The first 24 hours after Congress passed the Sarbanes financial-reform bill must have been excruciating for many of our nation's leading legislators. In a stunning burst of boldness -- or panic, what with the market's collapsing -- they had enacted an important bill reforming a number of corporate and financial practices. They had stood up to some of the most powerful business lobbies in the land -- that is, many of their biggest donors. And clearly, their psychic equilibrium, even their sense of identity, had gotten all shook up.
One day of public service, apparently, was about all that our legislators could stand. The day after the Sarbanes bill sped through Congress, two more "normal" pieces of legislation -- one giving the president the authority to negotiate fast-track trade agreements, the other giving the credit-card companies their long-sought-after legislation making it more difficult for ordinary Americans to file bankruptcy -- hit the floor of the House, unheralded but with a full head of steam. The House narrowly enacted the fast-track bill; an ancillary battle over language concerning anti-abortion activists snagged the bankruptcy bill, though consumer lobbyists still think, and fear, that it will pass.
The Sarbanes accounting reform was a genuine if small step in the right direction. The bill doesn't address the stock-options problem, but it will improve federal oversight and enforcement of existing laws, and it will intimidate corporate executives by adding tougher penalties for malfeasance. For the first time since God knows when, liberal Democrats actually prevailed on financial legislation.
With that, Congress reverted to business as usual, taking up a bill of great importance to America's credit-card companies. The basic purpose of the bankruptcy legislation is to make it more difficult for Americans of modest means to discharge their credit-card debt. Under the terms of the bill, the card companies would be able to extract payments from debtors while filing for bankruptcy would be made more difficult. The bill makes no exceptions for employees who lose their jobs because of megacorporation collapses such as Enron's and WorldCom's, and places no new controls on certain predatory lending practices.
The bill has currently hit a bump in the road: The opposition of anti-abortion Republicans to some of its provisions has blocked House GOP leaders from speeding it along to the Senate. The House is expected to take the bill up again after its August recess.
Some of the country's largest campaign contributors -- among them, MBNA, whose employees were among the highest donors to Bush's presidential campaign -- put major resources into lobbying on the bill's behalf. Senate Majority Leader Tom Daschle, who has always carried water for the card companies, played a key role in keeping the bill alive.
For middle- and working-class Americans, the bankruptcy bill would come at a difficult time. The economy is sagging, and no one knows how Wall Street's great sell-off may affect the "real economy." Medical coverage is shriveling while health-care bills are rising (and sometimes being paid off with credit cards). Consumer debt continues to soar: Nearly 20 percent of households now have either zero or negative net worth. Total "revolving consumer credit" -- primarily credit-card debt -- has tripled in the last decade.
Unfortunately, trade-promotion authority failed to raise the ire of adamant anti-abortionists. It rocketed through the House, from a dead-of-night conference to a dead-of-night vote, taking many members by surprise. On Thursday, July 25, conference committee heads Sen. Max Baucus (D-Mont.) and Rep. Bill Thomas (R-Calif.) threw out their fellow conferees and shut themselves in a room to hammer out the differences between the House and Senate versions of the bill. When they'd finished, Baucus had been steamrolled by Thomas. (One anti-fast-track lobbyist called it a meeting between "the village idiot" and "an evil genius.") The actual text of the legislation -- all 304 pages of it -- wasn't released until 7 P.M. Friday, and shortly before 4 A.M. the House approved the measure by a 215-to-212 vote. Senate passage is a foregone conclusion.
Why the rush? The White House argues that granting the president trade-promotion authority will, in the short term, help pump up the ailing economy by building investor confidence. But when fast track failed to pass in 1997 and 1998, the markets barely flinched; indeed, the greatest run-up in market history only accelerated. For the long term, the White House argues, the president's newly restored (and unchecked) negotiating power will create jobs at home and build the U.S. export market. But even if exports do rise, that doesn't always translate into expanded employment opportunities. According to Rob Scott of the Economic Policy Institute, three million jobs migrated abroad between 1994 (when the North American Free Trade Agreement took effect) and 2000. "Global trade deals generally send jobs overseas," he says.
