery, and Dothan.

It was only the Huntsville rally that made national news — after an armed counter-protester attempted to disrupt the event. Whether explicitly stated or not, the narrative was the same: A white Trump supporter threatening violence came to epitomize Alabama’s stance on immigration.

It’s a convenient narrative that plays into the hands of anti-immigrant policymakers, who’ve been using Alabama to justify harsh immigration policies for years.

In 2011, Alabama passed the notorious HB 56, the harshest anti-immigrant law in the country. It required schools to determine the immigration status of students, barred undocumented immigrants from working or renting housing, gave local law enforcement authority to verify immigration status, and criminalized certain actions by individuals and charitable organizations — including transporting immigrants to the doctor or grocery store.

Some of these provisions were struck down following legal challenges, but many of the most egregious elements are finding new life at the federal level. Secretary of Education Betsy DeVos recently said schools should be able to decide whether to report undocumented students to ICE. And Jeff Sessions’ new “zero tolerance” policy and a series of procedural changes have taken the spirit of Alabama’s original HB 56 nationwide.

What gets ignored is the actual attitude of Alabamians toward immigrants. The majority of Alabamians aren’t uneducated racist bigots in lockstep with President Trump’s agenda.

Yes, Trump won 62 percent of the vote in Alabama, but 36 percent of eligible voters weren’t compelled by any candidate to turn out to vote. Taken together with those who voted against him, Trump only won 39 percent of the total Alabama electorate. Among those who voted for him, an even smaller margin supports his every move.

As a native of Alabama who grew up in small towns, this isn’t news to me, but the rest of the country needs to know as well.

The fact that hundreds of people attended numerous rallies across Alabama in support of immigrants should be evidence enough. The crowds may not have broken any records, but in a state that’s predominantly rural, it’s a big deal.

Volunteers with Hometown Action, a new group organizing a multiracial constituency of working class people in small towns and rural communities, have knocked on thousands of doors throughout Alabama. They’re asking about which issues matter most to local residents, and who they believe is responsible for their problems.

Even in some of the most conservative counties in the state, we found that most people don’t blame immigrants for their problems — even if politicians do.

Most people understand it’s the politicians and their wealthy corporate donors — industries that also exploit the resources of Latin American nations, the labor of immigrant workers, and profit off the incarceration of children and their families — who are responsible for their day-to-day struggles.

These are the same kinds of people who profit off the opioid crisis, replace good-paying jobs with precarious low-wage work, and who limit the opportunities of our children by under-funding our public schools.

I’m sick and tired of my people — working-class white people and small town Alabamians — being used by politicians as justification for these atrocities.

Alabamians are standing up for immigrants, and it’s time to change the narrative about who we are.

Justin Vest is the executive director of Hometown Action. He grew up in Alexander City, Alabama. Distributed by OtherWords.org.

The Mosquito Gap

How poverty, climate change, and bad policy put poor people at greater risk from pest-borne diseases.

By Sarah Anderson | March 28, 2018

OK, I admit it, I’m a freeloader.

My neighbors asked if I’d go in on a mosquito control service last spring, and I turned them down. I was skeptical about whether the “eco-friendly” service would actually work. But I was mostly taken aback by the cost: $750 for the season.

Several neighbors went ahead and paid for the service, which proved so effective I was able to enjoy my back yard for the first time without first dousing myself with bug spray.

I felt guilty — and not just because I was mooching off somebody’s pricey pest control. I’d also been forced to recognize yet one more way privileged people like me are often insulated from public problems.

As fears of mosquito-borne diseases increase and public pest management spending falls far short, private control services are rapidly expanding. The Zika outbreak in 2016 helped kick up residential mosquito control revenues by an estimated 12.6 percent. Demand has also created a market for automatic home spraying systems, which run about $4,000.

For low-income Americans, the cost of these services would be prohibitive. Yet poor neighborhoods are more likely to have severe mosquito problems.

A three-year study in Baltimore found that the greater prevalence of good mosquito breeding grounds in poor neighborhoods, including abandoned buildings and accumulated trash, led to worse infestations than in more affluent areas.

Another study in one Georgia county found that neighborhoods made up mostly of people of color were 4.5 times more likely than whites to be at risk of West Nile, while residents of high poverty areas were 5.5 times more likely to be at risk.

In 2017, the Centers for Disease Control received reports of more than 2,000 cases of West Nile virus from across the United States — and 121 people died from the disease. The actual number of cases is likely much higher, since the poor are also more likely to lack health insurance, and thus avoid seeking medical treatment if they do become ill.

Public health problems related to mosquitoes aren’t going away.

