If Maine’s Sam Smith were as well-known as Rush Limbaugh or Sean Hannity, America would be a vastly better place, with a lot more compassion, a lot more decency, a lot more fun, and a whole lot more good food.

A wry combination of I.F. Stone, Will Rogers, George Seldes, E. B. White, along with a dash of Molly Ivins and Dorothy Parker, Smith is America’s unknown national treasure of punditry, an essayist unafraid to think original thoughts and habitually deft at offending the guardians of the stale conventional wisdom — of every stripe — even while those stale thoughts are still being treated as penetrating insights from the “think” tank denizens.

For more than 50 years, using only his wit and his pen as his weapons. Smith lived and wrote in Washington, D.C., and he went into battle for a better America daily, practicing what Orwell called the hardest thing in the world: seeing what is right in front of your nose.

OregonPEN is proud to reprint this exceptionally timely essay, by kind permission of the man who should get a White House nod as “America’s Prose Laureate” but who is far more likely to be left off the guest list entirely for being an unrepentant and recidivist truth teller extraordinaire.

One of the sad things about the ethnic conflict that has increasingly defined our land is the lack of movements that produce change rather than merely more anger. While the victims of such things as police brutality have more than enough reason to express this anger, that doesn’t mean the anger will produce results by itself.
 
Even when alternatives are proposed, the media continues to show its bias for conflict over resolution. For example a check of Google found that in the last month less than 5% of online news mentions of Black Lives Matter also included a description of the group’s list of police reforms it is seeking.
 
Then there are those of liberal bent who seem to prefer semantic and symbolic change over more substantial improvements. For them, to remove the sign on a building named after John Calhoun or to label a whole ethnic group as possessing “white privilege” takes the place, say, of actually changing how a police department operates. 
 
In fact, the number of whites in poverty is almost twice as large as the number of blacks and the number of whites earning a minimum wage or less is more than twice the combined black and latino figure. And because it is considered acceptable by many liberals to ‘dis lower class whites, it is not surprising that so many have sought salvation on the right.
 
To deal effectively with the issues that confront us, we need alter our language, convert justified anger into effective action, and build cross-cultural alliances that are currently ignored or disparaged. At the present time, for example, blacks comprise only 13% of the population, far too few to achieve righteous goals without the aid of a large number of whites. Lumping the latter into a constituency of privileged racists is not only wrong, it’s not going to change anything for the better.
 
As the new book, Third Reconstruction, based on the important work of the Moral Mondays movement, points out:
 
Often the groups most impacted by injustice have been convinced that they are enemies. Fusion politics is about helping those who have suffered injustice and have been divided by extremism to see what we have in common. We do this by bringing people together across dividing lines and helping them hear one another. We have no permanent enemies, only permanent issues, rooted in our deepest moral and constitutional values.

Some of the authors’ other important approaches can be found here.
 
And here are a few other ideas we could be talking about and acting upon, some of them excerpted from my book, Great American Repair Manual.
 
Stop using the word race: There is simply no scientific definition of race. What are considered genetic characteristics are often the result of cultural habit and environmental adaptation. As far back as 1942, anthropologist Ashley Montague called race our “most dangerous myth.”
 
Yet in our conversations and arguments, in our media, and even in our laws, the illusion of race is given great credibility. As a result, that which is transmitted culturally is considered genetically fixed, that which is an environmental adaptation is regarded as innate and that which is fluid is declared immutable.
 
Many still hang on to a notion similar to that of Carolus Linnaeus, who declared in 1758 that there were four races: white, red, dark and black. Others make up their own races, applying the term to religions (Jewish), language groups (Aryan) or nationalities (Irish). Modern science has little impact on our views. Our concept of race comes largely from religion, literature, politics, and the oral tradition. It comes creaking with all the prejudices of the ages. It reeks of territoriality, of jingoism, of subjugation, and of the abuse of power.
 
DNA research has revealed just how great is our misconception of race. In The History and Geography of Human Genes, Luca Cavalli-Sforza of Stanford and his colleagues describe how many of the variations between humans are really adaptations to different environmental conditions (such as the relative density of sweat glands or lean bodies to dissipate heat and fat ones to retain it). But that’s not the sort of thing you can easily build a system of apartheid around. As Thomas S. Martin has written:
 
The widest genetic divergence in human groups separates the Africans from the Australian aborigines, though ironically these two ‘races’ have the same skin color…. There is no clearly distinguishable ‘white race.’ What Cavalli-Sforza calls the Caucasoids are a hybrid, about two-thirds Mongoloid and one-third African. Finns and Hungarians are slightly more Mongoloid, while Italians and Spaniards are more African, but the deviation is vanishingly slight.
 
If we were to come to accept the fact that our social identity is best defined far more by the ethnicity and culture in which we are raised and live than by biology, we would, for example, pay more attention to the fact that our first “black president” spent considerably more time with the Harvard Law School then with a black parent. And that the color of his skin was not the best clue to who he really is.
 
The real reason race is important to us: Even as we talk endlessly of race, we simultaneously go to great lengths to prove that we are all the same. Why this contradiction? The answer can be partly found in the tacit assumption by many that human equity must be based primarily on competitive equality. Listen to talk about race (or sex) and notice how often the talk is also about competition. The cultural differences (real or presumed) that really disturb us are ones of competitive significance: thigh circumference, math ability and so forth. We accept more easily other differences — varieties of hair, degree of subcutaneous fat, prevalence of sickle cell anemia — because they don’t affect (or affect far less) who gets to the top.
 
We don’t spend the effort to separate facts from fiction because both cut too close to our inability to appreciate and celebrate our human differences. It is far easier to pretend either that these differences are immutable or that they don’t exist at all.
 
The Catch-22 of ethnicity: It is hard to imagine a non-discriminatory, unprejudiced society in which ethnicity and sex matter much. Yet in our efforts to reach that goal, our society and its institutions constantly send the conflicting message that they are extremely important.
 
For example, our laws against discriminatory practices inevitably heighten general consciousness of race and sex. The media, drawn inexorably to conflict, plays up the issue. And the very groups that have suffered under racial or sexual stereotypes consciously foster countering stereotypes — “you wouldn’t understand, it’s a black thing” — as a form of protection. Thus, we find ourselves in the odd position of attempting to create a society that shuns invidious distinctions while at the same time — often with fundamentalist or regulatory fervor — accentuating those distinctions.
 
The most important fact about prejudice – It’s normal. That isn’t to say that it’s nice, pretty, or desirable. Only that suspicion, distrust, and distaste for outsiders is a deeply human trait. The anthropologist Ruth Benedict wrote that “all primitive tribes agree in recognizing [a] category of the outsiders, those who are not only outside the provisions of the moral code which holds within the limits of one’s own people, but who are summarily denied a place anywhere in the human scheme. A great number of the tribal names in common use, Zuñi, Déné, Kiowa . . . are only their native terms for ‘the human beings,’ that is, themselves. Outside of the closed group there are no human beings.”
 
Many attempts to eradicate racism from our society have been based on the opposite notion — that those who harbor prejudice towards others are abnormal and social deviants. Further, we often describe these “deviants” only in terms of their overt antipathies — they are “anti-Semitic” or guilty of “hate.” In fact, once you have determined yourself to be human and others less so, you need not hate them any more than you need despise the fish you eat for dinner. This is why those who participate in genocide can do so with such calm — they have defined their targets as outside of humanity.
 
What if, instead, we were to start with the unhappy truth that humans have always had a hard time dealing with other peoples, and that much ethnic and sexual antagonism stems not from hate so much as from cultural narcissism? Then our repertoire of solutions might tilt more towards education and mediation and away from being self-righteous multi-cultural missionaries attacking yahoos in the wilds of the soul. We could turn towards something more akin to what Andrew Young once described as a sense of “no fault justice.” We might begin to consider seriously Martin Luther King’s admonition to his colleagues that among their dreams should be that someday their enemies would be their friends.
 
Telling stories: If we are to rid our minds of stereotypes, something needs to fill the empty space. Nothing works better than the real stories of real people drawn from the anecdotal warehouses that supply many of our deepest values, feelings and philosophy.
 
If you find your classroom, organization or workplace bogged down in cultural tension and abstract confrontation — or perhaps feeling the silence that comes from being near one another and not knowing what to say — why not take a break and let people tell their own stories?
 
How Mr. Platt did it: In the middle of the stolid, segregated, monolithic 1950s, Howard Platt taught one of two anthropology courses available in an American high school. I was lucky enough to be among his students. Mr. Platt showed us a new way to look at the world.
 
And what a wonderful world it was. Not the stultifying world of our parents, not the monochromatic world of our neighborhood, not the boring world of 9th grade, but a world of fantastic options, a world in which people got to cook, eat, shelter themselves, have sex, dance and pray in an extraordinary variety of ways. Mr. Platt’s subliminal message of cultural relativism was simultaneously a subliminal message of freedom. You were not a prisoner of your culture; you could always go live with the Eskimos, the Indians or the Arabs. By the time the bell sounded I was often ready to go.
 
Mr. Platt did not exorcise racism, and he did not teach ethnic harmony, cultural sensitivity, the regulation of diversity, or the morality of non-prejudiced behavior. He didn’t need to. He taught something far more important, something so often missing from our discussions on race, something frequently absent from college curricula. Mr. Platt opened a world of variety, not for us to fear but to learn about, appreciate and enjoy. It was not an obstacle, but a gift.
 
Be friendly and respectful: In a culturally varied society, it is easy to transmit signals that are misunderstood but, fortunately, kindness, friendliness and respect come across clearly. Make good use of them.
 
Learn about other cultures: We typically try to resolve inter-cultural tensions without giving people a solid reason for liking one another. Mutual enjoyment and admiration provide the shortest route between two ethnicities. Education is one thing that we know reduces prejudice. Yet for all our talk about diversity, this isn’t so easy to come by. We could well spend less time on abstractions of racism and more on the assets of each other’s traditions.
 
We could be teaching, in high school classes and college seminars, the variety of the world as something to explore and enjoy, not just as a problem or an issue. You don’t have to teach diversity. Diversity is. You don’t have to defend it in lofty liberal rhetoric. Studying humanity’s medley is not a moral act; it is simply intelligent.
 
And you don’t have to learn it all in school. France became a haven for black exiles in the last century in no small part because of French enthusiasm for jazz and African art. Similarly, jazz clubs and concerts were among the few places in segregated America that apartheid was regularly ignored.
 
Diversity within cultures counts as well as that between them: Just because jazz is important to black culture doesn’t mean all blacks like jazz. Or that colleges shouldn’t recruit black cellists as well as black forwards. Or that just because someone’s white, they have to be Anglo-Saxon or a Protestant.
 
