Q&A: Muckraker David Cay Johnston

While the term is little used these days, David Cay Johnston might be best described as a muckraker for his work as an investigative reporter producing both award-winning newspaper stories and best-selling books.

Salon in 2004 said Johnston “has cultivated a reputation for being the kind of reporter unafraid to speak truth to power. He is diligent, persistent, and has a network of sources deep in government and in the corporate world.”

Johnston got his first reporting job at age 19 with the San Jose Mercury News. He went on to report for the Detroit Free Press, Los Angeles Times, Philadelphia Inquirer and New York Times. While with The Times, he won the Pulitzer Prize in 2001 for reporting that uncovered loopholes and inequities in the federal tax code.

He also has written four books, two of which, Free Lunch and Perfectly Legal, were best sellers. Earlier this month he released The Fine Print: How Big Companies Use “Plain English” to Rob You Blind. Johnston is also active on social media and you can follow him on Twitter.

In June, Johnston was elected president of Investigative Reporters & Editors, the world’s pre-eminent trade organization for investigative journalists with 4,200 members.

Investigative Post Editor Jim Heaney interviewed Johnston on Oct. 23. A 5 minute, 37 second video clip including interview highlights is posted above. The full 20 minute, 16 second interview is posted deeper in the transcript, which has been edited lightly for clarity.


Heaney: You’re no stranger to Buffalo. You live in Rochester, right?

 Johnston: Right. And I teach in Syracuse, so all three cities.

Heaney: You are in town to participate in a session that Investigative Post sponsored on Tuesday – “The State of Investigative Reporting.” Let’s talk a little bit about the state of journalism in general and then backtrack from there in terms of how it’s impacted investigative reporting. What kind of shape – financially, and therefore, journalistically – is the mainstream media in?

Johnston: The fastest disappearing job in America is the journalist. As a percentage of jobs, it’s vanishing very quickly.

Philadelphia – where I worked at the Philadelphia Inquirer at one time – 10 or so years ago had over 260 journalists from various organizations covering various aspects of city government, courts, police, city hall, etc. There’s now less than 50. And this is happening all across America.

One of the results of this is the scandal that happened in Bell, California, a blue-collar suburb of Los Angeles where the city manager was paid $800,000 a year. The city council members made about a quarter of a million each. All these gigantic salaries – they were all voted on in open public meetings because there was no journalist who ever attended their sessions for years.

So there’s a real serious problem in America. On the other hand if you’re a clepto-politician, if you’re a business owner who lives off of subsidies provided by the taxpayers, it’s great opportunity.

Various local news organizations do lots of good investigative reporting. The place where we’re not getting it and we need it are the state capitals and Washington.

Heaney: So the function of watchdog journalism – give us a little bit of a historical perspective. We had the muckrakers of the turn of the century – there’s been an of ebb and flow, things went down, then picked up with Woodward and Bernstein.

Johnston: There’s always been a little bit of investigative reporting going on locally. There wasn’t a lot of national investigative reporting.

In 1962 the New York Times hired a reporter named Wallace Turner, who was one of the premier investigative reporters in America. And he brought along a whole generation of people who he trained in the ‘60s and ‘70s. I’m one of those people. He taught us how to dig, taught us also how to manage the reaction after you’ve done something, which many times investigative reporters do a great story and then they mishandle the attacks and assaults that follow on important stories. Starting in the late ‘60s you began to see an increase in this, and Woodward and Bernstein and the Watergate coverage, although the very best coverage was actually in many cases in the L.A. Times and the New York Times. You saw this tremendous increase in investigative reporting.

Investigative Reporters and Editors was started 40 years ago and we have 4,200 members around the country.

Various local news organizations do lots of good investigative reporting. The place where we’re not getting it and we need it are the state capitals and Washington.

Heaney: Was that always the case or has there been fallback in that over time?

Johnston: I think that generally – I mean in 1973 I had several jobs in front of me to take and one of them was to be the investigative reporter in the Lansing state capital bureau for the Detroit Free Press. And the editors of better papers said, “Take that job because there’s never been an investigative reporter in Lansing.” And I did and it turned out to be terrific for three years.

