Archive for the ‘congress’ category

Tax Reform On The High Wire

April 28, 2017

With a one page, 200-ish word handout, President Trump presented his outline for revamping the Federal Tax code, and in one fell swoop, jump starting US economic growth. The Trump Administration announced the largest tax cuts “in history” and with a straight face assured listeners that these cuts would pay for themselves by boosting current 2% annual growth to 3+%. Hmmm.

The supply side argument is that lower taxes puts money in Americans pockets and with the extra cash, Americans will spend more. More spending, in turn, stimulates industry which adds more capacity, employing more Americans. The increased employment then ignites another round of investment and job hiring. If nothing else, it is an exciting story.

Regrettably, supply side economics (George H W Bush called it VooDoo economics) has been tried before and has been discredited by most economists. Arguably if most Americans received a big positive hit from a tax cut, one might feel President Trump’s outline was worth a shot.  Unfortunately most of President Trump’s tax savings proposal would flow to the already wealthy.  Hmmm.

Progressive economists (Keynesian followers) would prefer outright government spending if the desired policy is to stimulate growth. In practice tax cuts have tended to find their way into the already wealthy’s pockets and not into business investment. Surprised?

The proposed tax cut is a shameless attempt to steal from the average person and give to the wealthy. Hillary Clinton had proposed somewhat the opposite when she proposed new taxes on the wealthiest of Americans. While it is fair to question why the very wealthiest should pay more in taxes (as oppose to everyone paying more), the Trump proposal, as outlined, could increase the taxes of average Americans living in States with high State taxes (which are deductible now on Federal returns). But more than anything, the Trump proposal promised the lower income Americans nothing, question marks to middle income, and a bountiful gift to the wealthiest. For what?

First quarter GDP growth numbers were announced this morning.  The 0.7% growth underlines the problem America’s economy is facing.  Consumers aren’t spending nor are they choosing to save instead.  The average American does not feel flush with money and is choosing to wait on discretionary purchases.  A small increase in most consumer’s discretionary income (via a tax cut) will likely have only a small impact compared to an equal sized increase in direct Government spending.

There is another and important part to the tax cut announcement. Trump Administration is proposing to lower the “corporate” tax rate from 35% to 15%. This is worth listening too. Why? The stated objective is to make our corporation globally competitive and in the process encourage (and not discourage as in now the case) American corporations to repatriate their overseas earnings. (One report estimated that there may be over 2 trillion dollars in overseas banks.) Corporations claim that the 35% tax on repatriated earnings is too onerous compared to their alternatives.

The reasoning goes that repatriated overseas earnings could be used to invest and stimulate the economy, and once taxed, provides the Government a means to increase spending without increasing the debt.

As with many well intended objectives, lowering the corporate tax rate across the board could bring handsome savings to many who do not compete with foreign companies or have hoarded money in far away places. Lawyers, doctors, and hedge funds, to name a few, could spin this lower rate and change their tax paying status for income taxed at 35% to the new lower !5% corporate rate. And why would that be a wise use of the tax code?

There is precious little known about the exact tax code reform but what is implied in the one page press release, the rationale (stimulating growth) for implementing this reform is highly doubtful.

What seems not doubtful is that the very wealthiest Americans will take home a bundle. Hmmm.

Self Righteous Indignation

April 26, 2017

The public’s role  is becoming harder every day. The everyday citizens’ task must overcome disenchantment, distrust, or outright contempt for public officials. This weighs heavily upon Americans and makes recognizing the truth nearly impossible. For most Americans, it’s “tune out” time. Despite historically low approval ratings the same people seem to get reelected to Congress and nothing changes. Where has “Camelot” or “It’s Morning in America”gone?

Politics and especially our Congress members have gone high tech. There are researchers, writers, strategists, communication specialists, make-up professionals, booking agents, and lest we forget, “chief of staffs” supporting most members of Congress. Consequently most everything we hear or read from these public officials has been sanitized and reflects a carefully nuanced position statement. Can’t be too careful these days, ones words might come back in the next election.

Let’s consider the Senate and House investigations over whether or how or with whom the Russians interfered with the 2016 Presidential election. Forgetting for a moment the Republican political speak which seeks to avoid questioning the validity of President Trump’s victory, and instead listening to the righteous indignation, typically, “this is a serious matter, if true, and Congress must get to the bottom of these charges”

To be sure if the Russians and members of the Trump campaign team did collude this would and should be front page news. But, the fact that Russian operatives hacked into emails and electronic files, or distributed “fake” news should rank in the “so what else is new”, or the “been there, done that” categories. History of CIA involvement in foreign elections is well documented and decorated US foreign policy’s covert component. So, let’s hold back the crocodile tears.