Find something in common that’s more important than what’s not: It can be a political goal, a sport, an avocation or a business. I’ve seen it work in situations as diverse as a project to train church archivists, a kid’s team headed for a playoff, the creation of a city’s major third party, and the stopping of one of the largest planned freeway systems in the country. The importance of ethnicity is often inversely proportional to what else we have on our minds
 
Stop being shocked by prejudice. We have attempted to exorcise racism much as Nancy Reagan tried to get rid of drugs, by just saying no. It has worked about as well. Once we recognize the unpleasant persistence of human discrimination, once we give up the notion that it is merely social deviance controllable by sanctions, we will be guided away from puritanical corrective approach towards ones that emphasize techniques of mitigating harm, and towards activities and attitudes that become antibiotics against prejudice.
 
Talk about it but not too much: At a meeting called to discuss racial problems, a black activist said, “I don’t want to talk about race unless we are going to do something specific about it.” It’s not a bad rule for every public discussion of race. Unproductive talk can leave people feeling more helpless and frustrated than when it began.
 
Diversity includes people you don’t like. Even liberals don’t talk about this but a truly multi-cultural community will include born-again Christians opposed to abortion, Muslims with highly restrictive views on the role of women, prayer-sayers and atheists, Playboy readers as well as Seventh Day Adventists. Remember that you’re not required to express — or even have — an opinion about everyone else in the world. Encourage reciprocal liberty: I can’t have my freedom unless you have yours.
 
Don’t sweat the small stuff. Common sense is a great civil rights tool. Even in a multi-cultural society, loutish sophomores are going to use tasteless language, fundamentalists will sneak in private prayers on public occasions, and eight-year-old boys will grab girls where they shouldn’t. Hyper-reaction to such minor phenomena hurt and trivialize the cause of human justice.
 
Try to avoid putting virtues in competition: School bussing placed the virtue of integration in direct conflict with the virtue of neighborhood schools. Often such conflicts can be avoided or mitigated by choosing other tactics. For example, why was there so much attention to bussing and so little to residential integration?
 
Attack economic discrimination, too: After every ethnic or gender group gets its rights, the powerful among them will still discriminate against the weak and the wealthy against the poor. As Saul Alinsky said, “When the poor get power they’ll be shits like everyone else.” Opposition to affirmative action might have been much less had the programs been based on zipcode as well as on race and sex. Martin Luther King Jr. pointed out in 1964 that “the white poor also suffer deprivation and the humiliation of poverty if not of color. They are chained by the weight of discrimination, though its badge of degradation does not mark them. It corrupts their lives, frustrates their opportunities and withers their education.” And bear in mind that slavery was not just ultimate ethnic discrimination, it was also ultimate economic discrimination as well: the master had all; the slave nothing.
 
Be tough on leaders, not on followers: Those with tightly defined ideas about how we should behave often make little distinction between people who merely accept the values of their culture and those who control, market and manipulate them. It helps to remember that we are all creatures of our cultures and often speak unconsciously with their voice. This may not be an admirable characteristic but it certainly is a human one. After all, if it weren’t for Rush Limbaugh, dittoheads would have nothing to ditto.
 
Recognize that we are all part something else. By dint of exposure to TV alone, it is virtually impossible to live in America and not have absorbed aspects of other cultures. We all, in effect, belong to a part-culture, which is to say that our ethnicity is somewhat defined by its relationship to, and borrowing from, other cultures. There are almost no pure anythings in America anymore. The sooner we accept and enjoy this, the better off we’ll be.
 
Remember that everyone is an ethnic something. There are no unethnic Americans.
 
If you are in a minority you can still lead the majority –There are all sorts of ways. The moral leadership of civil rights activists, political leadership, leadership in the arts and literature, or in a high school. Or creating cross cultural spaces such as the traditional Irish bar As one politician said in Chicago many years ago, “An Italian won’t vote for a Jew and a Lithuanian won’t vote for an Pole but all four will vote for an Irishman.”
 
Create new alliances: A long needed black-latino alliance representing approximately 30% of American would shake up our politics. Create a black-latino-labor alliance and politics could be changed forever. You don’t have to agree on everything; just go for the goals you all like.

America is in serious danger because of our continued reliance on 18th Century voting methods.

Thanks to our “first past the post” election laws that only allow voters to express one choice in the ballot box, there is a significant chance that a grossly unqualified narcissist, Donald J. Trump, will be the Republican Party nominee for President in 2016. And, thanks to the same rickety election methods — coupled with Electoral College, which creates a strong bias in favor of GOP candidates, allowing them to win the election despite losing the popular vote — nominee Trump will be a serious threat to win the White House.

Rob Richie, longtime Executive Director of the invaluable organization “Fairvote.org” (formerly “Center for Voting and Democracy”), shows how our failure to let voters vote by ranking their choices is winnowing the GOP field to Trump’s advantage.

OregonPEN readers who want to better understand how RCV (ranked choice voting) works can find sample elections or even create and experiment with their own at the Fairvote site.

Below Richie’s essay is a round-by-round breakdown of how the GOP nomination fight would change if GOP voters could have ranked their choices instead of being restricted to just on. Based on surveys of 1,000 GOP and independent voters, the survey shows just how different election results are when voters can rank their choices instead of being limited to just one.

This fact is especially important for Oregon, where the Oregon Constitution in Article II already expressly permits use of ranked choice voting:

Section 16. Election by plurality; proportional representation. In all elections authorized by this constitution until otherwise provided by law, the person or persons receiving the highest number of votes shall be declared elected, but provision may be made by law for elections by equal proportional representation of all the voters for every office which is filled by the election of two or more persons whose official duties, rights and powers are equal and concurrent. Every qualified elector resident in his precinct and registered as may be required by law, may vote for one person under the title for each office. Provision may be made by law for the voter’s direct or indirect expression of his first, second or additional choices among the candidates for any office. For an office which is filled by the election of one person it may be required by law that the person elected shall be the final choice of a majority of the electors voting for candidates for that office. These principles may be applied by law to nominations by political parties and organizations.

 Without an Instant Runoff, Trump Favored to Win GOP Nomination

Posted by Rob Richie, Executive Director, Fairvote.org

Last night Donald Trump received harder body blows than ever before in a Republican presidential debate, but it may be too late for those seeking to stop his run to the GOP nomination.

After Trump’s lopsided victory in the Nevada caucuses on Tuesday – following his big wins in primaries in the diverse states of New Hampshire and South Carolina – only three scenarios could possibly deny him the nomination: 1) an unlikely sea-change in the preferences of his supporters; 2) an even more unlikely reduction in the Republican field to just one opponent before March 15; or 3) an impossible entry into an alternate universe where ranked choice voting was being used in this year’s primaries.

As far as changes in the minds of the voters, tonight’s GOP debate was likely the last big chance for that to happen. Polls consistently show that Trump’s voters are by far the most loyal and sure of their choice. Absent a bigger stumble than any last night or fresh information that affects voter opinion, at least a third of the GOP primary electorate is likely to keep backing Trump.


The second and third scenarios, based on when the field might be reduced to only two candidates in lieu of having an instant runoff with ranked choice voting ballots, are the most problematic for our representative democracy. With our current plurality voting rules, Trump’s success depends less on what most voters want than on the vagaries of whether certain candidates drop out. It also means that representative outcomes depend on forcing out candidates who often have important perspectives and loyal supporters.


By the Numbers

Want some evidence? See this review of every poll we found where the pollster asked questions that allowed head-to-head comparisons and often asked who people would prefer if the field were reduced to the three frontrunners (Trump and Senators Marco Rubio and Ted Cruz). Keep an eye on a few facts:

  • Trump leads in the plurality choice by at least 10% in 11 of the 13 non-Iowa polls, yet trails in the head-to-head comparison to Cruz and/or Rubio in nine of those polls.
  • Trump wins the head-to-head contest in just four of the 16 polls, but leads in the three-way contests in 12 polls, including all in which he starts out at least 10% head and all but two outside of Iowa.
  • In all 16 polls, Rubio and Cruz close the gap between the plurality choice and the head-to-head comparison, and they close the gap between the plurality vote and the three-way comparison in all but one poll.
  • Outside of New Hampshire, Cruz generally leads Rubio in head-to-head before February but since Iowa Rubio generally has done better.

Review of PollsText is bolded when Trump trails
Feb. 24-25, 2016, Florida poll (Public Policy Polling)

Head-to-Head
Trump leads Rubio (52% – 38%) and Cruz (62% – 30%)
[Rubio defeats Cruz 60%-26%]

Three Way
Trump 51%, Rubio 33%, Cruz 11%

Plurality Vote
Trump 45% , Rubio 25%, Cruz 10%

Feb. 14-16, North Carolina poll (Public Policy Polling)

Head-to-Head
Trump trails Rubio (43% – 49%) and leads Cruz (43% – 42%)
[Rubio defeats Cruz 42%-29%]

Three Way
Trump 37%, Rubio 26%, Cruz 26%

Plurality Vote
Trump 29% , Cruz 19%, Rubio 16%

Feb. 14-16, national poll (NBC/WSJ)

Head-to-Head
Trump trails Cruz (40% – 56%) and Rubio (41% – 57%)
[No Rubio-Cruz comparison]

Three Way
(Based on 2nd choice allocation) Cruz 32%, Trump 30%, Rubio 26%

Plurality Vote
Trump 26% , Cruz 28%, Rubio 17%

Feb. 14-15, South Carolina poll (Public Policy Polling)

Head-to-Head
Trump leads Cruz (48% – 38%) and Rubio (46% – 45%)
[Rubio leads Cruz 47% – 37%]

Three Way
Trump 40%,  Rubio 28%, Cruz 22%

Plurality Vote
Trump 35%, Rubio 18%, Cruz 1%

Feb 4-8 and Jan. 21-25, national poll (FairVote/College of William and Mary/YouGov)
Note: Comparisons rely on rankings – more than 90% ranked all 11 candidates

Head-to-Head
Trump trails Cruz (49% – 51%) and leads Rubio (54% – 46%)
[Cruz leads Rubio 57% -43%]

Three Way
Trump 43%, Cruz 32%, Rubio 25%

Plurality Vote
Trump 35%, Cruz 22%, Rubio 13%

Feb 2-3, national poll (Public Policy Polling)

Head-to-Head
Trump trails Cruz (41% – 47%) and Rubio (40% – 52%)
[Rubio leads Cruz 46% – 40%]

Three Way
Trump 33%, Rubio 34%, Cruz 25%

Plurality Vote
Trump 25%, Rubio 21%, Cruz 21%

Jan 26-27, Iowa poll (Public Policy Polling)

Head-to-Head
Trump trails Cruz (47% – 40%) (no Trump-Rubio comparison)
[No Cruz-Rubio comparison]