There’s never been nearly enough and there’s been a lot of retreat, but it has not , as a lot of people think, vanished. What’s disappeared is that you’re not seeing so much of it anymore in Washington because the focus is on what the politicians say and the partisanship that’s arisen there, rather than on what the government is doing.

Heaney: Why is that? Is it because it’s easier?

5:27 Johnston: It’s cheaper. It’s easier.

Senator Chris Dodd one night at an event told me that a young woman had walked up to him that day and took his wine glass and went like this (gestures) and almost threw it on everybody intentionally. So the young woman literally stuck a camera in his face and said, “I need a quote, senator.” He said, “About what?” (She said) “It doesn’t matter; I need a quote.”

And there’s a real problem with this. A lot of the coverage in Washington is what I call “ ‘He said’ journalism, da da da da, comma ‘he said.’” Or sound bites. And it isn’t paying attention to the fundamental major changes that have been taking place in Washington and the state capitals.

Little known fact: state and local subsidies to business – just state and local, not federal – now cost a family of four $900 a year. That is more than a week’s take home pay for the average income family of four in America.

Heaney: And what are those fundamental major changes?

Johnston: Well, the single biggest thing going on – and it’s what my new book is about – is companies getting — bit by bit, here and there, a rule here and a law there — the rules of competition, the laws of competition repealed in this country, and replacing competitive markets with monopolies, duopolies, oligopolies and creating what I call corporate socialism.

Little known fact: state and local subsidies to business – just state and local, not federal – now cost a family of four $900 a year. That is more than a week’s take home pay for the average income family of four in America — $900. (It comes to ) $70 billion a year.

Heaney: The most common forms of those subsidies are what?

Johnston: Well, in many cases when you go to a new big box retail store or even a shopping mall, the sales tax you pay at the cash register is kept by the store and it is used to pay the cost of acquiring the land and building the store.

Heaney: So basically, taxpayers are paying the capital cost of the retail.

Johnston: That’s exactly right. So that’s one of the most common ones all over the country.

And generally, only the big national operators benefit from this. You don’t see this deal being done for “Jim’s Five and Dime.” It’s one of the reasons you’re seeing more and more homogenization of our market and national firms. One of the companies that I wrote about in my last book, Free Lunch, is Cabela’s, who sell hunting and fishing gear

Heaney: Oh yeah, they’re a counterpart of Bass Pro, we know all about Bass Pro.

Johnston: And I would know about the detail of Bass Pro, but it’s private. Cabela’s is public. The first three years, Cabela’s was a public company. For every dollar of profit they earned in the market, they made deals worth $1.37 that have subsidies from government. And I showed how Cabela’s destroyed a local business in a Pennsylvania town to charge lower prices simply because of their scale and the government picking them instead of the local merchant.

So all over the country, what you’re seeing is businesses courting government – and that’s why there are so many thousands of lobbyists in Albany, Sacramento, Washington – who are courting government to get your tax dollars diverted to them, to restrain competitors, to provide them with the capital so they don’t have to go to the marketplace in order to do it. And there are lots of places out there where 100 percent of the capital cost of a new project is provided by the taxpayer.

2,700 corporations have made deals where they get to keep the state income taxes withheld from the workers’ paychecks. You heard me right. The company gets to keep the taxes taken out of your paycheck for the state.

Heaney: I did a piece that you’re aware of a couple years ago where Verizon wanted to build a data center north of Buffalo. If the project had gone forward, the subsidies would have been $2 million to $3 million a job.

Johnston: $3.1 million per job. The average job was going to pay less than $50,000.

Well, in a normal market, 5 percent interest you would expect on $3.1 million is more than $60,000. I’m sorry, 5 percent interest, you’d expect somewhere in the order of $160,000 of interest for a job that pays less than a third of that much. And Verizon walked away because they got a better deal somewhere else.

But all across America we’re doing this. You read about it in my new book. I cite the story of how Niagara Falls – this incredible, valuable resource. Most of the electricity from Niagara Falls goes to a handful of companies who have politically wired deals.

