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Foxconn cashes in for $3 billion-plus: Analysis

Foxconn hit the jackpot with Wisconsin on Wednesday, when CEO Terry Gou and Governor Scott Walker signed a memorandum of understanding for the company to invest $10 billion in southeastern Wisconsin in return for $3 billion in state subsidies and an undetermined amount of local incentives in the form of tax increment(al) financing (TIF).*

The basic outline of the deal, sent to me by John Haynes of the Milwaukee Journal-Sentinel, is pretty simple: Foxconn is required to invest $10 billion and employ 13,000 workers within six years at an average pay rate of $53,875 a year plus benefits. In return, the state will give Foxconn $1.5 billion in tax credits for the 13,000 new jobs, $1.35 in tax credits for the $10 billion investment, and $150 million in sales tax breaks on construction materials for the plant. The tax credits are refundable, so Foxconn will receive a check if it doesn’t owe much or anything in state income tax in any given year. The state credits will total $200-$250 million a year for up to 15 years, or until Foxconn has received the entire $3 billion. All this must be approved by the state legislature by September 30. According to the state, if Foxconn does not create all the jobs or make the entire investment, it does not get the full subsidy.

In addition, the legislature must also amend the state’s TIF law by lifting the 12% cap on the ratio of TIF’d property value to a municipality’s total property value, and extending the allowable life of TIF bonds. Together, these would make larger TIFs and greater municipal debt possible. It is unclear exactly how much more this will add to the subsidy package, since a final site hasn’t been chosen in the Kenosha-Racine area. But Kansas City has certainly managed to give hundreds of millions of TIF dollars to companies in the past, so a large local component to the incentives package is certainly possible.

Is this a good deal for Wisconsin? As the state’s press release points out, it’s better than the deals Boeing has gotten in Washington state, including a much lower cost per job — but that’s a pretty low bar. As I discussed last time, Foxconn wanted desperately to locate in the United States due to its fear of U.S. protectionism, so the country as a whole was actually in a very strong bargaining position. However, the possibility of a bidding war between different states negated this, even though the individual states (Wisconsin at 3.1%) had very low unemployment rates and thus greater bargaining power than otherwise. Without EU-style rules to restrict bidding wars, there was a high probability of Foxconn hitting the jackpot.

With EU-type rules, it would be impossible to give a $3 billion investment incentive, since $9.9 billion of the $10 billion would only be eligible for 34% of any region’s maximum aid intensity. The maximum conceivable subsidy would be a little over $1 billion.** We might say this consideration is the high bar, but it’s worth knowing what is already achievable with a different set of rules.

On a strict cost basis, if the deal works out as claimed, you still have a cost per job of $231,000 and an aid intensity of 30%. These would be normal numbers for an automobile assembly plant, but Foxconn will only be paying a tiny bit over the Wisconsin average wage, certainly less than auto assembly pays. So these are basically just average jobs getting a lot of money. Many average jobs, certainly, but there is a good argument that you have diminishing returns. The more jobs there are, the more pressure that gets put on schools and infrastructure as people move to southeast Wisconsin, and the greater the number of jobs that will likely go to Illinois residents (indeed, Greg LeRoy of Good Jobs First says Illinois is the biggest winner of this deal after Foxconn itself). So you really shouldn’t be spending 10 times the incentive dollars for 10 times the jobs.

What seems worst to me is that not only did Foxconn definitely need to be in the United States, but it probably wanted to locate in the Congressional District of House Speaker Paul Ryan all along. This was a very short bidding war. Wisconsin municipal officials were only notified about two months ago, and we have seen no stories about competing bids, nothing about other governors making a pilgrimage to Asia. This seems like it was never much of a competition. If that’s true, Wisconsin got taken to the cleaners. Even if there was a genuine competition, the deal was way too rich.

 

* In Wisconsin and a few other states, the program is known as tax incremental financing, but in most of the country, it is simply tax increment financing.

** According to EU rules, the maximum aid intensity of 50% of investment is only allowable in regions with less than 45% of EU average per capita income. These areas are unlikely to be the site of an advanced manufacturing facility. The next highest maximum is 35% (down from 40%, such as Dresden, Germany, which has quite a bit of high-level manufacturing, such as microchip fabrication), and 34% of that is 11.9%. 11.9% of $10 billion is obviously $1.19 billion, which is why I say the maximum conceivable subsidy is just over $1 billion, and $3 billion is simply impossible under these rules.