Three Way
Trump 36%,  Rubio 25%, Cruz 31%

Plurality Vote
Trump 31%, Rubio 14%, Cruz 23%

Jan 18-19, North Carolina poll (Public Policy Polling

Head-to-Head
Trump leads Cruz (49% – 41%) and Rubio (52% – 37%)
[Cruz leads Rubio 47% – 32%]

Three Way
Trump 43%, Cruz 27%, Rubio 18%

Plurality Vote
Trump 38%, Cruz 16%, Rubio 11%

Jan 9-13, national poll (NBC/WSJ)

Head-to-Head
Trump trails Cruz (43% – 51%) and leads Rubio (52% – 45%)
[No Cruz-Rubio comparison]

Three Way
Trump 40%, Cruz 31%,  Rubio 26%

Plurality Vote
Trump 33%, Cruz 20%, Rubio 13%

Jan. 8-10 Iowa poll (Public Policy Polling)

Head-to-Head
Trump trails Cruz (37% – 54%) and Rubio (45% – 46%)
[Cruz leads Rubio 59% – 26%]

Three Way
Trump 32%, Cruz 38%, Rubio 22%

Plurality Vote
Trump 28%, Cruz 26%, Rubio 13%

Jan. 4-6 New Hampshire poll (Public Policy Polling)

Head-to-Head
Trump trails Cruz (39% – 46%) and Rubio (40% – 52%)
[Rubio leads Cruz 42% – 35%]

Three Way
Trump 36%, Rubio 34%, Cruz 19%

Plurality Vote
Trump 29%, Rubio 15%, Cruz 10%

Dec. 15-16 national poll (Public Policy Polling)

Head-to-Head
Trump leads Cruz (45% – 44%) and Rubio (54% – 38%)
[Cruz leads Rubio 48% – 34%]

Three Way
Trump 42%, Cruz 26%, Rubio 22%

Plurality Vote
Trump 34%, Cruz 18%, Rubio 13%

Dec 10-13 Iowa poll (Public Policy Polling)

Head-to-Head
Trump trails Cruz (34% – 55%) and Rubio (45% – 49%)
[Cruz leads Rubio 59% – 30%]

Three Way
Trump 31%, Cruz 39%,  Rubio 24%

Plurality Vote
Trump 28%, Cruz 25%, Cruz 14%

Dec. 4-9, 2015, national poll (Economist/YouGov)

Head-to-Head
Trump trails Cruz (47% – 53%) and Rubio (47% – 53%)
[No Rubio-Cruz comparison]

Three Way
No 3-way poll question

Plurality Vote
Trump 35%, Rubio 18%, Cruz 13%

Dec. 5-7 North Carolina poll (Public Policy Polling)

Head-to-Head
Trump leads Cruz (48% – 41%) and Rubio (53% – 42%)
[Cruz leads Rubio 48% -35%]

Three Way
Trump 41%, Cruz 27%, Rubio 24%

Plurality Vote
Trump 33%, Cruz 16%, Rubio 14%

Nov. 30-Dec 2, New Hampshire poll (Public Policy Polling)

Head-to-Head
Trump trails Cruz (41% – 44%) and ties Rubio (45% – 45%)
[Rubio leads Cruz 43% – 37%]

Three Way
Trump 35%, Rubio 32%, Cruz 22%

Plurality Vote
Trump 27%, Cruz 13%, Rubio 11%

Polls Reinforce Trump’s Perception as a Winner

Reviewing this history, it’s crystal clear that the 2016 nomination contest would have been dramatically different if pollsters had regularly asked and touted head-to-head comparisons and contests had been held with ranked choice voting. Even those polls would have been different, as part of Trump’s appeal has been the perception that he’s a winner – and polls showing his plurality lead reinforced that image, and have led Republican voters to say (including in FairVote’s YouGov survey) that Trump was the strongest, most viable candidate. Trump’s loss in Iowa quite possibly would have been followed by defeats in New Hampshire and South Carolina, and the whole trajectory of the race would have been different. 

This is not to badmouth Trump. He’s playing by the rules of the game, and his tactics might well have been different with different rules. But is a warning shot to the major parties and state legislators that our current primary voting rules make fair outcomes far too dependent on individual egos – both those of the candidates and of the funders of Super PAC donors who can single-handedly sustain a candidate.


Give Voters More Choice, Stronger Voice in Elections

It doesn’t have to be this way. This Sunday, the Oscar for Best Picture will be chosen by ranked choice voting – an “instant runoff” ballot that avoids vote-splitting and ensures that the majority choice wins once the field is reduced to two. Recommended by Robert’s Rules of Order for elections by mail, ranked choice voting is used in a growing number of elections, including in American cities like Minneapolis (MN) and Oakland (CA) and in other nations like Ireland (for president), Canada (for leaders of the major parties), New Zealand (mayor of Wellington and choice of flag in a recent national referendum) and United Kingdom (for mayor of London and party leaders). In fact, several Republican members of the Utah legislature were selected in ranked choice voting elections to fill vacancies.

Republican primary voters are ready for it as well. In our collaboration with the College of William and Mary on a national YouGov sample of 1,000 likely Republican and independent voters, we found that more than nine in ten chose to rank all 11 Republican candidates, which helped provide a clear insight into the dynamics of the race. Not only that, but 57% said they would like to see RCV for presidential primaries, including 72% of those with an opinion, including more than four in five millennials.

For the moment, though, the race is Donald’s Trump’s to lose – even if he continues to often fall short of majority support.
 

Picture

First choices with all then-active GOP candidates polled

Picture

Trump has strong support, but most GOP voters polled prefer Cruz to Trump; Because we don’t use ranked choice ballots, GOP is most likely not to nominate the choice of most GOP voters

Download PDF Version of Release

WASHINGTON, DC — The College of William of Mary and the nonpartisan electoral reform organization FairVote have released a report on a national survey offering new insights into voter preferences and views on electoral reform. In partnership with YouGov and scholars Alan Abramowitz (Emory University) and Walter Strone (UC-Davis), they conducted a national online survey of a representative sample of 1,000 Republican and independent voters, with half of the sample from January 21-25 (before the Iowa caucuses) and half from February 4-8 (before the New Hampshire primary).

Read Full Report

The new survey’s innovative methodology incorporated presidential candidate rankings (with more than nine in ten respondents ranking all 11 candidates who were surveyed), issue analyses, and opinions on electoral reforms. “Our survey provides journalists, pollsters, and campaigns with valuable insights into voter preferences that have been largely overlooked in national polling,” said FairVote executive director Rob Richie.

The full report, with analyses and appendices with all responses and crosstab information for questions involving electoral reform, is available at FairVote.org. The ranking data is also presented at http://www.GOP2016poll.com with an interactive data tool that allows users to see how candidates fare against each one-on-one, who is the second choice of backers of different candidates and which candidate would win under a ranked choice voting, “instant runoff” election system.

Key Findings

Presidential Race – Trump’s high floor comes with relatively low ceiling as underscored by loss to Ted Cruz in instant runoff: The College of William and Mary/FairVote survey echoes most other national polls indicating that Donald Trump is far ahead in voter intentions, with 38.5%, compared to 17.8% for Ted Cruz, and 12.3% for Marco Rubio. However, when a ranked choice voting tally is run that results in a one-on-one “instant runoff” between Trump and Cruz, Trump trails 51% to 49% and loses ground to other candidates in every single round of the tally. Although Trump does defeat all other candidates one-on-one, including a 54% to 46% over Marco Rubio and 66% to 34% over Jeb Bush, he is the last choice of more than one in five respondents.

Republican and independent voters are ready for electoral rule changes: Voters are generally ready to embrace changes in the nature of congressional elections and the composition of Congress, albeit some hesitation and uncertainty exists. As consistent with past surveys of right-of-center voters more than four in five respondents on an absolute scale support voter identification requirements (86.5%) and term limits for Congress (82.6%).

Support was also high for a voter registration system that registers all eligible voters while blocking ineligible voters (78.6%), easier ballot access for third parties and independents (73.2%), limits of political donations, (72.7%) impartial redistricting (66%), and a national popular vote for president (66.4%). Ranked choice voting was backed most strongly for primary elections (51.8%) and local elections (49.3%), and had more support than opposition for its use at every level of election. When it comes to imagining changes by 2030, large majorities of those with an opinion support a Congress with more third parties, women, people of color and major party representatives from the opposition party’s strongholds – with no more than 18.9% opposing any of these changes.

Voters ready for presidential nomination rules changes: Although respondents are not passionate about any single change to the nomination process, they have little support for the rules as they are. Strong majorities are ready to support ranked choice ballots in the nomination process ((57.1%), a national primary among the top candidates (57%), changing the schedule so Iowa and New Hampshire don’t always come first (55.8%), and delegates in all states being awarded proportionally rather than by winner take all (51.7%).

Millennials most ready for electoral changes: Millennial voters (under 30) had the highest intensity of support for electoral changes when compared to other age groups. For example, 23% of millennials in the survey strongly favor having more third party and independents in Congress, as opposed to 13% of respondents over 60. Substantial, if slightly smaller gaps exist between those age groups for having more women and people of color in Congress. When it comes to reform, ranked choice voting had the backing of 61% of all respondents with an opinion about it, but a whopping 79% of millennials.

The Tea Party remains influential: A majority of Republicans identify as Tea Party supporters (53%) to some extent, and in 2014, Tea Party supporters accounted for more than two-thirds of active Republicans (those Republicans who campaigned, donated to, advocated for, or voted for a Republican candidate). An overwhelming majority of Ted Cruz supporters are Tea Party supporters (84%), however, Donald Trump receives high support from both Tea Party and non-Tea Party supporters.

A three-party race in November: Only about one-in-four Republicans are willing to support the Republican ticket both with Donald Trump as the nominee and with Marco Rubio as the Republican nominee against Democratic frontrunner Hillary Clinton and an independent candidate.

The data-rich report, with detailed questions about a wide range of issues and more information about how voters see the election, is available in full on-line. The interactive feature allowing users to see the impact of voter rankings of candidates is at http://www.GOP2016poll.com

For more information, contact FairVote communications director Michelle Whittaker at mwhittaker@fairvote.org or call its offices at (301) 270-4616.
FairVote is a nonprofit, nonpartisan organization that seeks to make elections fair, functional, and fully representative. The College of William and Mary is the second-oldest college in the nation, known for cutting-edge research.

Many different aspects of Justice Scalia’s legacy on the Supreme Court have been discussed extensively since his death, but one important issue has largely escaped attention: his outsized role in promoting the use of forced arbitration in consumer, employment and a wide range of other types of contracts. Fine print forced arbitration clauses bar consumers and workers from going to court, but require them to go into a corporate-designed private dispute resolution system where they are forbidden to be a part of a class action. As the New York Times set forth in a series of remarkably thorough and well-researched stories, forced arbitration has allowed corporations to break the law and get away with it in a wide variety of settings.

