Is Small Business Really The Backbone Of Our Economy? And Do Congressmen Have Backbones?

Southern California's best member of Congress, Ted Lieu, understands the problems small businesses face better than most members. "Republicans," he told us this morning, "love to talk a big game when it comes to supporting small businesses, but in reality most of their policies benefit big corporations. I grew up working in a small gift shop owned by my parents, so I know that small businesses really are the backbone of our economy. Since the turn of the last century, we have known that when a very few massive corporations have nearly complete control over a market it is bad for workers, bad for consumers, and bad for innovation. Government has an essential role to play in protecting its citizens from the adverse effects of corporate consolidation."

If you're interested in monopolies and anti-trust action to contain them, you've got to watch the John Oliver segment above. It's among his greatest hits. It's time to bring back an anti-trust effort in a big way and for candidates to start addressing it. Voters certainly understand they're being screwed by the monopolies Oliver was talking about on his show. A couple of weeks ago, we took a look at the state of monopolies in the Trump Era. Today I turned to Lillian Salerno, the sensible populist candidate running against GOP crackpot Pete Sessions in the Ft. Worth area (CA-32). As an Obama deputy undersecretary of rural development for the Department of Agriculture, she's something of an expert on the destruction monopolies cause to working families. Today she told us that "There is a graveyard of small businesses that died from the gunfire of monopolies and corporate strongmen. The American worker and consumer pay the price, as all of working class America wonders how they are going to put their kids through college or pay for elder care in retirement."

South of where she's running, another progressive Democrat, Derrick Crowe, is the candidate Blue America has endorsed for the Austin-San Antonio seat being occupied by reactionary Republican Lamar Smith has recognized the monopoly problem and has been writing about it himself. This morning he told us that, "Monopolies suck cash out of the hands of working class people and give it to the super wealthy and corporations. Under monopolies and oligopolies, corporations call the shots, not voters. They bully the consumer and overcharge us. They bully suppliers and underpay them. They close markets to small businesses and they concentrate economic and political power in the hands of a very, very few people. That’s how we get the rigged system. That’s also why we pay too much for goods and services like health care, food, cable and Internet, and plane tickets.  We need people in Congress that will push the administration-- Republican or Democratic administrations--to use anti-trust tools to break up monopolies-- and also hold hearings to expose anti-competitive, anti-democracy behavior by corporations. We also need folks who are ready to fight the rise of platform monopolies so that companies like Facebook and Google don't get a stranglehold on democracy."

Last March Rep. Ro Khanna (D-CA) sent a letter to Secretary of Defense James Mattis and the Pentagon’s acting inspector general accusing defense contractor TransDigm Group of illegally overcharging the Department of Defense by acting as a "hidden monopolist."

The business model Khanna described is devilishly clever, wildly profitable and totally at odds with the basic principles of a competitive market. TransDigm is essentially the Martin Shkreli of defense contractors. It’s a large holding company that searches for specialty parts used in heavy machinery-- unique panels, connectors, cables and other components-- that are produced exclusively by a single company. TransDigm buys these producers and Pharma Bros them, dramatically inflating the price to exploit their monopoly.

Rep. Ro Khanna (D-Calif.) cited examples of TransDigm price hikes, including a cable assembly that went from $1,737 to $7,863 and a motor rotor that had been $654 now going for $5,474.

Khanna’s letter cited five specific aerospace parts the company had jacked the price on, including a “cable assembly” that went from $1,737.03 to $7,863.00 after being acquired by TransDigm. The price of a TransDigm “motor rotor” soared from $654.46 to $5,474.00.

But the practice is widespread throughout TransDigm. The company’s own filings with the Securities and Exchange Commission state that 80 percent of its sales come from parts for which TransDigm believes itself to be a monopolist.

Not all of the company’s parts even work. In 2016, the Washington Post reported that drones were crashing due to faulty starter-generators supplied by a TransDigm subsidiary.

“The president is asking for $54 billion more on defense,” Khanna told the Huffington Post. “How much money are we wasting on monopolistic behavior?”

The Pentagon has rules designed to defend itself against predatory pricing. Companies that function as the sole vendors of supplies have to detail their costs to the government, which allows the firms to reap a reasonable profit margin over and above these expenses. But Khanna’s letter argued that TransDigm evaded these rules by setting up “a network of captive distributors”-- middlemen who sold to the government, creating the illusion of an actual competitive market.

“TransDigm isn’t a business, it’s the abuse of monopoly power so extreme it borders on performance art,” according to Matthew Stoller, a fellow with the New America Foundation’s Open Markets division. “Congress should investigate this aggressively.”

No less than 12 TransDigm subsidiaries failed to disclose to the Defense Department in their procurement filings that they were owned by TransDigm, according to Khanna.

TransDigm did not respond to requests for comment. The company’s chief executive, W. Nicholas Howley, received $18.7 million in 2016-- more than the chief executives of Apple, Boeing or Citigroup.

Khanna’s interest in the TransDigm case reflects a broader concern in Washington over concentrated economic power. In early March, the Center for American Progress hosted a forum on Trump’s Supreme Court nominee, Neil Gorsuch, focused on his antitrust record...

Khanna is waiting to hear back from the Defense Department before taking further action, but he hasn’t ruled out a congressional investigation.

“This is a bipartisan issue,” Khanna told HuffPost. “There are many of my Republican friends who want to see our dollars going to troops and readiness and not to anticompetitive behavior.”

Haley Stevens is likely to be the next member of Congress from suburban Detroit's 11th CD. These kinds of issues are at the core of why she's involved in public service. Previously, the chief of staff for the Obama administration’s auto bailout, she told us that "We must reclaim the narrative that our economy drives from people, and a person's ability to make, sell, produce and purchase from their individual capabilities. For too long we've gone lax on anti-trust while the middle class has paid the price. We've let large conglomerates take over at the expense of our regional economies. Now is the moment to hold corporate America accountable, reclaim the fight for working families, fair wage, and an equal playing field that benefits people. It's the people first agenda that will win the future."

Dan Canon, a civil rights attorney, is running for the Indiana seat help by Trump rubber stamp backbencher Trey Hollingsworth. "We've known since at least the early 20th century," Dan told us, "that the dispersal of economic power creates a stronger working class, a stronger economy, and a stronger country. The only reason to gut antitrust laws, or not to enforce the ones already on the books, is simple: to consolidate economic power and create an oligarchy. If politicians really supported small business, they'd support antitrust reform and enforcement-- not tax cuts for the rich."