Cross-posted from Middle Class Political Economist.

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Repeal ACA Rejected Again – Updated

July 25, 2017: There is a lot of bad dialogue going on in the news these days. In my last three posts, I have tried to point out what can be passed by Repubs with just 51 votes and what requires 60 votes. Much thought being given to defunding Planned Parenthood and the Mandate(s). If Repubs chose to follow Reconciliation and not nuke it and/or the supermajority vote, both of the defunding and the elimination of the Mandate(s) are not going to happen. The Parliamentarian decided on 60 votes for each to pass.

“The discussions came as the Senate rejected 45-55 a straight repeal of Obamacare with a two-year delay in implementation to allow Congress to work out a replacement. Seven Republicans opposed the measure.”

In the 2015 bill, Republicans had attempted to kill the mandate. The parliamentarian had ruled it could not be done in Reconciliation. “In 2015 the Senate revised the ACA repeal reconciliation bill passed by the House after the Parliamentarian ruled that it could not repeal the individual and employer mandates under the Byrd rule, amending the bill to repeal only the penalties imposed by the mandates.” This would require sixty votes to accomplish if not amended. The Senate could eliminate the monetary penalty.

July 26, 2017: Sens. Lamar Alexander, R-Tenn.; Shelley Moore Capito, R-W.Va.; Susan Collins, R-Maine; Dean Heller, R-Nev.; John McCain, R-Ariz.; Lisa Murkowski, R-Alaska; and Rob Portman, R-Ohio, joined all Democrats to defeat the amendment, which would have given Congress two years to devise a replacement to the 2010 Affordable Care Act.

July 27, 2017: Not going to raise the flag in honor of McCain voting “no” as he should have done this long ago. McCain’s reasoning for voting against the repeal and/or amend is false.

“McCain said that he’s repeated time and time again that one of the ‘major failures’ of Obamacare was that it was “rammed through Congress by Democrats on a strict-party line basis without a single Republican vote.’

‘We should not make the mistakes of the past that has led to Obamacare’s collapse, including in my home state of Arizona where premiums are skyrocketing and health care providers are fleeing the marketplace,’ McCain said.”

Republicans had every opportunity to participate in designing the ACA and refused to do so. That premiums are increasing have two reasons. The lack of control of the rising cost of the healthcare industrial complex and the blocking of the Risk Corridor Program by Sessions, Upton, and Kingston.

– People have been claiming McCain is a maverick and he bucks party lines. Not really as he goes with the flow 87% of the time. He just took an opportunity to stick it to Trump and some others. The real Maverick who voted “NO” was Susan Collins who votes the party line 60% of the time.

July 28, 2017: Now Trump again has threatened to kill the ACA by blocking the CSR subsidies to those between 100% and 250% FPL attacking the low income citizens.

– In passing the blame around for the Republican failure to repeal and amend the ACA; Congressional Idiot Louis Gohmert crawls out from under his rock. “I pray for Senator McCain, for his health, his full recovery from the cancer but it doesn’t give him the right to make people suffer more under the current ACA,”

– Always the positive aww shuck guy Paul Ryan: “‘We were sent to Washington to fulfill the pledges we made to our constituents. While the House delivered a bill to repeal and replace Obamacare, unfortunately the Senate was unable to reach a consensus,’ Ryan said in a statement Friday. ‘I am disappointed and frustrated, but we should not give up. I encourage the Senate to continue working toward a real solution that keeps our promise.'”

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First Vote to Amend and Repeal Rejected

The first vote in the Senate to amend the PPACA was rejected.

“Senators voted 57-43 late Tuesday to reject the plan in the first vote on an amendment to the bill. Those voting “no” included nine defecting Republicans. The vote underscored problems Republicans will have in winning enough votes to recast Obama’s statute.

The rejected proposal included language by Senate Majority Leader Mitch McConnell erasing the Obama law’s tax penalties on people not buying insurance and cutting Medicaid.