Justice Scalia played a central role in bringing about this state of affairs. He was not only a reliable vote for enforcing arbitration clauses and expanding the 1925 Federal Arbitration Act far beyond the intentions of its framers, but he also wrote the most controversial and significant of the Court’s decisions enforcing forced arbitration clauses.

In American Express v. Italian Colors, for example, in 2013 Justice Scalia wrote the majority opinion in a sharply divided 5-4 decision holding that a take-it-or-leave-it arbitration clause could be used to prevent small businesses from actually pursuing their claims for abuse of monopoly power under the antitrust laws.This built upon Justice Scalia’s 2011 opinion for the Court in AT&T Mobility v. Concepcion, which overturned (without mentioning) more than 100 decisions where appellate courts in 20 states and the majority of circuits, and district courts throughout the country, had previously held that where a provision banning class actions in an arbitration clause was proven to prevent individuals from vindicating their rights under consumer protection or civil rights laws, that the clause couldn’t be enforced. In Concepcion, Justice Scalia invented a new rule of federal law that wiped away basic state contract law rules against contracts that let corporations just opt out of basic laws.

So what does this mean for what will happen to forced arbitration now that Justice Scalia is no longer on the Court? Well, obviously everything hinges upon who ultimately succeeds him. But if the next Justice is one who refuses to put corporations’ rights to force people into arbitration ahead of all other federal and state laws, there is reason to believe that the Court may reverse decisions such as Italian Colors and Concepcion.

One of the strongest hints as to this possibility was offered by none other than Justice Scalia’s close personal friend Justice Ruth Bader Ginsburg, just a few weeks before his death. In speaking at Brandeis University, Justice Ginsburg was reflecting on a disastrous series of U.S. Supreme Court decisions from the early decades of the 1900s, where it struck down minimum wage laws and many other worker protections as supposedly violating the corporate right to freedom of contract. And Justice Ginsburg linked this long discredited line of cases (the most famous of which is Lochner v. New York) with Italian Colors and Concepcion:

I was reminded of Lochner reading some decisions of the Court concerning workers, consumers, credit card holders who signed agreements saying “if you have a dispute with us, you can bring it only in arbitration — not in court — and you cannot use the class action. You must sue for your individual claim, which might be 30 dollars, and that’s it.” And that has also been described as tied to liberty of contract.

It is hard to read these words without understanding that Justice Ginsburg is indicating that Concepcion and Italian Colors are not just wrong, they are disastrously wrong, usurping the power of legislators to protect workers and consumers. Similarly, in a dissent in a very recent decision (DirecTV v. Imburgia), Justice Ginsburg noted that the Court’s “decisions have predictably resulted in the deprivation of consumers’ rights to seek redress for losses, and, turning the coin, they have insulated powerful economic interests from liability for violations of consumer-protection laws.”

That’s telling it like it is!

Justice Ginsburg is hardly the only justice to question the legitimacy of Justice Scalia’s most aggressive opinions promoting forced arbitration. In the Italian Colors case, Justice Kagan wrote an eloquent, even fierce dissent, that described the majority opinion as a “betrayal” of both the Court’s own prior arbitration decisions (the Court always used to say that arbitration just meant shifting a case from one forum (court) to another (arbitration), but was not supposed to mean that people lost their underlying substantive rights) and of the antitrust laws.

With Justice Scalia gone from the Court, no one can say what will happen next, with respect to forced arbitration or any other issue. But the exceptionally strong words of Justices Ginsburg and Kagan raise a very real possibility that the Supreme Court’s love affair — with forcing Americans into arbitration even when it lets corporations break the law with impunity — may finally be over.
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Reprinted by kind permission of Paul Bland, Executive Director, Public Justice, first published as “Notorious RBG Offers Hint to Whether Post-Scalia Court Will be Better for Workers, Consumers.

Below is an insightful essay by the publisher of Governing magazine, reprinted with the author’s kind permission.

Although the limited effectiveness of the proposal considered (effect of hiking marginal tax rates for high earners and giving the money to bottom-fifth households) mainly just shows that particular idea to be a Samuelson straw man (there are many more powerful, effective ways we could raise taxes rather than trying to do so by a hike in the ordinary income marginal rate — a tax that few in Mitt Romney’s set pay at all), Funkhouser’s larger point is still right on target:

Trying to fight inequality by direct attack on the haves to give to the have-nots is a poor strategy when there are so many more effective lines of attack available in every city and suburb, starting with doing the elementary basic tasks of governance better.

We must start by recognizing that America is beset with hidden taxes — costs and fees that aren’t called taxes but that actually are, because they come at the expense of the kinds of public goods that should be provided through taxation. The archetype of this is the “lack of transit” tax, a tremendous burden that is disguised as a “free market” outcome.

A Better Way to Attack Inequality Than Redistributing Wealth

Everyone talks about taxing the rich to give to the poor, but doing so would only have a small impact. There are ways to have a larger one.

by Mark Funkhouser | January 2016  

Many government leaders are justifiably concerned about our country’s huge and widening gaps in wealth and income and are looking for ways to reduce economic inequality and improve social equity. What surprises me, however, is how often, on both the left and the right sides of the political spectrum, the discussion turns to the idea of redistribution — taxing the rich to give to the poor by increasing social welfare payments.

In this scenario, as The Washington Post’s Robert J. Samuelson wrote a few weeks ago, “redistribution becomes an engine of social justice.” He cites a recent Brookings Institution study showing that increasing the top federal individual income tax rate from the current 39.6 percent to 50 percent would raise about $100 billion in tax revenue annually and that distributing that money to the poorest fifth of Americans would amount to an average of $2,650 per household.

In my view, there are real problems with thinking about redistribution in this way. First, many Americans don’t think that taking money from one person to essentially give it to another is a legitimate function of government. Second, redistribution is divisive, separating out the poor as a special class of people when we should be pursuing policies that increase unity and a sense of commonality among all Americans.

Instead of pursuing redistribution, state and local government officials should focus on the powerful impact on social equity of simply improving the operations of their governments. The welfare checks that might be generated by raising taxes on the rich would be small, while the aggregate impact of better policing, better schools and better public transit would be large. Everyone benefits when governments deliver services with fairness and competence, but the poor and the vulnerable benefit disproportionately because they are the most dependent on public services.

Ferguson, Mo., and Baltimore, for example, have given us some insight into the huge societal costs of unfair and incompetent administration of criminal justice. As for education, consider this: A person who doesn’t finish high school can expect about half the lifetime earnings of someone who does get a diploma.

And then there’s the one that bothers me the most because it seems so much more straightforward to improve than reforming our criminal justice system or public schools: transit.

Here again, numbers tell the story: The official federal poverty level for a family of two is $15,730. The average annual cost of owning and operating a car is $8,698. Obviously, owning a car is financially difficult for a poor family and yet, in most of America, there is no other way to get to work and to carry out the basic tasks of life. For any mayor wanting to make a difference in terms of social equity, an affordable and fully functioning transit system ought to be a high priority.

The wealthy don’t really need transit or many of the other basic services of local government. They can take care of themselves, with private cars, private police and private schools. Tax them if you want to, but use the money to run a good government.

Consumer Financial Protection Bureau director Richard Cordray is far too smart to come out and say what CFPB’s real mission is, but it boils down to one thing:

Undoing the poisonous pro-corporate, anti-American, anti-Constitutional legacy of the late Justice Antonin Scalia, the self-styled “originalist” who was actually a radical, a judicial version of the Biblical creationists who insist, against all evidence, on a particular, “original” meaning of words spoken long ago by people who had entirely different meanings for those words.

Just like the creationists who labor long to make the meanings of the words produce the result they deem pre-ordained, Scalia labored at length to justify his bizarre, duplicitous jurisprudence where he claimed to be subservient to the legislative bodies but then created, out of the whole cloth, his unique rules for interpreting their work, rules that, surprise!, were fabulously congenial to a corporatist view of America where fictitious persons could have religious views that trumped neutral government regulations, but actual flesh-and-blood Native Americans could not.

There’s a story that many of the people at Richard Nixon’s funeral thought they had accidentally gone to the wrong funeral when they heard the eulogies for him, so sainted were the descriptions of the guest of honor at the ceremony. That is what is happening to Scalia now as the corporate press and corporate law firms sing the praises of this of this profoundly bigoted and destructive man who did so much to deliver America to its enemies in the suites.

 http://www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-director-richard-cordray-at-the-american-constitution-society/
 
Feb 18 2016 By Richard Cordray
 
Thank you to the American Constitution Society for inviting me to speak today as part of the Access to Justice Series. I have a deep appreciation for the work you are doing to bring together attorneys, both young and old, who share a common commitment to understanding how the law can be put in service of justice to improve the lives of all Americans.

The Consumer Financial Protection Bureau, which I feel privileged to lead as its first Director, is a notable new example of that common commitment. As our mission, we have set ourselves the task of seeing to it that “consumer financial markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” That is not an abstract or academic goal – it is simply necessary so that people throughout our society can effectively manage the ways and means of their lives. Consumers have so very many financial judgments to make, ranging from small daily choices to a few momentous decisions that may occur only rarely over the course of a lifetime. The risks and complexities they face are far greater now than they were two generations ago. As people engage in the pursuit of happiness, their success or failure depends crucially on having more support to help them make informed choices and having stronger protections to keep them from being harmed by predatory conduct.

Before the Consumer Bureau was created, the authority for administering and enforcing federal consumer financial laws was strewn across seven federal agencies. For each of those agencies, consumer protection was only one of its many responsibilities. Consequently, no single agency was primarily focused on protecting the everyday users of financial products and services – and consumers paid the price when the financial crisis hit.

Our responsibility, as we understand it, is to stand on the side of consumers and ensure they are treated fairly in the financial marketplace. Through fair rules, consistent oversight, appropriate enforcement of the law, and broad-based consumer engagement, we are working to restore trust and confidence in the markets for household financial products and services. We are here to make sure that the problems that upended our economy and hurt so many consumers do not ever happen again. We also have the responsibility to foresee and forestall new problems that could arise in the future. And we aim to help people better understand and navigate the biggest financial decisions in life, such as borrowing to buy a car, to pay for college, or to own a home.

To date, the Consumer Bureau’s enforcement activity has resulted in $11.2 billion in relief for over 25 million consumers. The vast majority of that relief has resulted from matters where our investigations found that financial institutions had engaged in some form of deceptive conduct. Our supervisory oversight has further resulted in financial institutions providing more than $300 million in redress to over 2 million consumers. As of this month, we have handled over 800,000 complaints from consumers addressing all manner of financial products and services. Our team also provides unbiased, reliable answers about consumer finance issues through the “Ask CFPB” feature on our website, which has been accessed by over 10 million people.