This migration of economic activity abroad is reflected in the bill's cost to taxpayers: $10 billion to $12 billion over the next 10 years, much of which will be paid out in "trade-adjustment assistance" to workers who've lost jobs as a result of "foreign competition." It was partly the expansion of such programs that got five New Democrats -- Reps. Adam Smith and Rick Larsen of Washington state, Ellen Tauscher and Jane Harman of California, and Harold Ford of Tennessee -- who had opposed fast track in December to vote "yes" this time around. All five are business Democrats with a long record of support for free-trade accords, but they couldn't swallow the late 2001 House version of fast track, which potentially abrogated many state and federal statutes.
The chief difference between the current bill and December's is that the new one includes increased funding for trade-adjustment assistance. Whether that's really a decisive change is subject to dispute. AFL-CIO lobbyist Thea Lee says that such assistance will be "nearly impossible to administer, because the eligibility requirements have become so convoluted." The AFL-CIO lobbied hard -- as it always has -- against fast track and plans on yanking its support for those Democrats who switched their votes.
In actuality, fast track has little to do with the power of the presidency or the strengthening of America's economy; it's all about pumping up the power of global corporations to control markets and avoid government regulation. The new law not only denies Congress the ability to amend executive-branch trade deals, it also spreads NAFTA's Chapter 11 provisions to 31 countries, which will create a free-trade zone that will blanket the Western Hemisphere. Chapter 11 allows corporations to sue governments, in secret World Trade Organization tribunals, for "regulatory takings" -- the projected financial costs to businesses for having to comply with health, safety and environmental laws. Some Chapter 11 challenges have already forced governments to weaken their laws; others have ended in government payouts to allegedly aggrieved businesses.
The next area of global trade for which the corporate heavyweights are planning major mischief is the service sector, which includes everything from food safety to energy and -- surprise! -- accounting. So much for the spirit of Sarbanes. A little-known global pact called the General Agreement on Trade in Services (GATS) has been taking shape for years. With the passage of fast track, the trade discussions that were launched last November in Qatar can now push GATS along more quickly. Once in place, GATS would essentially give the WTO the power to oversee many service industries and open up others to privatization. One of the first targets of GATS is the accounting industry. A key adviser to the WTO in this endeavor has been the firm of Arthur Andersen, and many of the other big firms that the Sarbanes bill just slapped down have been working with the WTO as well. GATS negotiators claim they're trying to create greater openness and transparency in accounting standards, though with advisers such as Andersen, credulity is somewhat strained.
With one bill Congress taketh away corporate recklessness and with another it giveth back. This should not be a stunning development. Few workers' and consumers' advocates expected the Band-Aiding of one laissez-faire sector to quickly lead to the substantive reform of others. But fewer still expected Congress to send out such conflicting messages in the course of a couple of days.
Momentum, though, still rests with the reformers. During recent homeland-security deliberations, Democrats proposed an amendment that would forbid the government from giving security-related government contracts to corporations that have set up offshore tax shelters. Republicans initially were going to oppose the measure, but when they saw that it might pass, many of them changed their votes from "nos" to "yesses." Such small victories -- especially ones in the Republican-controlled House -- could spark others. At some point, expensing stock options should come to the floor, though corporate pressure on both parties to kill it will be intense.
Further reforms may gain momentum as more companies restate their profits, as other business behemoths collapse, and as the Harken and Halliburton stories unfold. A broader and more meaningful reform agenda -- public financing of campaigns, greater shareholder control over corporate boards -- is emerging. And new proposals are coming from the AFL-CIO, groups such as Public Citizen and progressive business leaders. At some point, Congress may realize that the dethronement of corporations is not only good politics but good for the country. Who knows? A few more genuine reforms and Congress might even regain some self-respect.