Language by Texas Republican Sen. Ted Cruz would let insurers sell cut-rate policies with skimpy coverage. And there was an additional $100 billion to help states ease costs for people losing Medicaid sought by Midwestern.

By 57-43 — including nine GOP defectors — it blocked a wide-ranging proposal by McConnell to erase and replace much of the statute. It included language by Sen. Ted Cruz, R-Texas, letting insurers sell cut-rate policies with skimpy coverage, plus an additional $100 billion to help states ease out-of-pocket costs for people losing Medicaid sought by Midwestern moderates including Rob Portman, R-Ohio.”

Senate blocks proposal to repeal ‘Obamacare’

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What Will It Take for Republicans to Be Able to Revise the ACA

The first section of issues McConnell and Republicans must overcome requires 60 votes due to the Parliamentarian ruling the provisions of the BCHA violate the Byrd Rule; consequently, the Reconciliation procedure requiring only 51 votes can not be used to repeal the Affordable Care Act (ACA) or waive the Byrd rule. The second set of provisions ruled upon by the Parliamentarian only require 51 or a majority vote to pass these changes.

There is little McConnell and Republicans can do to get past a supermajority vote. McConnell appears to be confident and it may also be possible to kill the supermajority vote. It will be interesting to see what he is thinking. The vote will take place this week unless canceled or rescheduled.

The provisions that the Parliamentarian ruled may be stricken if raised by a point of order include (requires 60 votes to waive the Byrd rule)

• The provision defunding Planned Parenthood;
• The provisions prohibiting the use of small business tax credits and individual market premium tax credits to pay for health plans that cover abortions;
• The sunset of an essential health benefit coverage requirement for Medicaid plans;
• The section funding cost-sharing reductions (CSRs), which the Parliamentarian ruled was redundant of current law, which already funds them (this ruling seems contrary to the lower court’s ruling in House v. Price that money had not been appropriated for the CSRs, but is consistent with the belief that the CSRs are already built into the budget baseline, thus an appropriation does not affect the deficit. A bill to clarify the appropriation situation could, of course, be passed separately from the reconciliation act;
• The six-month waiting period for individuals who have not maintained continuous coverage;
• The provision sunsetting the federal medical loss ratio requirement and allowing states to set the medical loss ratio;
• A provision, that has been removed from the most recent version of the BCRA, that might have allowed states to rollover unused Medicaid block grant funds and possibly use them for other purposes;
• The “Buffalo Bailout” which would have limited the ability of New York State to require counties other than those in New York City to contribute funding to the state’s Medicaid program (the ruling on this provision should caution against including further state-specific provisions in future versions of the legislation);
• A provision grandfathering certain Medicaid waivers and prioritizing Medicaid Home and Community-Based Services Waivers;
• A provision requiring a report by the Department of Health and Human Services (HHS) to Congress regarding the preferability of adopting a different system for reporting Medicaid data; and,
• A section requiring HHS to consult with the states before finalizing Medicaid rules,
• The provision allowing age rating at a 1 to 5 rather than the current 1 to 3 ratio, increasing premiums for older people and decreasing them for younger; and
• The provisions allowing small business association health plans that would be regulated as large group health plans, largely free from state regulation.

The Parliamentarian upheld against a Byrd rule challenge (requires majority vote to pass):

• A provision allowing state the option of imposing work requirement on Medicaid enrollees who are not disabled, elderly, pregnant, or within 60 days of giving birth;
• A provision granting $10 billion to Medicaid non-expansion states;
• The state stability and innovation fund, which imposes abortion restrictions by funding the program through the Children’s Health Insurance Program, which already prohibits abortion funding;
• A provision adjusting per capita cap targets for low-spending and high-spending states to promote equity;
• The permanent repeal of the cost-sharing reduction program beginning in 2020; and,
• A provision requiring states to include information on per capita enrollment and expenditures, psychiatric hospital expenditures, and children with complex conditions in their Medicaid expenditure reports.

