Free Lunch: David Cay Johnston off the leash

A version of this review appeared at Spot-on last week, but as you know over there I get heavily edited by Chris Nolan who’s a real journalist and all that. The beauty of the zero cost of publishing online is that you can show lots of versions. This is what it looked before it got to her. Enjoy.

Despite being buried in Health 2.0 work, somehow I’ve been managing to read a few books lately. But none of them have been quite as staggering as Free Lunch, the latest from former NY Times investigative reporter David Cay Johnston.

Johnston’s best known for his exhaustive investigation into how corporations and very very rich individuals subvert the tax code so that they pay less, while the rest of us pay more. But in this book (probably because he’s no longer a NY Times Reporter and is off the leash of restraint that the Grey Lady seems to put on its reporters) he gets almost biblical in calling out the cheats, crooks and murderers.

And when I say murderers, Johnston is talking about John Snow, Bush’s former treasury secretary — yup the one who did such a great job regulating the sub-prime mortgage market that the potential for a credit and housing collapse in the latter part of this decade was avoided…oh, wait….

Snow was CEO of CSX corp, a railroad corporation that Johnson shows
sucked entirely off the public teat, and systematically and knowingly
reduced the amount it spent on safety—and also subverted the safety
inspectors who were supposed to enforce the law—to the point that train
crashes and subsequent passenger deaths dramatically increased. And
when CSX was finally successfully sued by the wife of a Miami cop who
died in a crash, somehow it had managed to subvert the rules that
instead of the CEO or the shareholders paying the huge damages, Amtrak
did. Yup, you and me paid for it. That of course didn’t stop Snow
raking tens of millions off CSX over his tenure there, even as the
stock price fell. He later went off to run a company that managed to
fail to deliver ice to Katrina victims and was in charge of maintenance
in the infamous buildings at Walter Reed where Iraq war veterans lived
in squalid conditions.

If Johnston’s utter disdain for Snow drips off every page he writes about him, well Snow’s in good company.

Johnston goes after the welfare queens who run sports teams (George
Steinbrenner, George W. Bush et al) and the politicians who tax the
poor and middle class to pay them huge subsidies. In fact organized
sport in the US makes a profit for its owners that is less than the
amount of public subsidies it receives. That’s right—we’re all paying
for the billions those owners make.

He continues down the line of industries and individuals who have
lobbied to change the rules that benefit the rich at the expense of
everyone else. You think Warren Buffet is some cuddly grandfather who
gets a free pass cause he’s a Democrat who’s giving it all away to
charity? Not in Johnson’s world.

Johnston demonstrates that de-regulated electricity “markets” brought
to you by Enron and its kept politicians Bush, Cheney et al, were
systematically rigged against consumers, and shows why municipally-owned utilities produce cheaper (and more reliable supplies of)
electricity. Something by the way that the residents of Sacramento,
Palo Alto and Los Angeles know and that those in San Francisco would
like to find out, which is PG&E’s ads against the public power
initiative on the ballot in my home town have started 2 full months
before the election.

Johnson shows how Buffet’s lobbyists systematically went after
municipalities in Iowa which owned their own utilities and wanted to
compete with his utilities. He didn’t stop them in the free market; he
stopped them by paying off politicians.

That pattern is repeated over and over again in the book. Under the
cover of obfuscation and an emasculated corporate media, politicians at
the state and Federal level take payola (sorry, campaign
contributions), and wealthy men and corporations do anything they can
to suck more from the public teat and to avoid paying their fair share.
To the extent that the richest 400 families in America making over
$100m each pay a lower proportion of their income in tax than
the rest of us. And don’t forget, we’re borrowing from the Chinese to
fund that tax break, so our kids will pay it off.

Health care is not spared Johnson’s wrath. I was amused last year
when Bob Gumbiner who made tens of millions of dollars converting FHP
from a non-profit to a for-profit sent me his book
proclaiming that a single-payer socialized system was the answer for
America. Johnson reminds us how he essentially defrauded the state of
California out of about $200 million (in 1986 dollars!) when he got to
convert FHP on the cheap. Same with Len Schaeffer, who’s own initial
attempts to pay nothing when Wellpoint/Blue Cross converted
were eventually blocked. Of course the amount eventually given to the
California Endowment & the CHCF were quite large, but puny in
comparison to the market cap of Wellpoint. I’ve written about the excessive fawning over Len Schaeffer before on THCB,
but coincidentally I talked last week to someone about to go to lunch
with him. We got onto the topic of how much Len has taken out of the
health care system and the estimate was around $1 billion.

