In his 2016 State of the Union address, President Barack Obama urged Congress to pass a 12-nation trade agreement called the Trans-Pacific Partnership (TPP).1

The text of the TPP, which member nations began crafting in 20092, became available in November, 2015. The contents should trouble taxpayers.

A provision that's arguably one the worst for taxpayers is that which protects the profits of foreign investors.

Under the TPP, a foreign corporation's investors can sue state and local governments in the U.S. for any circumstances—such as, say, pollution limits—that interfere with the corporation's profits.

Moreover, the corporation can do this outside of our judicial system: Our courts have no jurisdiction, thanks to a TPP scheme called investor-state dispute settlement (ISDS).

Imagine, if you will, that a Japan-based company sets up manufacturing in Chicago. The company's manufacturing process produces toxic waste, which the company dumps into the city's sewer system—at a level exceeding limits set by Illinois and Chicago's environmental regulations.

Then, say that local government moves to stop the company's illegal dumping. Under TPP, the company's investors may sue to block the government's enforcement—claiming that the enforcement adversely affects their profits.

In such a suit, the TPP trumps our constitutionally guaranteed right of due process in a court of law. Instead, according to investor-state dispute settlement rules, the suit is adjudicated by an ISDS "tribunal" composed of several private "arbitrators" appointed under the TPP. The arbitrators, unlike U.S. judges, aren't bound by precedent or judicial ethics.3 The tribunal may award damages to the investors, paid for by U.S. taxpayers.

At the very least, awards in such cases would make citizens, not polluters, pay. At the worst, the threat of damage awards would choke off new or more stringent environmental safeguards.

And even if investors sue a local government unsuccessfully, we taxpayers still must pay for our government's lawyers. So we always lose.

Think this scenario is just hypothetical? It's already happened. The existing North American Free Trade Agreement (NAFTA) contains an ISDS provision—and Canadian energy company TransCanada has used it.

In January of this year, TransCanada announced that it would sue the U.S. government for halting construction of the Keystone XL oil pipeline. The company argued that it's been "unjustly deprived of the value of its multibillion-dollar investment by the U.S. administration's action" that blocked an important piece of its pipeline network. TransCanada seeks $15 billion in compensation—an amount that includes the profits that the company expects it would've gotten in future years.4

And that's just the tip of the iceberg. Existing trade agreements that the U.S. has with other countries have resulted in governments paying investors almost $4 billion in ISDS awards, according to Lori Wallach, Global Trade Watch director for Public Citizen.5 The TPP will boost the number of foreign investors that can use ISDS to extract payments from U.S. taxpayers.

Concerned citizens, though, have a vehicle for stopping the TPP: Congress.

After President Obama formally signs off on the TPP for the United States (which he's expected to do in February), Congress must then approve the deal. In the meantime, members of the public can weigh in with representatives and senators—many of whom have already signaled their opposition to the TPP.



1. The 12 proposed nation signatories (the TPP calls them "Parties") are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam.

2. "Timeline of the Trans-Pacific Partnership," Public Knowledge, June 27, 2012.

3. In fact, President Obama signaled his administration's contempt of courts years ago: In a March, 2012 speech at Northwestern University law school, then-U.S. Attorney General Eric Holder said "'Due process' and 'judicial process' are not one and the same . . . The Constitution guarantees due process, not judicial process."

4. "TransCanada’s $15 Billion Lawsuit Against U.S. on Keystone XL Presents Strong Case," Eric Zuesse, Global Research, January 8, 2016.

5. "Lame White House Response to Sen. Warren's Warning about TPP Investor Privileges," Lori Wallach, Huffington Post, May 2, 2015.

There was a local angle in recent news about the Trans-Pacific Partnership (TPP).

It has to do with Democratic Rep. Mike Quigley of Chicago. Quigley was the only House Democrat from Illinois to vote for authorization of Fast Track authority, also known as Trade Promotion Authority, regarding the TPP.

Most of the reporting we've seen for and against the TPP—including Quigley's own newspaper op-ed piece—focuses on how many U.S. jobs the TPP will create or destroy. Not as widely reported are other, potentially more insidious aspects of the TPP—which we know about thanks to leaks of TPP documents from Wikileaks and others.

According to the leaks, the TPP would:

  • Empower foreign firms to sue U.S. governments if regulations interfere with the firms' "expected future profits." Foreign corporations could bypass domestic courts and sue U.S. governments before a tribunal of private lawyers not answerable to the U.S. legal system. This so-called investor-state dispute settlement process could thwart our protections against environmental, food safety, banking, and manufacturing misdeeds, and award our tax dollars to corporations for violating laws that interfere with their profits.
  • Require the U.S. to let foreign countries import foods that violate U.S. food safety laws. Foreign entities could challenge U.S. safety rules on pesticides, labeling, or additives as "illegal trade barriers"—forcing the U.S. to allow the import of unsafe food.
  • Undermine efforts to re-regulate the financial sector. The TPP would (a) keep countries from outlawing particularly risky financial products; (b) prohibit policies that keep banks from growing "too big to fail;" (c) make it easier for banks to make hedge-fund-style bets with depositors' savings; and (d) prohibit financial transaction taxes, which provide significant revenues in dozens of countries world-wide.
  • Force the U.S. to waive "Buy American" procurement policies for all firms operating in TPP countries, offshoring our tax dollars to create jobs abroad.