There are a few more issues the Parliamentarian still has to rule upon which I have not included; but, you can find them on the link I have provided. Senate Parliamentarian Rules on BCRA July 25, 2017

Senate GOP Wins Vote To Debate Health Care, Then Loses Vote On ACA Replacement Bill July 26, 2017, Tim Jost, Health Affairs Blog

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Game Of Thrones Guesses

Dan here…Lifted from Robert’s Stochastic Thoughts:

Game Of Thrones Guesses

1. I guess from the TV series it is official that John Snow is the son of Lyanna Start and Rhaegar Targaryan
2. I’m a fairly sure that Lyanna Stark is also the knight of the laughing tree (and that’s part of the reason Rhaegar loved her so much it caused a civil war).
3. in King’s Landing there is a black cat with one ear who hates Lannisters . I am suspect that he was Rhaenys Targaryen’s pet whom she calle Bellarion the dread. I also suspect that Arya Stark will see through that cat’s eyes.
4. I am fairly confident that the horn of Joramun was found by John Snow with obsidian weapons and given to Sam Tarly
5. I am quite confident that the younger brother of Cersei who will strangle her is Jaime not Tyrion.
6. of course John Snow is one of the heads of the dragon. I guess that Aegon Targaryen VI isn’t the third (he would appear in the TV series if he were important). Some suspect that Tyrion is the bastard son of the mad king. I don’t have a guess. Also Brandon as Warg might control a dragon.

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US Public Support for Medicaid

Prominent among the things that the out of touch elite knows about regular Americans in, say Kansas where something is the matter, is that those people oppose means tested programs almost as much as they support Social Security old age and survivor benefits and Medicare.

(Another used to be that the didn’t support higher taxes on high income people. One of my angrybear obsessions was noting the solid to overwhelming majorities in all polls dating back to 1992 who have told Gallup that “upper income people” pay less than their fair share of taxes (search for Gallup here). For roughly a decade, I have been a voice crying out in a crowded room as the fact has become too obvious to deny.)

Now Kate Zernike & Abby Goodnough at the New York Times have noted the overwhelming support for means tested Medicaid (both the ACA expansion and legacy Medicaid).
update: I should write that I think the article is excellent. I object to one clause in the article.
End update:

But even when reporting the fact, they repeat the old falsehood asserting “The shift in mood also reflects a strong increase in support for Medicaid, ”

Now the mood certainly includes overwhelming support for Medicaid. The claim that this is an increase from previous lower levels is not supported by evidence presented in the article. There is the problem that, in plain English, high and increased are used as synonyms (that is people are generally innumerate about levels and changes). But, I think, it is also true that a plain fact clearly demonstrated in poll after poll has been denied by members of the out of touch elite. Here I think highly educated urban liberals assume most of our countrymen are savage reactionaries. Also political reporters talk to Republican operatives a lot and Republican operatives both live in the conservabubble and lie shamelessly.

In any case, US public support for Medicaid has been overwhelming for many years (always click and search for Medicaid)

In 2012 the fraction who found Medicaid cuts acceptable was a Kung Fu Monkey + 1 28%

“In order to strike a budget deal that avoids the so-called fiscal cliff, would you accept cutting spending on Medicaid, which is the government health insurance program for the poor, or is this something you would find unacceptable?” 12/13-16/12

Accept 28%
Unacceptable 68 %
Unsure 3%

On the stronger position “favor” not just “accept” Bloomberg found that cuts to Medicaid crushed the Kung Fu Monkey Crazification limit

“Cut Medicaid, which is government help for medical care for low-income people”

12/7-10/12

Favor 22 %
Oppose 74 %
unsure 4 %

McClatchy Marist found an almost Kung Fu Monkey crazy 26% in favor

“Cut spending for Medicaid”

12/4-6/12

Favor 26
Oppose 70
Unsure 4

With middle choice cut some but not a lot United Technologies got 35% support.

All these polls address the fiscal cliff. They were taken roughly four and one half years ago. They show support for cutting Medicaid very similar to support for the AHCA and BCRA in recent polls.

Back when the ACA passed, support for Medicaid expansion wasn’t as overwhelming as opposition to Medicaid cuts (it was a polarized debate and it is true that it is easier to refrain from giving than to take back once given). Still there was always at least plurality support for Medicaid expansion (even in the context of Medicare cuts).

23% support for Medicaid cuts (34% for increases when discussed in the context of the budget).

In particular, the pattern makes it very cleat that hatred of “welfare” isn’t hatred of welfare as defined by economists. I don’t know of much polling, but I certainly don’t know of much public opposition to disability pensions.