Today’s news brings a similar but different revelation. When asked by a reporter whether the Russians were supplying the Afghan Taliban weapons, US General John Nickolson responded that “he could not refute” such a claim. Hmmm.

For the press and Congress, this represents just one more piece of evidence that the Russians are up to no good. This is another chance to express righteous indignation. Hmmm.

I wonder how many remember the book “Charlie Wilson’s War” which recounts the cover CIA operation, funded by Congress (largely through Representative Wilson’s efforts), against the Russian attempt to occupy Afghanistan during the 1980s. Been there, done that.

It is of course not in our military’s best interest to have anyone arming the Taliban or financing their activities. There are other covert methods to make the Russians realize this interference is costly for them too.  But righteous indignation is a poor choice.

Whether it’s the Russian interference in US elections or supporting surrogates in world conflicts, the facts are that the world is a tit for tat place. Bombastic statements and doing the “unexpected” have questionable value.  These strategies rank poorly in effectiveness and well behind righteous indignation.  Covert “payback” is more difficult but is more easily understood by adversaries.

Righteous indignation, on the other hand, should be reserved diplomatic exchanges and not used to brain wash the American public.

The French Message

April 24, 2017

Yesterday France held the first step in electing its next President. In the French system all candidates run in round 1 and if one candidate receives more that 50% of the votes, that person becomes President. If not there is a round 2 between the two top finishers. The results were: the top finisher Emmanuel Macron, about 24% and Marine Le Pen, about 21%. Said differently, a centrist, not aligned with either of the two major parties and a far right (formerly fringe) candidate will meet in the run-off.

Macron, is a new comer who has never held a major elected position, garnered more votes than all the other 10 candidates. Early pundit predictions say Macron should win the run-off and become France’s next President. Le Pen, however, has been attempting to steer her far right party back towards the middle and may take advantage of unexpected events over the next month.

So what should Americans take as the message from this election?

For France, jobs and border security were key concerns of the electorate. As in America, jobs are a spotty issue. For those unemployed, it is a big deal while those with jobs don’t see the urgency.

Le Pen cites globalism (France First) as the unemployment problem’s root. For Le Pen the answer is leaving the EU and enacting protectionist measures. Macron, on the other hand, sees the world as global and that France must become more competitive in order to lower unemployment.

Border security is another matter. Le Pen used this term to explicitly call for restriction on Muslims including deportation of French Muslim citizens (two passport holders) under certain situations. Le Pen also paints these mainly North African Muslim immigrants as job takers and social services sponges. Macron is relatively silent on this issue reflecting the majority of French citizens (live and let live) attitudes.

France, population-wise is a bi-modal country with one large, densely populated city (Paris) and all the rest. Paris which most tourist flock to is also the center of banking and business. The rest of France is mainly agrarian and in certain cities home for large factories (like auto and air industries).

France has a strong socialist history featuring today the 35 hour work week and a highly developed set of regulations around work rules (pay, benefits, transfer, lay-offs, and firing). In short, it is easier (and often less costly) for a French company to not hire when demand increases. Consequently, even when times are good, one should expect less hiring in France.  The French social contract is well appreciated by French citizens and proposals to change it present a large challenge.

Blaming the EU misses entirely the point and returning France to the French franc will only acerbate the economic situation (where will investment come from?) and open the door for economic policies convenient to the ruling party but ruinous to the country.

So what are the messages relevant to the US?

  • Muslim baiting is not a sure winner. North Africans and other Muslims have had a difficult time fitting into French society.  They look and act differently than the traditional French population. It is true that unemployment and economic distress are higher amongst these Muslim groups but connecting these residents to the overall French malaise is not self evident. (Hmmm, do you think undocumented US residents from Mexico have anything to do with the employment rate in the coal industry?)
  • Jobs is a complicated subject. The idea that closing borders will increase employment is a tough sell (what about exports or reprisals from other countries?). Proposals to increase specific sectors present risk to other sectors. French citizens realize this. (Hmmm, do you think rhetoric will return jobs to the coal mining industry, or tax cuts for the wealthy will translate into lower unemployment?)
  • Voters lack confidence in their legislators. The rejection of the left and right traditional national parties confirms the lack of confidence that traditional leaders can improve the overall French life. (What do Americans think of a Congress which has voted almost 50 times to repeal Obamacare and cannot agree now on what to replace Obamacare with, even though Republicans have control of both houses of Congress and the Presidency?)