Alcoa’s net benefit from the super-cheap power that they are sold is so much, it’s more than 10 years of Alcoa’s profits. So I would argue that Alcoa doesn’t really make money in the market; it makes money off you and me by diverting a public resource to their private benefit. And the benefit they’re getting is – you calculated it – was about three times the salary and benefits for each job.

Heaney: Companies have been able to play the New York Power Authority effectively over the years.

Johnston: I don’t mean to suggest, and no criticism of the idea of making profits – I want a competitive market. Adam Smith told us in 1776 when he wrote The Wealth of Nations is anything businesses want to avoid, businessmen hate, is competition. Seldom do members of an occupation gather together, even for merriment, but the conversation quickly turns to a conspiracy against the public to raise prices and lower wages. It was true 236 years ago and it’s true today.

Heaney: This war on competition and corporate welfare – how much of that is the byproduct of what’s happening in Washington versus what happens in state capitals versus what happens in local deals that are cut by industrial development agencies or other local agencies?

Johnston: It’s going on at every level of government, but one of the reasons it’s not getting very much attention is because much of the important commercial regulation and law in the market is state level law.

I teach in the law school and the graduate business school at Syracuse part-time and I teach about the history of business regulation all the way back to Hammurabi’s Code 4,000 years ago. And we have well-developed principles about competitive business, fair play, reasonableness. In the utility field we have a concept called “just and reasonable.” Practices to customers should be just and reasonable, and profits to owners should be just and reasonable. And bit by bit, lobbyists are going in and they’re getting these laws repealed, and in many cases they claim they’re improving competition. But when we see the outcome of how they work, these are laws designed to destroy competition and bring about monopolies, duopolies, and oligopolies.

We don’t have some of the very worst laws, but they’re coming.

Heaney: How is New York State on this topic compared to other states? Are we any better, any worse?

Johnston: We don’t have some of the very worst laws, but they’re coming.

Can I give you an example from my book, “The Fine Print”? In 20 states – and New York will soon be one because it’s going on in our neighboring states, in 20 different states – 2,700 corporations have made deals where they get to keep the state income taxes withheld from the workers’ paychecks. You heard me right. The company gets to keep the taxes taken out of your paycheck for the state.

Heaney: So payroll taxes …

Johnston: Not payroll taxes, state income taxes. And the workers don’t know because once the money’s withheld, they’re just having paid their taxes. What happens is the company then gets a credit from the state equal to those taxes.

It’s billions of dollars being moved this way and every big company in America is doing it – General Electric, Proctor and Gamble, big European companies, European banks, Communist Chinese banks all have these deals. Rupert Murdoch’s News Corporation has it.

I believe this will spread everywhere. Pennsylvania is just about to become the 20th state to do this and it will be everywhere very quickly unless people know about it. And I’m the only national journalist who has written about this and I’ve been hammering at it for about a year and five months.

Heaney: So this is kind of under the radar. In open but under the radar. Give me an example of a couple of really egregious laws like that.

Johnston: Here in Western New York, I believe one of the big things holding back the economy here is the terrible internet we have. We see these ads, “blazingly fast internet.” America invented the internet so we started out as No. 1. We’re now 29th in the world in the speed of our internet. We are behind such leading industrial countries as Bulgaria and Ukraine.

The prices, however, we pay are the highest among the fully developed modern countries. You buy a triple play package here in Western New York. It typically is $160 when you add in the taxes you pay on it. But in France that same package costs $38 and you get not two-country calling but worldwide calling to 70 countries. You get not domestic television but live television from all around the world and your internet is 10 times faster. And you pay $38 equivalent, we pay $160.

One result of this is that products and services that could be created in the digital environment are not being created here. They’re being created in South Korea and Singapore and China and Lithuania – countries whose political leaders recognize that universal, low-cost, extremely high speed, large-capacity digital communications is the key to economic growth in the future. In every kind of industry this is crucial.

But here, we have a duopoly — AT&T and Verizon — and we’ve created rules where their profit interest is contrary to the national interest. And we’ve already had people in companies who leave America because our internet is so bad. It’s the functional equivalent of a two-lane Irish road where you stop and wait for the sheep periodically, compared to a better autobahn than the Germans ever built.