Interestingly, it seems that not even Congressional opponents to Fast Track press these arguments.

"I don't think you can use the word 'crisis' to describe" Illinois' pension-funding problem.

So said Illinois Senate President John Cullerton on Sunday, Sept. 20, 2013, on WGN radio's "The Sunday Spin" show.

Cullerton spoke of the pension fixes that the state legislature has considered this year, and still might pass. He estimated that those fixes, mostly in the form of cuts to pensioners' benefits, "will save annually anywhere from $750 million to $1.5 billion." However, Cullerton said, Illinois will lose about $5.4 billion in annual revenue when the state's personal and corporate income tax rates go down in 2015.

A partial transcript of WGN's interview with Cullerton appears below.

The Chicago Sun-Times, in an Oct. 23 editorial, called Cullerton's assessment "nonsense."

If state legislators heed Cullerton, wrote the Sun-Times, Illinois will lose something "the state needs most—a bill that significantly reduces pension costs."

In contrast, a recent report identifies a different source of states' budget woes: corporate tax subsidies.

The report, written by David Sirota and published by the Institute for America's Future, says that "the amount states and cities spend on corporate subsidies and so-called tax expenditures is far more than the pension shortfalls they face."

The report says that proponents of pension reductions claim "that cutting retiree benefits is the solution [to state revenue shortfalls] rather than simply rolling back the more expensive tax breaks and subsidies."

According to data collected by The New York Times and cited in the report, Illinois governments spend at least $1.5 billion annually on tax subsidies, including:

   • $874 million in sales tax refunds, exemptions, or other sales tax discounts

   • $452 million in corporate income tax credits, rebates, or reductions

   • $11.9 million in personal income tax credits

The Times analysis identified the four corporations receiving the largest subsidy amounts: Sears, Google, Archer Daniels Midland, and Chrysler.

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Partial transcript of WGN Radio's interview of Illinois Senate President John Cullerton on Sept. 20, 2013

[Sen. Cullerton said that he supported the pension reform bills passed earlier this year by the Illinois House and Senate, respectively. And he spoke optimistically of a proposed "compromise" bill currently under consideration by the legislature's bipartisan pension reform committee.]

"It's not that we owe a hundred billion dollars to somebody right now. It's just that folks don't wanna put as much money into pensions. They'd rather spend it on something else. Or they'd rather have their taxes lowered.

"And these pension bills that we're gonna vote on—and hopefully pass, and I'm supportive of it—the overall effect is gonna allow us to lower our income tax about a quarter of one percent. So if we pass the bill it'll be easier to lower our income tax by a quarter of one percent; if we don't, it'll be more difficult. And that's really what it's about.

"Now, I wouldn't call that a crisis. I think that people should put that in perspective."

"[The current income tax rate is] 5 percent for individuals, going to 3.75 [percent in 2015], and the corporate is 7, it goes to [5.25]. That, on an annual basis, is a drop in revenues of about $5.38 billion . . . and these pension bills that we've talked about will save annually anywhere from $750 million to [$1.5 billion]. So you're still gonna have real huge cuts we'll have to make if we don't raise that income tax higher than what they're scheduled to go down to.

"The pension reform, then, is about tax reduction, not about the solvency of the pension fund or about diverting money to spend more money on education."

"There's a great, strong feeling out there in the general public. Ya know, there's 720,000 folks that are affected by the pensions—both retirees [and] actives. That's all of the teachers outside Chicago, that's all the university employees and community college employees, and all the state employees and the judges and the General Assembly. But there's, ya know, almost 13 million people here [in Illinois]. And a lot of folks don't have a defined benefit plan as we do. And, by the way, the inflation rate now is [1.5] percent; these pension [benefits are increased annually by] 3 percent. So there's a strong argument to lower these benefits—that's why I've supported this legislation.

"But just keep in mind: It's not going bankrupt. The money that we save by lowering those benefits is gonna be used to lower the tax rates.

"This would surprise people, I guess: We have a balanced budget in Illinois. Nobody would know that, right? We are not spending more money during this budget than we have taken in. We passed a budget that says you can only spend this much money and this is the amount of money that we take in."

"Let's talk about [the state's unpaid bills.] Within that budget we include money to pay down old bills, including pension obligation bonds that we borrowed—and thank god we did—for the two years we were in the recession. Because we borrowed money, we put it in the pension fund, we've earned 800 million more than what the interest rate has been.

"But we're also paying down bills to vendors. We've paid down [$3.5 billion] in the last three years, and by the time we get to the end of this fiscal year, we'll have about [$2.5 billion] in bills over 60 days out of a $71 billion budget. So we've made tremendous progress in that.

"Remember, just like anybody's home budget, they have to pay mortgage, they have to pay student loans . . . they don't pay 'em all off in the first year. But they keep on including in their budget enough to pay what they owe. That's what we've been doing."

"Businesses are not fleeing Illinois because our taxes are so high. The fact is that our state tax rate is lower than all the other states that surround us, and almost about the same as Indiana."