One must be careful to not read too much into the French first round election results. French voters have traditionally been volatile people living amongst general apathy. At this point, the French seem to have acted prudently.

Vive La France.

Public Option?

April 21, 2017

The GOP and the Trump White House are beating the healthcare drum again. The President promises a really good plan for replacing Obamacare. According to a report in the Washington Post, Trump said, “We’re doing very well on health care.” “The plan gets better and better and better, and it’s gotten really good, and a lot of people are liking it a lot.”  “We have a good chance of getting it soon. I’d like to say next week, but we will get it.” Hmmm.

I suspect those Americans who loose their coverage or those who subsequently find out their coverage covers a lot less will not think their health plan got “better and better”.

Republicans are now debating behind closed doors a plan which seeks to bring together conservatives (Freedom Caucus who do not want any hint of entitlements in healthcare and would prefer for the government to not be involved at all), and moderates (The Tuesday Group who fear sharp political retribution if the benefits of Obamacare are rescinded). The Tuesday crowd are offering weasel words that would allow States to opt out of certain Obamacare services. Hmmm.

The overall facts appear unchanged. The American Health Care Act, even as amended, will provide less coverages to fewer Americans than Obamacare and will provide huge tax savings for the wealthiest Americans. The GOP’s embrace of “the best healthcare money can buy” is a sad replacement for the Affordable Care Act (Obamacare). Is that the best we can hope for?

Here’s a dream.  “Medicare for all” could be a next step in healthcare. Compared to the “oh so many” for-profit insurance companies today (which stand between you and your doctor), Medicare, which insures post 65 year old Americans, and fits seamlessly into existing doctors, hospitals, and pharmacies, could offer “a ready to go” alternative.

Of course Medicare is not without some problems, namely how it is funded. Republicans will decry the expansion of government and seek ways to defund Medicare. Cooler minds, however, might see Medicare as the ideal vehicle to determine what is basic healthcare and how to pay for it, especially if Medicare became the standard package for employer provided healthcare.

No sane discussion of healthcare reform should avoid the obvious elephant in the room. Americans spend more on healthcare than any other country in the world and receive mediocre healthcare outcomes in return. The difference in cost is significant (greater than two times).

An additional revelation is that balancing the Federal Budget can not be achieved unless there is a fix for Medicare and Medicaid, both of which collect less in tax revenues than they spend on healthcare benefits. With “Medicare for All” there is one program providing basic coverage with significant negotiating power with healthcare providers. Existing insurance companies could continue to “administer” Medicare benefits but would be unable to set different conditions around services.

Most likely efficiencies associated with a single payer would be insufficient to assure Medicare would be solvent. Consequently tax reform coupled with healthcare reform could be seen as reforms aimed at serving all Americans and not as ploys to pass on huge tax breaks to the already very wealthy.

Despite wrong headed GOP motivation on both tax reform and healthcare, Democrats, unfortunately, appear willing to simply play for a tie (defined as thwarting the American Health Care Act thereby keeping Obamacare) and rejecting tax reform unless the proposal is revenue neutral or positive.  Hmmm.

The can is poise for another kick down the road.

Impeachment, Probably Bad Idea

April 19, 2017

Allan J Lichtman, Professor of American political history at American University in Washington, DC, has an unusual claim to fame, he has picked the Presidential winner each election since 1984.

Lichtman has also just published a new book titled “The Case for Impeachment” in which he lays out an argument that the impeachment of President Trump is not about “if” but rather “when”. Hmmm.

Professor Lichtman has been making the rounds of 7/24 talk shows claiming his book is non-partisan and is quick to point out… unless President Trump changes his ways, impeachment is inevitable. Think President Trump will change?

Professor Lichtman has underscored what quite a few others have said. President Trump is hopelessly entwined with conflict of interest issues. Lichtman says that unless the President acts soon and decisively to separate himself from these conflicts, he will be impeached and likely found guilty in the Senate. Those are powerful words although not without some speculative aspects.

There would appear no doubt that the President has conflicts of interest like Carter had little liver pills. The mind bending part for Trump is that he continues to support the “appearance” of further developing these conflicts of interest, not unwinding them. For example, Ivanka Trump received two brand licenses in China on the same day she and President Trump had dinner with China’s President Xi. While most world leaders were distancing themselves from Turkey’s President Erdogan, President Trump who has large interests in Istanbul, called President Erdogan to congratulate him on his victory. Were these events chance or part of a concerted effort to profit as much as possible from his time as President?

The case for impeachment was clear on day 1, but both the public and the Congress were not interested. Hence, no action.

Time, however, has a way of changing opinions and making events once thought not possible, now possible.