All of this work is obviously important to individuals and families across America, but let me illustrate just how important it really is. We talk a great deal these days about income inequality. Many are hotly debating whether more should be done to see that American workers have more money in their pockets through higher wages, more affordable health care, or fairer taxes. Those matters are not within my authority as the Director of the Consumer Bureau. But it is one thing for people to have money in their pockets; it is quite another thing to keep it there. Just a few years ago, predatory conduct and irresponsible practices led to a broad financial crisis that cost millions of Americans their homes, cost millions more their jobs, and cost virtually all of us much of our retirement savings, adding up to trillions of dollars in total.

No single event during our lifetimes will have devastated the cumulative wealth of middle-class Americans like the financial crisis. The median net worth of those in the 20th to the 40th income percentile fell by half between 2007 and 2013. The median net worth of those in the 40th to the 60th income percentile fell by 40 percent over the same period. For people whose financial situations were affected by the crisis, these are the resources they would have had to help finance their children’s education or to help them secure a decent retirement. And though we all paid the heavy cost of under-regulated and poorly performing markets, the burden was not borne evenly. For most of those at the top end of our society, the climb back from the bottom was swift and sure. For those in the middle of our society and below, it still remains a long, hard slog just trying to get back to where people had been before the crisis, with no end in sight even now, eight years later.

There are many ways we are working to repair the fault lines in the system of consumer finance. We have adopted a substantial set of new regulations to address the malignancies that infected the mortgage market and are laid bare for all to see in movies like The Big Short and Too Big to Fail. We are engaged in strenuous oversight and numerous enforcement actions to improve the debt collection marketplace, still the most complained-about area of consumer finance, and we are preparing to overhaul that market with strong new rules. We are pushing hard for much greater transparency in student lending, and we are taking on the many sub-par and harmful practices employed by student loan servicers.

But today I want to talk to you about something that cuts across the entire consumer financial marketplace and has been on our radar screen since the very beginning: the effects on consumers of mandatory pre-dispute arbitration clauses. These important clauses have often been buried deep in the fine print of contracts for consumer financial products and services, such as credit cards, bank accounts, payday loans, and private student loans. And though they are nearly invisible to most people, they are having profound effects on American life.

Since I am speaking to the American Constitution Society, I need hardly say that under the U.S. Constitution, each one of us is entitled to seek justice through due process of law as set forth in the Bill of Rights. This right is reinforced in many state constitutions, which recognize the right to an effective remedy to redress injuries we may sustain to our person or our property. This is an important element of personal liberty, that people should be able to protect themselves by acting to vindicate their rights. But our adversarial system can only work effectively, and it can only deserve the public’s confidence, if it is built on the solid foundation of justice. As Chief Justice Earl Warren once observed, “You sit up there, and you see the whole gamut of human nature. Even if the case being argued involves only a little fellow and $50, it involves justice. That’s what is important.”

Arbitration clauses, as they are used today both in the field of consumer finance and more generally, often have been deliberately designed to block Americans from effective means of vindicating their rights. Some of the broader ramifications are surprising and even breathtaking in their scope. But now both the Congress and the courts are beginning to turn away from the extreme philosophy that says a take-it-or-leave-it provision buried deep inside a form contract can nullify an individual citizen’s ability to vindicate rights conferred on them by federal and state law. Earlier this month, Judge Harvey Wilkinson, a highly respected conservative judge writing for a unanimous panel of the Fourth Circuit Court of Appeals, refused to enforce a claim to arbitration pressed by a company acting as a debt collector on behalf of a tribal on-line payday lender. The court held that federal law “does not protect the sort of arbitration agreement that unambiguously forbids an arbitrator from even applying the applicable law,” and summed up its view that federal law “may not play host to this sort of farce” where a party is attempting to “underhandedly convert a choice of law clause into a choice of no law clause.”

So let us consider these developments further in light of the work currently being undertaken by the Consumer Financial Protection Bureau. As we will see, Congress has conferred specific authority upon the Bureau to take up the topic of arbitration and potential policy interventions. Today, I will share the steps we have been taking to learn more about how mandatory pre-dispute arbitration clauses affect consumers of financial products and services. I will also discuss the proposals we have under consideration to mitigate certain of those harmful effects.

We can start with a little background on how we got here. In 1925, Congress first enacted the Federal Arbitration Act to make written agreements to arbitrate certain disputes, including those arising out of contracts, enforceable in the courts. Rather than obtaining a legal judgment from a court, parties to an arbitration agreement would be bound by an arbitration award, which could be confirmed, but generally not reviewed or overturned, by a court.

For four decades after the Federal Arbitration Act was adopted, the federal courts maintained a skeptical and restrictive view of arbitration. In 1953, for example, the Supreme Court held that arbitration clauses could not be used to waive the right to a federal judicial forum granted under substantive federal financial statutes, such as the securities laws.

Starting in the 1980s, however, the law took a dramatic turn, and since then the Supreme Court has expressly overruled much of the prior case law in the area of financial statutes, such as securities laws and antitrust. During this period also, the Court generally revised its previous views of the Federal Arbitration Act and determined that the statute favors arbitration.

At about the same time, the use of arbitration clauses changed dramatically. Originally, arbitration was largely used in commercial disputes between businesses that bargained with each other to create tailored contracts; it was rarely used in disagreements between businesses and consumers. But in the last 20 years or so, banks started including arbitration clauses in their consumer contracts, requiring any disputes or disagreements to be resolved through private arbitration. Attorneys who sought to persuade banks to adopt arbitration clauses specifically noted that they could be used to block class actions.

In several recent cases, the Supreme Court has turned once again to interpreting the Federal Arbitration Act. In an important 2011 decision in the Concepcion case, the Supreme Court held that the Federal Arbitration Act preempted California state law that would have declined to enforce an arbitration agreement barring class proceedings in a consumer case on grounds of unconscionability. Two years later, in a class action antitrust suit against American Express, the Court enforced the arbitration clause of a contract even though it effectively precluded the plaintiff from ever vindicating its statutory rights under federal law.

Even as the judicial doctrine on arbitration has evolved to favor arbitration, it is clear that the Congress still has the authority to adopt additional laws to regulate dispute resolution procedures in the manner that it deems most conducive to the administration of justice. Where Congress addresses arbitration as a method of dispute resolution, the courts must follow its lead. In recent years, Congress has exercised this authority several times. In 2006, Congress first expressed explicit concern about the effect such clauses may have on the welfare of individual consumers in the financial marketplace. Indeed, the Military Lending Act prohibited mandatory pre-dispute arbitration clauses in connection with certain loans made to servicemembers.

Congress also sought to confine the reach of arbitration in the Dodd-Frank Act. In the statute, Congress expressly prohibited the inclusion of arbitration clauses in most residential mortgage loan contracts. It gave the Securities and Exchange Commission authority to prohibit or restrict use of such clauses for certain disputes, if it finds that doing so would be in the public interest and for the protection of investors. It directed the Consumer Bureau to conduct a study and provide a report to Congress on the use of pre-dispute arbitration clauses in consumer financial contracts. And, finally, Congress provided that “[t]he Bureau, by regulation, may prohibit or impose conditions or limitations on the use of” such arbitration clauses in consumer financial contracts if the Bureau finds that such measure “is in the public interest and for the protection of consumers,” and findings in such a rule are “consistent with the study” performed by the Bureau. These provisions represent a clear and conscious decision by Congress to prompt a careful examination of whether arbitration should be used as a means of cutting off the ability of consumers to vindicate their rights.

Pursuant to our statutory authority, we conducted what even our critics acknowledged is the most rigorous and comprehensive study of consumer finance arbitration ever undertaken. Before we performed the study – which ran to 728 pages – we first had to compile extensive information on thousands of federal and state court cases and analyze data from the largest arbitration forum in the country.
What we found was that arbitration clauses are pervasive in consumer finance contracts. Large banks, in particular, commonly include these clauses in their standard agreements for credit cards and checking accounts, among other products. Additionally, many payday lenders and private student lenders have put these clauses in their contracts. Given the size of these markets, we can safely say that tens of millions of consumers are covered by one or more such arbitration clauses. Sometimes consumers are given a one-time chance to opt out of these clauses, but most are unaware of this chance. In fact, the vast majority of Americans do not even know that arbitration clauses exist.

Importantly, our study showed that arbitration clauses restrict consumers’ relief in disputes with financial service providers because companies are using them to block class proceedings in any forum – whether court or arbitration. This affects consumers’ access to justice because group proceedings are often the only practical way to seek relief for relatively small claims. Class actions also create a mechanism to bring about much-needed changes in business practices. By inserting an arbitration clause into their contracts, companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm consumers.

In our study, we took a close look at the impact of these clauses – how many consumers pursued and got relief in arbitration procedures or in individual litigation when they challenged company behavior they believed to be wrongful. We found that very few consumers used the arbitration procedures. Only about 25 disputes per year involved affirmative consumer claims of $1,000 or less, and only a handful of those achieved any relief whatsoever. We also found that consumers generally did not use the court system – including small claims courts – to obtain redress for individual matters.

We also found that far more consumers were able to obtain relief when they were not bound by arbitration clauses and were able to join class action lawsuits. We identified about 420 federal class action settlements in consumer finance cases that were approved between 2008 and 2012. We found that those settlements totaled $2.7 billion in cash, in-kind relief, fees, and expenses. And it is important to recognize that these numbers only tell part of the story, because they exclude the prospective benefits to consumers from lawsuits or settlements that led to changes in company behavior and the deterrent effect associated with these settlements. Clearly $2.7 billion in monetary relief looking backward over a specific prior period means that consumers will save many more billions of dollars in the future if those harms are now eliminated going forward.

We also examined whether companies that include arbitration clauses in their contracts are able to offer lower prices. Our methodology here centered on a real-world comparison of companies that dropped their arbitration clauses and companies that did not change their use of arbitration clauses. We found no statistically significant evidence of any price increase. We likewise found no evidence that issuers which dropped their arbitration clauses reduced access to credit relative to those whose use of arbitration clauses was unchanged.
Finally, our study examined the extent to which consumers are aware of arbitration clauses and understand their implications. In our survey of 1,000 consumers with credit cards, we found that of those consumers who said they knew what arbitration was, three out of four reported that they did not know if they were subject to an arbitration clause. Of those who said they did know, more than half were wrong about whether their agreements actually contained an arbitration clause.
Taken together, these results show that arbitration clauses severely limit consumers’ options to pursue a just resolution of their disputes, to their detriment and without their knowledge.

In our governing statute, Congress specified that the results of this arbitration study are to provide the basis for important policy decisions. So after carefully reflecting on the findings of our study, the Bureau has decided to launch a rulemaking process to protect consumers. Last fall, we released an outline of proposals that we are considering so that we could get additional feedback from small providers of financial services that might be subject to the rule and a range of other stakeholders. As that outline explained, we are considering whether to prohibit companies from using arbitration clauses to block class actions. This would apply to a wide range of consumer financial products and services such as credit cards, checking and deposit accounts, certain auto loans, small-dollar or payday loans, and private student loans, among many others.