There has been overwhelming opposition to Medicaid cuts for many years. Public support for Medicaid is slighly lower than public support for Medicare, but basically feelings about the two programs are similar. This fact doesn’t fit the narrative, so the fact was surpressed.

The hatred of “welfare” is based on racism and not on any particular program or belief about incentives or anything else. In context “welfare” means “Money for black people”. The pattern in public opinion polling makes this almost undeniable.

I’m going to try to avoid discussing the implications for the argument that social insurance is politically feasible while redistribution isn’t. I can’t help noting that I consider this hypothesis to have been rejected by the data.

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Still Not a Win and Just a Delay

The biggest lie coming out of the Senate today:

“’One of the major problems with Obamacare was that it was written on a strict party-line basis and driven through Congress without a single Republican vote,’ McCain said. He added that Congress must now ‘hold hearings, receive input from members of both parties, and heed the recommendations of our nation’s governors.’”

An African-American comes to be President and Republicans vow from day one to obstruct. McConnell made it his “single most important thing to achieve is for President Obama to be a one-term president.” There was no intent to ever work with Barack Obama then or Democrats today.

Lets not forget, the Republicans have until EOM September to pass a bill under Reconciliation to change the ACA. October 1 is a new budget year and the Republicans will have to decide whether to change those parts of the ACA using Reconciliation or pass Tax Reform using Reconciliation. They can not do two Reconciliations in one budget year. One or the other will have to wait.

Besides blocking the Risk Corridor Program which caused much of the premium increase since 2015, insurance companies to lose money and withdraw from healthcare exchanges, and Coops to go bankrupt; President Trump has threatened to withhold CSR subsidies for out-of pocket expenses to those 100% – 250% FPL with Silver Plans. This subsidy goes directly to insurance companies. Withholding it will cause premiums again to increase and more companies to withdraw from the exchanges.

The second biggest lie coming out of Congress comes from a Congressman who relied on SS benefits to put him through college and who hopes to deny healthcare to his constituents and others as well.

“’The Senate’s got to pass a bill for us to even move the process forward,’ Congressman Ryan said. ‘That’s the next step. So, we’re hoping that they can achieve that next step so that we can bring real relief.’”

This is what Trump means by making the ACA fail or worst than what has occurred to date with Republican meddling in it.

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Shootings by Police Officers: Self-Control and More

I stumbled on a recent paper in the Police Quarterly entitled “Quick on the Draw: Assessing the Relationship Between Low Self-Control and Officer-Involved Police Shootings.”

The authors are Christopher M. Donner, Jon Maskaly, Alex R. Piquero, and Wesley G. Jennings from Loyola, U of Texas at Dallas, U of Texas at Dallas and U of South Florida, respectively.

Quoting from the paper:

While the extant literature on police use of deadly force is voluminous, it is fairly limited with regard to the influence of officer characteristics. Moreover, this is the first known study to explore an individual-level criminological theory(i.e., self-control) in the context of police officer-involved shootings. In building on previous studies linking low self-control to negative police behavior more generally (Donner et al., 2016; Donner & Jennings, 2014), this study uses data from a sample of 1,935 Philadelphia police officers to investigate the extent to which Gottfredson and Hirschi’s (1990) general theory can predict officer-involved shootings specifically.

Based on theory and related research, it is hypothesized that officers with lower levels of self-control will be more likely to have used deadly force because police shooting incidents would provide low self-control officers (those who are more impulsive, self-centered, short-sighted, thrill-seeking, and easily provoked) with an opportunity to engage in a behavior that it is often spontaneous, can provide immediate gratification, is adrenaline-inducing, and can provide an outlet for frustration.

Methods
Data and Sample
In this study, we use data collected by Greene et al. (2004) for an National Institute of Justice (NIJ)-sponsored study on police integrity in the PPD. The initial collaboration between Temple University and the PPD began in an effort to help create an information system that would assist the PPD with integrity oversight. To aid this process, baseline information concerning possible predictors of negative police behavior was needed. The data set includes background files, academy training records, and personnel information for 2,094 police officers across 17 academy classes from 1991 to 1998. Due to missing files and incomplete academy training among some officers, the final sample of cases included 1,935 officers. Additional methodological details may be found in Greene et al. (2004).