It’s good to know that in the course of Schaeffer, McGuire,
Abramson, Glasscock et al becoming billionaires, the health care system
became cheaper and all the problems with access got fixed….oh wait…

Johnson ends the book laying out the income data. And although we
know it, it’s staggering. All of the gains in the last thirty years
have gone to the top 10%. Everyone else has seen their incomes go down
in real terms and of course their share of the nation’s wealth plummet.
But wait there’s more (a catch phrase Johnson likes!). The bottom half
of the top 10% are standing still and it’s only the top 5% who have
gained, and most of that gain is in the top 1% and most of that gain is
in the top 0.1%.

After 35 years of “free marketeers” running their own version of
corporate welfare, we are a nation that has an income distribution that
looks like Mexico, Russia or Brazil. Or like France before 1789.

Revolution anyone?

Free Lunch is a fabulous book by a veteran investigative reporter
giving you his life’s work. There’s way more in it than I’ve described
here. Buy it and read it.

Livongo’s Post Ad Banner 728*90

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BillTomRobPeterMG Recent comment authors
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1) Gosh, when did DCJohnston leave the NYTimes? Did I miss a story in the Times? 2) David’s “Perfectly Legal” is another, earlier, screed on the IRS–of particular interest in that it documents how our Congress has insisted on spending lots of money on audits of the poor (with full-dress terrorizing tactics and draconian punishments perfectly matched (NOT) to the incredibly huge amount of dollar-damage (NOT) done to our national debt by the disgustingly evil, greedy, sinful and immoral poor people. (Do I have to say NOT again?). And wait! There’s MORE!! Congress’ concomitant cutting of funds –even the tiniest… Read more »


MG, before you start assigning blame take a look at JS-2369, April 13, 2005. That’s Snow’s testimony before the House Financial Services Committee…and yes there was testimony before the Senate as well. Bottom line Chairman Oxley & ranking member Frank, did not want Fannie Mae or Freddie Mac regulated…I think a D follows there political affiliation. Try doing some research and get your facts straight. Might also interest you that, yes, the incompetant administration has been calling for regualtion since 2001. It was Raines a, oopps, a ‘D’ buddy who mismanaged the organization and walked with 90 million over his… Read more »


Yes. We’re all victims of a systemic-level pyramid scam. Sell the rabble on the idea of being well-off, of buying classy goods, of being a solid, unfrightened, casual citizen without care. Give them “opportunities” to save and scrimp and invest. Make up paper entities to invest in, with promises of silly returns guaranteed to take care of them the rest of their lives. Oh, or for retirement. Yeah. That’s a nice long time. No one will notice. Sell documents that are selling documents of assets that are themselves documents of documents of assets that are promises of future assets that… Read more »


What great timing for this book. As we are seeing there is just not a free lunch for connected million/billionaires, but dishonest ones as well. Think about how this financial mess was created – non-regulated corporations (Thank you Republicans) actively involved in creating fraudulent paper, then getting that paper’s risk fraudulently changed to AAA rating, then selling that paper to incompetent corporations. Taxpayers get your checkbooks out – if you have any money in the bank after cashing in your home’s equity, maxing out your credit cards, borrowing for your kids education, paying for your healthcare; and now for the… Read more »


Lots of industries in the US receive subsidies of one form or another but the most disgusting is professional sports franchise. I love baseball but here is just a taste: Cities have forked over over $3 billion of public funding for baseball stadiums since 1991. But the 9 stadiums that opened in the 90s, 81%(~$2B) came from public funding. For stadiums that opened between 2000-06, public funding went down to ~55%. For the 6 baseball stadiums built or to be built afterward 2006, 45% is expected from public funding. Most of these taxes too are kind of hidden in the… Read more »