One approach we might have taken would have been a complete ban on all arbitration agreements for consumer financial products and services. The proposals we are considering do not do that. Companies could still have an arbitration clause, but they would have to say explicitly that it does not apply to cases brought on behalf of a class unless and until the class certification is denied by the court or the class claims are dismissed in court.

While the proposals we are considering would not impose a total ban, we are concerned that consumer harm could arise if arbitrations are conducted in an unfair manner. So we have also been considering whether to require companies to send to the Bureau all initial claims and awards in consumer financial arbitration disputes. By gathering this data, over time we will be able to refine our evaluation of how such proceedings may affect consumer protection, if at all. To create more transparency and spur broader thinking by researchers and other interested parties, we are also considering publishing this information for all to see, so the public can analyze it as they see fit. Of course, before collecting or publishing any arbitral claims or awards, the Bureau would ensure that these activities comply with privacy considerations. Depending on what the data reveal, these issues could be subject to further consideration both by us and by other policymakers over time.

We have been analyzing a broad range of feedback we received in response to the outline, with a particular focus on feedback from small businesses. Our next step will be to publish a Notice of Proposed Rulemaking and seek public comment from all stakeholders prior to finalizing a rule.

At the Consumer Bureau, we are dedicated to helping fashion a financial marketplace that is characterized by fair, transparent, and responsible business practices. The proposals we are considering would advance these objectives in three ways.

First, consumers would have the opportunity to vindicate their legal rights, which we have recognized is a core American principle. As noted U.S. Court of Appeals Judge Richard Posner has convincingly observed, “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.” That is, in fact, a primary reason why federal and state courts developed procedures for class actions to do justice in such cases. By joining together to pursue their claims as a group, affected consumers would be able to seek and, when appropriate, obtain meaningful relief that as a practical matter they could not get on their own. In this manner, our civil justice system has found a way to effectuate the basic point Chief Justice Warren made, as quoted earlier, that “even if the case being argued involves only a little fellow and $50, it involves justice. That’s what is important.”

Second, the proposals we are considering would deter wrongdoing on a broader scale. One way this is often expressed is by describing group lawsuits as being brought by “private attorneys general” as a means of vindicating public rights and aiding other methods of law enforcement. Although many consumer financial violations impose only small costs on each individual consumer, taken as a whole these unlawful practices can yield millions or even billions of dollars in revenue for financial providers. Companies that are protected behind the effective immunity of arbitration clauses are likely to take less care to ensure that their conduct complies with the law than they would take if faced with class actions. The potential to be held accountable to large numbers of consumers significantly changes this dynamic.

Finally, by requiring companies to provide the Bureau with arbitral claims and awards, which might be made public, the proposals we are considering would bring the arbitration of individual disputes into the sunlight of public scrutiny. In this way, we agree with one of the first great consumer advocates, Justice Louis Brandeis, who said that “sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

One way to think about the effect of mandatory pre-dispute arbitration clauses is to recall what Sherlock Holmes described as “the curious incident of the dog in the night-time.” In the famous detective story, everyone except Holmes misses the fact that the dog did nothing during the night, including not barking at all, which yields the important clue that the intruder likely was recognized. What the story illustrates is that it is often hard to grasp the significance of something that does not happen and thus can easily go unnoticed.

The same point can also be applied to arbitration. What we learned in the course of our study is that very few consumers of financial products and services are seeking relief individually, either through the arbitration process or in court. When we looked for arbitrations of small dollar claims, they simply were not there. They did not turn up in small claims court either. Yet the markets we studied involve tens of millions of consumers. Some class actions did get through the arbitration net, but others did not, and an unknown number are never filed because of the mere presence of an arbitration clause. Millions of other consumers who may not even realize that their rights were violated might have obtained relief as class members if group lawsuits were permissible. Like the dog that did not bark in the night, the silent fact of all this missing relief for consumers can be hard to notice, but it is nevertheless a vital piece of the story.

The central idea of the proposals we are considering is to restore to consumers the rights that most do not even know had been taken away from them. Companies should not be able to place themselves above the law and evade public accountability simply by inserting the magic word “arbitration” in a document and dictating the favorable consequences. Consumers should be able to join together to assert and vindicate their established legal rights. The truth is nobody should have to rely on the government first deciding to pursue an enforcement action in order to get their money back and hold others accountable. In many of our laws, Congress has expressly provided for private remedies. Sometimes Congress has deliberately decided to do so, and sometimes it has not. That should count for something.

Of course, consumer finance is not the only area where industry is using mandatory pre-dispute arbitration clauses to block consumers from the courtroom. Other consumer advocates – both inside and outside of government – are doing great work investigating the effects of arbitration clauses in contracts for insurance, employment, franchises, and other goods and services. Many of you are here today, and we encourage you to continue this critical work in the public interest.

I want to close by again thanking the American Constitution Society for convening those who are committed to preserving access to justice and defending the rights of consumers. We look forward to working together on this issue and many others.

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Consumer Financial Protection Bureau director Richard Cordray is far too smart to come out and say what CFPB’s real mission is, but it boils down to one thing:

Undoing the poisonous pro-corporate, anti-American, anti-Constitutional legacy of the late Justice Antonin Scalia, the self-styled “originalist” who was actually a radical, a judicial version of the Biblical creationists who insist, against all evidence, on a particular, “original” meaning of words spoken long ago by people who had entirely different meanings for those words.

Just like the creationists who labor long to make the meanings of the words produce the result they deem pre-ordained, Scalia labored at length to justify his bizarre, duplicitous jurisprudence where he claimed to be subservient to the legislative bodies but then created, out of the whole cloth, his unique rules for interpreting their work, rules that, surprise!, were fabulously congenial to a corporatist view of America where fictitious persons could have religious views that trumped neutral government regulations, but actual flesh-and-blood Native Americans could not.

There’s a story that many of the people at Richard Nixon’s funeral thought they had accidentally gone to the wrong funeral when they heard the eulogies for him, so sainted were the descriptions of the guest of honor at the ceremony. That is what is happening to Scalia now as the corporate press and corporate law firms sing the praises of this of this profoundly bigoted and destructive man who did so much to deliver America to its enemies in the suites.

 http://www.consumerfinance.gov/newsroom/prepared-remarks-of-cfpb-director-richard-cordray-at-the-american-constitution-society/
 
Feb 18 2016 By Richard Cordray
 
Thank you to the American Constitution Society for inviting me to speak today as part of the Access to Justice Series. I have a deep appreciation for the work you are doing to bring together attorneys, both young and old, who share a common commitment to understanding how the law can be put in service of justice to improve the lives of all Americans.

The Consumer Financial Protection Bureau, which I feel privileged to lead as its first Director, is a notable new example of that common commitment. As our mission, we have set ourselves the task of seeing to it that “consumer financial markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.” That is not an abstract or academic goal – it is simply necessary so that people throughout our society can effectively manage the ways and means of their lives. Consumers have so very many financial judgments to make, ranging from small daily choices to a few momentous decisions that may occur only rarely over the course of a lifetime. The risks and complexities they face are far greater now than they were two generations ago. As people engage in the pursuit of happiness, their success or failure depends crucially on having more support to help them make informed choices and having stronger protections to keep them from being harmed by predatory conduct.

Before the Consumer Bureau was created, the authority for administering and enforcing federal consumer financial laws was strewn across seven federal agencies. For each of those agencies, consumer protection was only one of its many responsibilities. Consequently, no single agency was primarily focused on protecting the everyday users of financial products and services – and consumers paid the price when the financial crisis hit.

Our responsibility, as we understand it, is to stand on the side of consumers and ensure they are treated fairly in the financial marketplace. Through fair rules, consistent oversight, appropriate enforcement of the law, and broad-based consumer engagement, we are working to restore trust and confidence in the markets for household financial products and services. We are here to make sure that the problems that upended our economy and hurt so many consumers do not ever happen again. We also have the responsibility to foresee and forestall new problems that could arise in the future. And we aim to help people better understand and navigate the biggest financial decisions in life, such as borrowing to buy a car, to pay for college, or to own a home.

To date, the Consumer Bureau’s enforcement activity has resulted in $11.2 billion in relief for over 25 million consumers. The vast majority of that relief has resulted from matters where our investigations found that financial institutions had engaged in some form of deceptive conduct. Our supervisory oversight has further resulted in financial institutions providing more than $300 million in redress to over 2 million consumers. As of this month, we have handled over 800,000 complaints from consumers addressing all manner of financial products and services. Our team also provides unbiased, reliable answers about consumer finance issues through the “Ask CFPB” feature on our website, which has been accessed by over 10 million people.

All of this work is obviously important to individuals and families across America, but let me illustrate just how important it really is. We talk a great deal these days about income inequality. Many are hotly debating whether more should be done to see that American workers have more money in their pockets through higher wages, more affordable health care, or fairer taxes. Those matters are not within my authority as the Director of the Consumer Bureau. But it is one thing for people to have money in their pockets; it is quite another thing to keep it there. Just a few years ago, predatory conduct and irresponsible practices led to a broad financial crisis that cost millions of Americans their homes, cost millions more their jobs, and cost virtually all of us much of our retirement savings, adding up to trillions of dollars in total.

No single event during our lifetimes will have devastated the cumulative wealth of middle-class Americans like the financial crisis. The median net worth of those in the 20th to the 40th income percentile fell by half between 2007 and 2013. The median net worth of those in the 40th to the 60th income percentile fell by 40 percent over the same period. For people whose financial situations were affected by the crisis, these are the resources they would have had to help finance their children’s education or to help them secure a decent retirement. And though we all paid the heavy cost of under-regulated and poorly performing markets, the burden was not borne evenly. For most of those at the top end of our society, the climb back from the bottom was swift and sure. For those in the middle of our society and below, it still remains a long, hard slog just trying to get back to where people had been before the crisis, with no end in sight even now, eight years later.

There are many ways we are working to repair the fault lines in the system of consumer finance. We have adopted a substantial set of new regulations to address the malignancies that infected the mortgage market and are laid bare for all to see in movies like The Big Short and Too Big to Fail. We are engaged in strenuous oversight and numerous enforcement actions to improve the debt collection marketplace, still the most complained-about area of consumer finance, and we are preparing to overhaul that market with strong new rules. We are pushing hard for much greater transparency in student lending, and we are taking on the many sub-par and harmful practices employed by student loan servicers.

But today I want to talk to you about something that cuts across the entire consumer financial marketplace and has been on our radar screen since the very beginning: the effects on consumers of mandatory pre-dispute arbitration clauses. These important clauses have often been buried deep in the fine print of contracts for consumer financial products and services, such as credit cards, bank accounts, payday loans, and private student loans. And though they are nearly invisible to most people, they are having profound effects on American life.