On average, the sample was almost 27 years of age (range: 18–55), and approximately two thirds of the sample was male. There was virtually equal representation among White (44.5%) and Black (46.0%) officers, and the sample included a smaller number of Hispanic (7.4%) and other race or ethnicity (2.1%) officers. The average education level and length of service was 13 and 3 years, respectively. About one fifth (21%) of the sample was married and one tenth (10.9%) had a parent who served in law enforcement. Additional descriptive statistics may be found in Table 1.

The paper goes on:

Dependent Variable
Greene et al. (2004) were granted access to various databases maintained by the PPD Internal Affairs Division and Police Board of Inquiry. Specifically, these databases contained information relating to, among other things, citizen complaints, officer-involved shootings, other internal investigations, and depart-mental disciplinary actions. These data were collected in the Year 2000; thus,officers in the sample had been out of the police academy for roughly 2 to 9 years. The outcome variable of interest in this study, police shootings, is measured dichotomously (0 = No; 1 = Yes) and reflects whether an officer had ever been involved in a police shooting in which they discharged their firearm.

The primary independent variable, low self-control, was constructed from selected behavioral indicators contained within an officer’s Personal Data Questionnaire (PDQ).2 Individuals, who apply to be a Philadelphia Police Officer and pass the entrance examination, are referred to the Background Unit of the police department. Here, qualified applicants are given a PDQ.The PDQ collects self-reported background information, including among other things the applicant’s identifying information, family background, residence history, educational history, employment history, credit history, military record, motor vehicle history, adult and juvenile criminal history, and drug-use history. This information is validated through an interview with a background investigator, a full background investigation, and subsequently a polygraph examination.

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Bizarro World

At least 40 Republican Senators and possibly the critical 50 have decided to stand up to the lobbyists, the interest groups and big business. They are willing to vote for the Cruz amended BCRA which would not just repeal Obamacare, but also destroy US individual market health insurance. If they do so, they stand up to many of the most powerful lobbies including the AMA and the AARP (but not the NRA or AIPAC). Most importantly, they reject the very firm claims and fierce arguments of the relevant health insurance industry lobby AHIP

AHIP (and BCBS) wrote an extraodinarily passionate and detailed letter to the Senate which included “this provision will lead to far fewer, if any, coverage options for consumers who purchase their plan in the individual market. As a result, millions of more individuals will become uninsured.” Notice the future indicative (which I will never ever use). The claim is definite and made with absolute confidence. They express 100% confidence that enacting the reform (with the Cruz amendment) will cause a disaster.

The amazing thing is that AHIP is demanding that its members be regulated. They are asserting that they will damage the country if allowed ““As healthy people move to the less-regulated plans, those with significant medical needs will have no choice but to stay in the comprehensive plans, and premiums will skyrocket for people with preexisting conditions”. This correctly asserts that AHIP members will cherry pick if they are allowed to. AHIP correctly assumes that AHIP members will destroy the health insurance system for short term gain if allowed. It’s like a serial killer cherry picker writing “stop me before I medically underwrite again”.

It is bizarre for an industry to demand regulation to protect consumers from them. The suspicion must be that the concern for the general public is an excuse for support for regulation which helps incumbents or limits competition. The second Bizarre thing is that I personally don’t doubt the sincerity of the lobbyists advocating regulation in the public interest of the members of the lobby. For one thing, their claims are obviously correct and at least an overwhelming majority of independent experts agree. In fact, I haven’t read a defence of the Cruz amendment by ultra hack Avik Roy (I think there is one by uber hack Stephen Moore). I don’t think that an honest case can be made that an industry lobby isn’t sincerely acting (this time) in what it’s officers consider to be the public interest.

But strangeness beyond strangeness, it seems possible that 50 GOP Senators will ignore all serious independent analysis and all of the relevant interest groups. I don’t recall the last time so many Republicans seriously considered standing up to big business. I don’t think it is really surprising that Republicans finally say no to an interest group when that interest group says the public must be protected from the socially damaging profit seeking which shareholders will fore on them.

Everything is updide down in Bizarro World.

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