Suppose Republicans realize that there is no winnable path to repeal and replace Obamacare, and the GOP also realizes that tax reform, at least the kind associated with a President who will not release his own tax returns, is a non-starter. Oh, and President Trump still pushes an unfunded Infrastructure investment maddening “dark money” libertarians. And don’t overlook that Wall Street could begin to vote with a sustained bear market.

Suppose Education Secretary DeVoss garners a large amount of public distrust as she pushes for vouchers and grants no relief to usurious college loan debts. Or, EPA changes its rules enabling energy companies to frack and drill without government checks, and it just so happens there is another oil drilling catastrophe. Or, use your imagination about what could go wrong with over the top border enforcement or Homeland Security extending its reach into the public’s everyday travels. Hmmm.

The picture might become clearer to Congress that the President is a liability and not a positive face for the next election. With dark money in the background, Congress might just conclude that an impeached President Trump and a new President named Mike Pense is a winning idea. All this could happen comfortably before the 2020 election. Hmmm.

For Republicans this might be a dream idea, but for Democrats and Independents, this appears more like a nightmare. A President Pence brings the same public policy bent as President Trump (and adds a religious evangelism on top), but Pence could be seen by the public as needing a fair chance. The GOP controlled congress might escape the public’s judgement over proposed tax reform (gift to the wealthy), efforts to kill Obamacare (insuring less Americans with less coverage while delivering a generous gift to the wealthy), and ignoring recklessly overturned rules and regulations by blaming President Trump. There is no reason, however, to expect a President Pence to pursue different domestic policies.

For Democrats, an impeachment scenario is a greater than zero possibility, and should it happen there is nothing Dems could do to stop Vice President Pense from taking over. In a dark way, Democrat 2020 prospects might shine brighter with no impeachment but plenty of bad press.

A wounded (self inflicted) Presidency might offer the best Democrat 2020 prospects.

The 2016 Presidential election should never have gone to President Trump but it did because Trump made a more compelling case to enough voters. Democrat leaders had better use the time created by the White House turmoil to get their message in order and begin now defining the 2020 narrative against an ineffective and probably corrupt President Trump  rather than a squeaky clean President Pence.

The Jobs Promise

April 17, 2017

President Trump campaigned on the promise to make America great again and a key step was creating lots of great jobs. As these words rolled off Trump’s tongue, one would have thought jobs would be growing on trees when Spring arrived. Hmmm.

As the 100 day mark approaches, a period far to short to measure President Trump’s jobs performance, all that can be said is that the Trump Administration has done nothing to change the former President Obama’s job creation momentum. Frankly this should not be a surprise and President Trump’s ultimate performance is an event for the future.

Most everyone has heard (and seen) the President’s strong arm on the auto industry as well as other American manufacturers like Carrier Air conditioners. Plenty of “new” jobs have been promised but there has been a deafening silence by these same companies on whether they were promising “net” job increases or just a gross number overlooking job cuts, layoffs, and retirements.

The ironic aspect of Candidate Trump’s jobs promise is his selection for domestic cabinet appointments and his much ballyhooed budget proposal. His cuts to the EPA, FDA, Lobor, Energy, and Commerce will (if enacted in the budget) be a real jobs killer, especially when one considers the zealous nature these new Cabinet heads are bringing to the job. To be sure beefing up Homeland Security will add some jobs but the net impact appears to be significant jobs decrease.

President Trump’s ace in the hole has been his infrastructure proposal. A robust infrastructure investment would certainly mean a lot of new jobs, both direct and indirect in support of those working directly on infrastructure activities. Trump’s challenge will be how to get a reluctant Republican conservative faction to go along with his plan.

To understand President Trump’s quandary, one has to understand who are really his constituents. Let’s begin with the unavoidable truth that President Trump’s most important supporters are not voters like the coal miners or the out of work/under employed rust belt workers either. The people who moved heaven and hell for the Republican majority are deep pocketed conservative and libertarian Americans. It is with their money, filtered through an alphabet of foundations, charities, and 401 c (4)’s which turn these charitable donations into ammunition for faceless operatives who in turn destroy the political careers of anyone who does not vote the way this dark money wishes. (Read “Dark Money” by Jane Mayer for a fuller accounting.)

So, why wouldn’t these moneyed interests not also want infrastructure work?

The very best one could say is that these rich interests are agnostic about infrastructure work, providing they do not have to pick up the bill. From an ideological argument perspective, dark money participants do not want the debt expanded. So the question is how to pay for this trillion dollar investment?  Hmmm.