Since I am speaking to the American Constitution Society, I need hardly say that under the U.S. Constitution, each one of us is entitled to seek justice through due process of law as set forth in the Bill of Rights. This right is reinforced in many state constitutions, which recognize the right to an effective remedy to redress injuries we may sustain to our person or our property. This is an important element of personal liberty, that people should be able to protect themselves by acting to vindicate their rights. But our adversarial system can only work effectively, and it can only deserve the public’s confidence, if it is built on the solid foundation of justice. As Chief Justice Earl Warren once observed, “You sit up there, and you see the whole gamut of human nature. Even if the case being argued involves only a little fellow and $50, it involves justice. That’s what is important.”

Arbitration clauses, as they are used today both in the field of consumer finance and more generally, often have been deliberately designed to block Americans from effective means of vindicating their rights. Some of the broader ramifications are surprising and even breathtaking in their scope. But now both the Congress and the courts are beginning to turn away from the extreme philosophy that says a take-it-or-leave-it provision buried deep inside a form contract can nullify an individual citizen’s ability to vindicate rights conferred on them by federal and state law. Earlier this month, Judge Harvey Wilkinson, a highly respected conservative judge writing for a unanimous panel of the Fourth Circuit Court of Appeals, refused to enforce a claim to arbitration pressed by a company acting as a debt collector on behalf of a tribal on-line payday lender. The court held that federal law “does not protect the sort of arbitration agreement that unambiguously forbids an arbitrator from even applying the applicable law,” and summed up its view that federal law “may not play host to this sort of farce” where a party is attempting to “underhandedly convert a choice of law clause into a choice of no law clause.”

So let us consider these developments further in light of the work currently being undertaken by the Consumer Financial Protection Bureau. As we will see, Congress has conferred specific authority upon the Bureau to take up the topic of arbitration and potential policy interventions. Today, I will share the steps we have been taking to learn more about how mandatory pre-dispute arbitration clauses affect consumers of financial products and services. I will also discuss the proposals we have under consideration to mitigate certain of those harmful effects.

We can start with a little background on how we got here. In 1925, Congress first enacted the Federal Arbitration Act to make written agreements to arbitrate certain disputes, including those arising out of contracts, enforceable in the courts. Rather than obtaining a legal judgment from a court, parties to an arbitration agreement would be bound by an arbitration award, which could be confirmed, but generally not reviewed or overturned, by a court.

For four decades after the Federal Arbitration Act was adopted, the federal courts maintained a skeptical and restrictive view of arbitration. In 1953, for example, the Supreme Court held that arbitration clauses could not be used to waive the right to a federal judicial forum granted under substantive federal financial statutes, such as the securities laws.

Starting in the 1980s, however, the law took a dramatic turn, and since then the Supreme Court has expressly overruled much of the prior case law in the area of financial statutes, such as securities laws and antitrust. During this period also, the Court generally revised its previous views of the Federal Arbitration Act and determined that the statute favors arbitration.

At about the same time, the use of arbitration clauses changed dramatically. Originally, arbitration was largely used in commercial disputes between businesses that bargained with each other to create tailored contracts; it was rarely used in disagreements between businesses and consumers. But in the last 20 years or so, banks started including arbitration clauses in their consumer contracts, requiring any disputes or disagreements to be resolved through private arbitration. Attorneys who sought to persuade banks to adopt arbitration clauses specifically noted that they could be used to block class actions.

In several recent cases, the Supreme Court has turned once again to interpreting the Federal Arbitration Act. In an important 2011 decision in the Concepcion case, the Supreme Court held that the Federal Arbitration Act preempted California state law that would have declined to enforce an arbitration agreement barring class proceedings in a consumer case on grounds of unconscionability. Two years later, in a class action antitrust suit against American Express, the Court enforced the arbitration clause of a contract even though it effectively precluded the plaintiff from ever vindicating its statutory rights under federal law.

Even as the judicial doctrine on arbitration has evolved to favor arbitration, it is clear that the Congress still has the authority to adopt additional laws to regulate dispute resolution procedures in the manner that it deems most conducive to the administration of justice. Where Congress addresses arbitration as a method of dispute resolution, the courts must follow its lead. In recent years, Congress has exercised this authority several times. In 2006, Congress first expressed explicit concern about the effect such clauses may have on the welfare of individual consumers in the financial marketplace. Indeed, the Military Lending Act prohibited mandatory pre-dispute arbitration clauses in connection with certain loans made to servicemembers.

Congress also sought to confine the reach of arbitration in the Dodd-Frank Act. In the statute, Congress expressly prohibited the inclusion of arbitration clauses in most residential mortgage loan contracts. It gave the Securities and Exchange Commission authority to prohibit or restrict use of such clauses for certain disputes, if it finds that doing so would be in the public interest and for the protection of investors. It directed the Consumer Bureau to conduct a study and provide a report to Congress on the use of pre-dispute arbitration clauses in consumer financial contracts. And, finally, Congress provided that “[t]he Bureau, by regulation, may prohibit or impose conditions or limitations on the use of” such arbitration clauses in consumer financial contracts if the Bureau finds that such measure “is in the public interest and for the protection of consumers,” and findings in such a rule are “consistent with the study” performed by the Bureau. These provisions represent a clear and conscious decision by Congress to prompt a careful examination of whether arbitration should be used as a means of cutting off the ability of consumers to vindicate their rights.

Pursuant to our statutory authority, we conducted what even our critics acknowledged is the most rigorous and comprehensive study of consumer finance arbitration ever undertaken. Before we performed the study – which ran to 728 pages – we first had to compile extensive information on thousands of federal and state court cases and analyze data from the largest arbitration forum in the country.
What we found was that arbitration clauses are pervasive in consumer finance contracts. Large banks, in particular, commonly include these clauses in their standard agreements for credit cards and checking accounts, among other products. Additionally, many payday lenders and private student lenders have put these clauses in their contracts. Given the size of these markets, we can safely say that tens of millions of consumers are covered by one or more such arbitration clauses. Sometimes consumers are given a one-time chance to opt out of these clauses, but most are unaware of this chance. In fact, the vast majority of Americans do not even know that arbitration clauses exist.

Importantly, our study showed that arbitration clauses restrict consumers’ relief in disputes with financial service providers because companies are using them to block class proceedings in any forum – whether court or arbitration. This affects consumers’ access to justice because group proceedings are often the only practical way to seek relief for relatively small claims. Class actions also create a mechanism to bring about much-needed changes in business practices. By inserting an arbitration clause into their contracts, companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm consumers.

In our study, we took a close look at the impact of these clauses – how many consumers pursued and got relief in arbitration procedures or in individual litigation when they challenged company behavior they believed to be wrongful. We found that very few consumers used the arbitration procedures. Only about 25 disputes per year involved affirmative consumer claims of $1,000 or less, and only a handful of those achieved any relief whatsoever. We also found that consumers generally did not use the court system – including small claims courts – to obtain redress for individual matters.

We also found that far more consumers were able to obtain relief when they were not bound by arbitration clauses and were able to join class action lawsuits. We identified about 420 federal class action settlements in consumer finance cases that were approved between 2008 and 2012. We found that those settlements totaled $2.7 billion in cash, in-kind relief, fees, and expenses. And it is important to recognize that these numbers only tell part of the story, because they exclude the prospective benefits to consumers from lawsuits or settlements that led to changes in company behavior and the deterrent effect associated with these settlements. Clearly $2.7 billion in monetary relief looking backward over a specific prior period means that consumers will save many more billions of dollars in the future if those harms are now eliminated going forward.

We also examined whether companies that include arbitration clauses in their contracts are able to offer lower prices. Our methodology here centered on a real-world comparison of companies that dropped their arbitration clauses and companies that did not change their use of arbitration clauses. We found no statistically significant evidence of any price increase. We likewise found no evidence that issuers which dropped their arbitration clauses reduced access to credit relative to those whose use of arbitration clauses was unchanged.
Finally, our study examined the extent to which consumers are aware of arbitration clauses and understand their implications. In our survey of 1,000 consumers with credit cards, we found that of those consumers who said they knew what arbitration was, three out of four reported that they did not know if they were subject to an arbitration clause. Of those who said they did know, more than half were wrong about whether their agreements actually contained an arbitration clause.
Taken together, these results show that arbitration clauses severely limit consumers’ options to pursue a just resolution of their disputes, to their detriment and without their knowledge.

In our governing statute, Congress specified that the results of this arbitration study are to provide the basis for important policy decisions. So after carefully reflecting on the findings of our study, the Bureau has decided to launch a rulemaking process to protect consumers. Last fall, we released an outline of proposals that we are considering so that we could get additional feedback from small providers of financial services that might be subject to the rule and a range of other stakeholders. As that outline explained, we are considering whether to prohibit companies from using arbitration clauses to block class actions. This would apply to a wide range of consumer financial products and services such as credit cards, checking and deposit accounts, certain auto loans, small-dollar or payday loans, and private student loans, among many others.

One approach we might have taken would have been a complete ban on all arbitration agreements for consumer financial products and services. The proposals we are considering do not do that. Companies could still have an arbitration clause, but they would have to say explicitly that it does not apply to cases brought on behalf of a class unless and until the class certification is denied by the court or the class claims are dismissed in court.

While the proposals we are considering would not impose a total ban, we are concerned that consumer harm could arise if arbitrations are conducted in an unfair manner. So we have also been considering whether to require companies to send to the Bureau all initial claims and awards in consumer financial arbitration disputes. By gathering this data, over time we will be able to refine our evaluation of how such proceedings may affect consumer protection, if at all. To create more transparency and spur broader thinking by researchers and other interested parties, we are also considering publishing this information for all to see, so the public can analyze it as they see fit. Of course, before collecting or publishing any arbitral claims or awards, the Bureau would ensure that these activities comply with privacy considerations. Depending on what the data reveal, these issues could be subject to further consideration both by us and by other policymakers over time.

We have been analyzing a broad range of feedback we received in response to the outline, with a particular focus on feedback from small businesses. Our next step will be to publish a Notice of Proposed Rulemaking and seek public comment from all stakeholders prior to finalizing a rule.

At the Consumer Bureau, we are dedicated to helping fashion a financial marketplace that is characterized by fair, transparent, and responsible business practices. The proposals we are considering would advance these objectives in three ways.

First, consumers would have the opportunity to vindicate their legal rights, which we have recognized is a core American principle. As noted U.S. Court of Appeals Judge Richard Posner has convincingly observed, “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.” That is, in fact, a primary reason why federal and state courts developed procedures for class actions to do justice in such cases. By joining together to pursue their claims as a group, affected consumers would be able to seek and, when appropriate, obtain meaningful relief that as a practical matter they could not get on their own. In this manner, our civil justice system has found a way to effectuate the basic point Chief Justice Warren made, as quoted earlier, that “even if the case being argued involves only a little fellow and $50, it involves justice. That’s what is important.”