Many news organizations have discovered that if they want to keep their audience, they need to give you less of who the Kardashians are kissing this week and more serious news.

Heaney: You’ve really done investigative books, so to speak.

Johnston: Yes, and this book in particular you won’t find in Google what’s in here. It’s four years of original research.

Heaney: You’ve been in the business for over 40 years. How has the nature of doing investigative reporting changed? Obviously there are more investigative books done now than there used to be, but in terms of the craft itself and how it’s practiced, how have things changed?

Johnston: In good part thanks to Investigative Reporters and Editors that I’m the president of, we run training programs all across the country to pass on the skills and help people develop them. And many news organizations have discovered that if they want to keep their audience, they need to give you less of who the Kardashians are kissing this week and more serious news.  So there is some recognition of the commercial value of this, which is crucial.

On the other hand, government has been tightening up and tightening up and tightening up. Currently the federal government, for example, says that if you’re a book author, you have to pay fees for Freedom of Information Act requests because you’re not a First Amendment activity in the view of several federal agencies. The Obama Administration, which promised to be wide open and in some ways has been, and also in some ways is worse than the Bush Administration, which was much worse than the Clinton Administration, which was pretty bad.

Local governments have been tightening up on records. I asked for some public records over in Monroe County where I live in Rochester. The county actually paid a lawyer to sit there and watch me reading these documents. It’s not the first time that’s happened here in New York.

And the judiciary generally has become very hostile to investigative reporting. There’s a famous case in Pennsylvania where a newspaper reported on a school teacher who had an arrest record dealing with a pedophilia-type crime. And the court ruled the newspaper could not relie on that in a suit against them because it happened more than 20 years ago and was regarded by the court as “hoary,” spelled H-O-A-R-Y. That’s very troubling. We have court orders all over the place that are helping the government hide information.

And after all, we give the power to the government. It derives its powers from the consent of the people.

I’m going to give you one other example of something that’s happened in this business. We are seeing more international investigative reporting, which is a very important development. The New York Times’ Walt Bogdanovich, for example, wrote about all the people who died from tainted milk and tainted medicines in China and the Chinese responded in the Chinese style and executed the head of what amounts to their FDA. We’ve seen more reporting on some environmental disasters, on how the blue fin tuna are being hunted into extinction.

So there is more international reporting going on. It’s very expensive and most of that’s been supported with grants rather than newsroom budgets.

Heaney: That’s international reporting done by American news organizations?

Johnston: A lot of it by American news organizations, but there’s some being done by Canadian broadcasting, the BBC. There’s some consortiums in Europe that have done work.

Heaney: What news organizations are really excelling at this?

Johnston: Well, the very best and largest print investigative operations in the U.S. are The New York Times, which puts a lot of money and effort and has top-notch people; The Seattle Times, one of the few family-owned newspapers in America, which has done tremendous work exposing everything from school coaches who couldn’t keep their hands off the girls to stock manipulations right in their own hometown.

We’ve seen very good work by a lot of smaller papers around the country and there are some cities’ TV stations – a TV station, for example, in Indianapolis that did a terrific job of simply going on and saying, “The governor keeps saying he created all these jobs with these giveaway programs. Let’s go see the locations.” And they turned out to be things like an empty barn that got hundreds of thousands of dollars supposedly for a business and showing that what government says and what government does are often not at all the same.

Heaney: One final question: What is it going to take for investigative journalism to regain traction?

Johnston: I think public demand. I think people need to recognize that without a watchdog – not a lapdog, but a watchdog – without reporters who know how to dig, and without support for that – without public support that says, “We want to know what our government is doing. We want to know what our judges are doing. We want to know about the conflicts of interest that our elected officials have and holding them accountable for how they treat both our money and the rules,” because after all the government makes the rules. Rules define society.

That’s the crucial thing you have to have is a recognition of the importance of digging, and remember the founders of this country put the First Amendment in place at a time where newspapers just literally made stuff up. There was no reporting. They just made things up. And they (the Founding Fathers) thought that was better than to have secrecy and government in control of the information.