As climate change improves environmental conditions for mosquitoes, it increases the risks of the diseases they carry. According to Climate Central, in dozens of cities across the Midwest, Northeast, and along the Atlantic Coast, mosquito seasons have grown by at least 20 days over the past 35 years.

Despite this growing menace, public funding for mosquito control has declined by more than 60 percent since 2004, according to the National Association of County and City Health Officials.

In North Carolina, for example, the state government cut all funding for such programs in 2014. And while some counties and cities in that state began paying for private services, other cash-strapped communities have not. The Asian tiger mosquito, which has the ability to transmit West Nile virus as well as other diseases like Chikungunya and dengue fever, has been found in every county in the state.

In the long-term, the impacts of this under-funding could be catastrophic.

In 2017, a team of Johns Hopkins Bloomberg School of Public Health and other researchers analyzed the potential costs of a major Zika attack in the Southeast United States and Texas. They concluded that efforts to control and treat the disease, which causes neurological defects in growing fetuses, could cost from $1.2 billion to as much as $10.3 billion.

On top of all the other challenges facing people in poor communities, they shouldn’t have to worry about getting sick from mosquitoes. Unfortunately, the White House budget proposal for 2019 would cut resources for the Centers for Disease Control — the nation’s health protection agency — by 20 percent.

Closing the mosquito gap is going to take a much bigger commitment than that.

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and co-edits Inequality.org. Follow her at @Anderson_IPS, Distributed by OtherWords.org.

The Organic Food Industry Thrives on Regulation

Without strict standards, the organic label would become worthless. So why is the White House rolling them back?

By Jill Richardson | August 1, 2018

Strangely enough, sometimes industries want regulation.

Obviously, this is not true of all (or perhaps even many) industries, and it’s certainly not true of all regulations. However, the organic food industry thrives on regulation — and for good reason.

Organic producers can charge a premium for their products. The reason why consumers are willing to pay higher prices for ostensibly the exact same products they could get for cheaper is because they have confidence that organic food is, in some way, better.

Organic foods are produced without chemical fertilizers, sewage sludge, genetically engineered seeds, antibiotics, and synthetic pesticides.

For farmers, becoming organic is purely optional. Yes, the government regulates organic standards, but no farmers are required to become organic.

Those who become certified organic do so for a reason. Maybe they believe organic agriculture is the best way to grow food, or maybe they simply see it as a clever business strategy. Either way, becoming an organic producer opens the door to getting paid higher prices for your products.

For consumers, it’s only worth paying extra for organic food if you believe you’re getting something extra. Does that organic label mean anything? Or is organic food basically the same as the non-organic food that costs less?

That’s where the regulations come into play. The rules for organic agriculture must be strict enough to convince consumers that they’re getting a product worth paying extra for, but not so strict that no farmers can ever achieve them.

Yet the Trump administration is pulling the plug on regulations that the organic agriculture industry wants.

One proposed rule they’ve withdrawn was a requirement that organic hens had to have access to an outdoor space with soil, and not just an enclosed porch with concrete floor.

The proposed rule speaks to a longstanding difficulty in organic agriculture: It’s difficult to profitably raise livestock, particularly in a large operation, while providing the animals with living conditions that organic consumers may wish for.

Access to an outdoor area with soil doesn’t go far enough for many organic consumers, who would no doubt prefer the hens also have access to grass. Chickens enjoy eating grass, and they especially love scratching in the dirt for tasty bugs. The chickens’ diet affects the flavor and nutrition of the eggs, too.

For a farmer, the problem is scale. If you put too many chickens in too small a space, they’ll eat every blade of grass in no time at all. Given the tiny profit margins on each egg laid and the enormous number of laying hens required for a farm to turn a profit, it’s hard to imagine any large egg operation having enough space to allow hens access to grass.

Allowing chickens outdoor access to soil, on the other hand, is more doable. This is one of several proposed organic rules that the industry actually wants, but the Trump administration has canceled.

If you ask me, the deregulation zeal of the Trump administration has gone too far.

The entire value of the organic label is in the stringency of organic standards. Without regulations, the organic label would become worthless. Consumers would lose their reason to pay more for organic food.

One cannot help but wonder if gutting the organic program is actually the intent of Trump’s Department of Agriculture. Or are they simply so accustomed to opposing regulations that they can’t conceive of an industry actually finding them beneficial?

The Trump administration should leave well enough alone when it comes to organics. If both industry and consumers prefer the regulations, there’s no reason whatsoever to get rid of them.

OtherWords columnist Jill Richardson is the author of Recipe for America: Why Our Food System Is Broken and What We Can Do to Fix It. Distributed by OtherWords.org.

Flannery
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