Second, the proposals we are considering would deter wrongdoing on a broader scale. One way this is often expressed is by describing group lawsuits as being brought by “private attorneys general” as a means of vindicating public rights and aiding other methods of law enforcement. Although many consumer financial violations impose only small costs on each individual consumer, taken as a whole these unlawful practices can yield millions or even billions of dollars in revenue for financial providers. Companies that are protected behind the effective immunity of arbitration clauses are likely to take less care to ensure that their conduct complies with the law than they would take if faced with class actions. The potential to be held accountable to large numbers of consumers significantly changes this dynamic.

Finally, by requiring companies to provide the Bureau with arbitral claims and awards, which might be made public, the proposals we are considering would bring the arbitration of individual disputes into the sunlight of public scrutiny. In this way, we agree with one of the first great consumer advocates, Justice Louis Brandeis, who said that “sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

One way to think about the effect of mandatory pre-dispute arbitration clauses is to recall what Sherlock Holmes described as “the curious incident of the dog in the night-time.” In the famous detective story, everyone except Holmes misses the fact that the dog did nothing during the night, including not barking at all, which yields the important clue that the intruder likely was recognized. What the story illustrates is that it is often hard to grasp the significance of something that does not happen and thus can easily go unnoticed.

The same point can also be applied to arbitration. What we learned in the course of our study is that very few consumers of financial products and services are seeking relief individually, either through the arbitration process or in court. When we looked for arbitrations of small dollar claims, they simply were not there. They did not turn up in small claims court either. Yet the markets we studied involve tens of millions of consumers. Some class actions did get through the arbitration net, but others did not, and an unknown number are never filed because of the mere presence of an arbitration clause. Millions of other consumers who may not even realize that their rights were violated might have obtained relief as class members if group lawsuits were permissible. Like the dog that did not bark in the night, the silent fact of all this missing relief for consumers can be hard to notice, but it is nevertheless a vital piece of the story.

The central idea of the proposals we are considering is to restore to consumers the rights that most do not even know had been taken away from them. Companies should not be able to place themselves above the law and evade public accountability simply by inserting the magic word “arbitration” in a document and dictating the favorable consequences. Consumers should be able to join together to assert and vindicate their established legal rights. The truth is nobody should have to rely on the government first deciding to pursue an enforcement action in order to get their money back and hold others accountable. In many of our laws, Congress has expressly provided for private remedies. Sometimes Congress has deliberately decided to do so, and sometimes it has not. That should count for something.

Of course, consumer finance is not the only area where industry is using mandatory pre-dispute arbitration clauses to block consumers from the courtroom. Other consumer advocates – both inside and outside of government – are doing great work investigating the effects of arbitration clauses in contracts for insurance, employment, franchises, and other goods and services. Many of you are here today, and we encourage you to continue this critical work in the public interest.

I want to close by again thanking the American Constitution Society for convening those who are committed to preserving access to justice and defending the rights of consumers. We look forward to working together on this issue and many others.

###
 

Oregon has fallen for the ethanol scam just as hard as Iowa, with far less excuse. The so-called “Clean Fuels Bill” in Oregon is larded up with fantasy — like the fantasy of something for nothing, which is the basic proposition of biofuels, or agrofuels as they are more correctly known (since fossil fuels are biofuels as well).

Chemical engineer Robert Rapier has worked tirelessly to sort fact from fiction about “biofuels,” especially in massive hurricane of hype that surrounds “cellulosic” ethanol, sometimes referred to as “advanced biofuels.”

With a last name like that, Rapier could be excused for trying to slash through the bunk with humor and sarcasm, but what he tends to do is even more powerful — he doesn’t use snark at all — instead, he simply recalls the promises and projections and compares them, one by one, demolishing the hypesters with their own words.

Ten years ago a visionary named Vinod Khosla gave a presentation called Biofuels: Think Outside the Barrel. It seems to have disappeared from his Khosla Ventures website, but you can find an archived version here. In that presentation Mr. Khosla outlined his vision for biofuels. He projected that ethanol produced from biomass – aka “cellulosic ethanol” – would scale up rapidly. From zero commercial production in 2006, Khosla foresaw the first 100 million gallons of cellulosic ethanol hitting the market in 2008 (see Slide 78), ramping rapidly to 2.5 billion gallons in 2011, 14.6 billion gallons in 2015, and ultimately 173 billion gallons per year by 2030. Combined with corn ethanol production, he believed cellulosic ethanol could totally end U.S. dependence on petroleum for transportation fuel – but he needed to get the government on board to foot some costs.

Khosla addressed potential obstacles in his presentation. Certainly cellulosic ethanol wouldn’t fail because of technology. There were too many companies working on it. The magic of Moore’s Law and black swans would be the ticket to success. (As an aside, he doesn’t seem to understand the black swan theory, as he frequently cites these “high-profile, hard-to-predict, and rare events” as an expected outcome). The only real barrier he could identify was those despicable oil companies, who had to be shaking in their boots that this 100-year old upstart technology would spell their demise.

But he would deal with the oil companies through legislation by forcing them to purchase this product that had yet to be commercialized. So he lobbied, and he testified before Congress. He lost a vote or two, but he was instrumental in getting cellulosic ethanol mandates included in the Renewable Fuel Standard (RFS) in the Energy Independence and Security Act of 2007. The EPA was charged with implementing the RFS, and they based the mandated volumes on the amount that potential cellulosic ethanol producers claimed they would be able to produce. For 2010 the EPA was counting on 100 million gallons of cellulosic fuels based on claims primarily from two companies associated with Vinod Khosla: Range Fuels and Cello Energy.

This is ground that has been amply covered here before. Range Fuels and Cello Energy both went out of business after spending hundreds of millions of dollars — including taxpayer money — without delivering a drop of cellulosic fuel. In fact there were zero gallons of qualifying cellulosic ethanol production for 2010 and 2011. In 2012 the first qualifying batch of cellulosic ethanol was produced — 20,069 gallons by Blue Sugars Corporation. The ethanol was produced in April 2012, but that was it for the year. And Blue Sugars went out of business.

There was no qualifying cellulosic ethanol produced in 2013, the year Vinod Khosla had projected 7.2 billion gallons of cellulosic ethanol production. But 2014 finally saw some qualifying production as several new plants came online.

INEOS Bio and its joint venture partner New Planet Energy had announced the opening of the Indian River County BioEnergy Center in Florida in 2012. The nameplate capacity of this plant was 8 million gallons of cellulosic ethanol per year. The House Committee on Agriculture was told in 2012 “The biorefinery is a major landmark for this country. It’s the first commercial cellulosic refinery.” But the EPA doesn’t show any production from anyone in 2012 or 2013, and in December 2013 the company issued a press release that said in part: “Bringing the facility on-line and up to capacity has taken longer than planned due to several unexpected start-up issues at the Center. These efforts have highlighted some needed modifications and upgrades.” Another update from them in 2014 cast doubt that they would ever produce any ethanol.

On July 7, 2011, the U.S. Department of Energy had announced a $105 million loan guarantee to POET for the development of its 25 million gallon per year corn cob-to-ethanol facility, dubbed Project Liberty, at Emmetsberg, Iowa. POET, one of the largest producers of ethanol in the world announced that they were open for commercial cellulosic ethanol production in September 2014. Cellulosic ethanol production had been slated to begin in May 2013, but more than a year later than projected Jeff Broin, POET Founder and Executive Chairman, stated “Some have called cellulosic ethanol a ‘fantasy fuel,’ but today it becomes a reality.”

Another company, Abengoa (NASDAQ: ABGB) built a $500 million cellulosic ethanol plant in Hugoton, Kansas. In October 2014 they announced the grand opening of the facility: “Abengoa’s new industry-leading biorefinery finished construction in mid-August and began producing cellulosic ethanol at the end of September with the capacity to produce up to 25 million gallons per year.”

A 4th company, Quad County Corn Processors (QCCP), claims they are producing 2 million gallons of cellulosic ethanol from the cellulose in corn kernels in a bolt-on process to a corn ethanol plant.

In October 2015 DuPont announced what was billed as the largest cellulosic ethanol plant in the world. The $225 million plant in Nevada, Iowa was designed to convert corn stover to 30 million gallons per year of cellulosic ethanol.

Thus the cellulosic ethanol revolution is well underway. To summarize the plants and their capacity:

  • INEOS – 8 million gallons per year. Announced start up in 2012.
  • Quad County Corn Processers – 2 million gallons per year. Announced first production in July 2014
  • POET – 25 million gallons per year. Announced start up in September 2014
  • Abengoa – 25 million gallons per year. Announced start up in October 2014
  • DuPont – 30 million gallons per year. Announced start up in October 2015

The initial mandate in the RFS had called for 3 billion gallons of cellulosic ethanol to be produced in 2015. 

At the beginning of 2015 there were 4 companies all claiming to produce cellulosic ethanol. Nameplate capacity for the 4 companies was 60 million gallons per year. So how much was actually produced?

Last month the EPA announced total cellulosic ethanol production for 2015.

The tally? 2.2 million gallons.

That’s about 3.6% of the nameplate capacity on plants that cumulatively cost more than $1 billion to build.

Leaving DuPont out of the mix because they didn’t start up until late in 2015, it’s not even clear who is producing the ethanol. QCCP alone claims they are making 2 million gallons per year. It doesn’t appear that INEOS is producing any cellulosic ethanol at all. Abengoa filed for bankruptcy in November, shutting down its cellulosic ethanol plant.

What on earth is going on?

It’s simple really. This is a technical issue and an economic issue that has been known for 100 years. Ethanol can be produced from cellulose. The technology has been around a long time. This isn’t even the first time over a million gallons of cellulosic ethanol have been produced. It was done in 1910

But it’s very costly to produce fuel grade ethanol from cellulose. Thus, there have been many attempts to commercialize cellulosic ethanol since the early 1900′s, and every 20-30 years or so we forget why this already failed. So we saddle up and attempt to do it again. People think they are the first to discover fire, and they sometimes convince Congress to give them tax dollars to commercialize their “invention.”

The technical issues can obviously be addressed, or we wouldn’t see any production at all. It’s just that the solutions come at a high cost. So, I don’t think any of these guys will make any money at this. Certainly not when you consider the capital involved. I think you will see POET and DuPont persevere for a few more years, running at low capacities because they are losing money on every gallon they make. Then they will idle the projects, and we will chalk it up as a lesson learned.

Again.

Link to Original Article: Cellulosic Ethanol Falls A Few Billion Gallons Short