President Trump’s path forward, however, must be as cynical as these rich people. This group seeks less regulations so that their business interests can make greater profits, and they want lower tax rates so that they can keep more of their businesses’ profits.  Accordingly, these dark money leaders approve of Trump’s draft budget and the aggressive roll back of regulations.

These wealthy people speak glowingly about America and the American dream but at the end of the day its about how they personally can make more money and keep more of it by paying less taxes. To be perfectly clear, this large donors care not a dime about average Americans or anything that even hints at fairness. The most important issue, morning, noon, or night is freeing their businesses from government rules and regulations and lowering the tax bill.

President Trump, if he is perceptive, will realize that if he pushes through tax “reform” and delivers for the top 1/2 of 1% wealthiest earners, these greedy interests will lose interest in the rest of the President’s agenda.  The infrastructure initiative which could create lots of new jobs will be last year’s fashion.  The President will suddenly find no friends in Congress where each Republican Congress member will worry more about reelection than doing their job.

The “jobs promise” was a cruel trick to play on voters.  The dark money behind financing the election wants less regulations to make more money, not to create new jobs. The dark money wants smaller government in order to pave the way for their businesses to operate without oversight or burdensome (in their opinion) rules.

Why?

Greed is just that. Greed consumes and often consumes so much that the greedy person does not see it consuming themselves. A lot of voters are expecting a much more dynamic labor market and are very likely to be disappointed.

In time, the dark money trail of revoked regulations leading back to the prime sources will be documented and reveal the unpleasant fact that certain wealthy persons and their businesses were never interested in creating more jobs, just making more money for themselves.  IMO, the grass roots disappointment and disgust could become so big that by 2020 voters throw out this GOP set of bums and give the reins of government to the bums of the other party.

2017 and World War I

April 9, 2017

The Pennsylvania Academy of Fine Art (PAFA) is currently hosting a show titled “World War I and American Art”. The show, timed to coincide with America’s entry into the European war, is compact, contains timely reminders of what man can do, and reminds us of our liberties. Most of us have some acquaintance with horrors of trench warfare and the introduction of chemical (gas) killing methods, both made famous in the great war.

World War I made no sense to most historians but each of the belligerents gave it their all. Deaths and traumatic injuries left people around the world hoping WW I was the war to end all wars.

The show traces America’s involvement with paintings designed to glamorize the “going to war” attitude. There are “posters” advocating every man’s duty to register for the draft, for women to chose some line of work which supports the war effort, and astonishingly, encourages and praises the participation of “the colored boys” (even though US troops were segregated).

Some American artists were embedded with military units and recorded everyday life at the front along with heroic acts against the enemy. It wasn’t, however, until the war ended that art critical of war, especially depicting broken men and senseless slaughter appeared. Why might that have been?

America was extremely divided over entry into World War I. When the Germans began indiscriminately sinking US shipping after three years of war, the tide shifted and Congress declared war on Germany and its allies. And that was not all Congress did.

Congress passed “The Espionage Act of 1917 and the Sedition Act of 1918” both of which violate 1st Amendment rights. Congress’ intent was to intimidate and silence opposition to the war and keep the nation focused upon the fight in Europe. Speech, writings, and art which opposed the government or its efforts were subject to fines, confiscation, and detention.

Fortunately the war ended about a year and a half after the US entered. Then the flood gates opened and so many artist produced paintings, pictures, and sculptures depicting the unglamorous, horrific realities of the War.   War’s real message could no longer be suppressed.

“World War I and American Art” completes its display with a cross section of works clearly showing what price so many people had to pay. As we know, the war to end all wars failed and most historians say World War I actually precipitated an even more horrible war, World War II… and in turn the Korean War, the Vietnamese War, and Gulf Wars I + II.

In 2017, Americans can again see war from the comfort (and security) of their living room. Americans also feel they can protest in person or write anti-government works with no fear of repression. So why is the PAFA show so important?

Civil liberties can be ephemeral. Most Americans enjoy life and do not spend free time researching where their freedoms came from. Ideologues, on the other hand, are so sure they are correct in their goals that any means are justified.  Rejecting refugees and making it very difficult for certain peoples to enter the US is an early warning signal about civil liberties.

Words are strong, pictures are stronger, and art can be the strongest of all in telling or warning what is or what might happen. World War I teaches us allowing only one set of words, photos, or art works (meeting some government standard) informs us of all we should know.  Rather, we must consider pros and cons, reports from sources we trust and sources we are uncomfortable with. Most importantly suppression of information or expression has never benefited society regardless of how dangerous the enemy is described.

Civil liberties are elusive and can disappear quickly.   Ends never justify means.