Why Isn’t the Tax Cut Bipartisan?

In previous posts we’ve talked about possibilities for bipartisan cooperation on the federal budget and the tax plan.   There were obvious possibilities for that to happen.   The biggest cuts after all are to the corporate income tax, and Obama already discussed his interest in that in the 2015 State of the Union.  Other Democrats talked to Trump about bipartisan options prior to the announcement of the tax plan.

Why didn’t that happen?  Let’s look at the primary provisions.

  1. The Corporate Tax Cut

First of all, as many have mentioned, the average effective corporate rate in the US is not 35% but more like 24%, which is not so far from the international average.   Real tax reform would bring the effective and nominal rates in closer line with each other–with the advantage of removing artificial lobbyist-created inequities in the tax plan.   That, with adjustments to assure parity with other countries, would not break the bank.  It would help the country and could have bipartisan support.

We have instead chosen to close few loopholes, insist on a nominal 20% corporate tax rate, and incur a massive revenue shortfall.  That choice gives us the deficit as well as the middle-class tax increases.  The connection to jobs is weak at best, so most of this additional corporate saving going to investors.   Since it isn’t a matter of competitive parity—why are we doing it?

  1. The Pass-Through tax cut

The stated target of this tax cut was small business, but in fact few small businesses would be helped.   Further, as was recognized early, this tax cut opens opportunities for wealthy people to avoid personal tax rates.   The current form of the tax cut has rules that attempt to limit that.  However many loopholes remain, and the rules are strangely targeted.   Manufacturing and real estate can benefit, but not services.

Since most of this money is going to people who can exploit the loopholes—not to the stated targets—why are we doing it?

  1. The Estate Tax cut

This is of course the most problematical of all.   Only rich people with estates over $10 million are involved, and the benefit increases with wealth.  It is worth emphasizing that we don’t just raise the tax-free limit, we completely abolish it and with no unpaid capital gains taxes on the heirs!

As to why we’re doing it, the explanation is the most transparent of self-serving nonsense—“making rich people richer is good for everyone”.

 

These tax cuts are not bipartisan, because their logic has nothing to do with the welfare of the country.   Donors are complaining they haven’t gotten what they paid for, so it’s time to get the job done.  Bipartisanship is not on the agenda.   These tax cuts are delivered as ordered.

It is important to recognize that there is nothing mysterious about the small, ultra-rich donor community (with the Koch organization as primary mover channeling money from others) and also nothing ambiguous about their demands—both money and power.  You might even argue—though it’s a stretch—that perhaps the stock market is rising not on business prospects, but on all that extra money the ultra-rich donors will have to invest somewhere!

And there’s another twist to this too.   Trump and the Koch brothers have much the same motives, but Trump is the President after all.  How can he get away with a tax program that has been precisely engineered for his own benefit?

Trump was born for this job.   He actually believes that whatever is good for him personally is by definition the best possible thing for the country.

So we are left with a philosophical quandary.   Is a crook who uses his office to pocket more than a billion dollars from the country excused if he is too self-intoxicated to realize what he’s doing?

 

 

Some History and Consequences of a Tax Cut

1929

In the years since the Great Depression economists of all stripes have come to a consensus about what happened.   Wild speculation produced a crash.   That led to intense stress on the banking system.   The Federal Reserve (as primary villain) was unwilling and unable (because of the gold standard) to provide support.   So the banks failed, and the rest of the economy collapsed.  National income was down a massive 60% by 1932.

The collapse originated in the US and was much worse here than elsewhere. Germany, still paying World War I reparations, was a special case and fared badly.  It is important to remember that without the 1929 crash, Hitler would have remained a curious side-show.

Recovery in the US took a full decade.  There was a serious blip in 1937-38 when Roosevelt dialed back on stimulus and a GDP slowdown followed.  International trade dwindled in the 30’s, as many countries instituted protectionist barriers.   The US wasn’t fully out of the depression until the second World War.

 

2008

Fast forward to the crash of 2008.   The banking system was again central, because mortgage-backed securities brokers had become unregulated de facto banks.  (Why should businesses earn nothing on cash when mortgage-backed securities paid real interest and were rated “just as safe”?)  When the deteriorating economy led to large-scale mortgage defaults, the mortgage-backed securities collapsed in value and trillions of dollars of supposedly safely-banked assets disappeared.

People running things had fortunately learned the lessons of 1929, and stepped in immediately to keep the banking system afloat and pump money into the economy to prevent a depression.  That stopped things going from bad to worse—very painful but not a depression.

 

Crisis and Recovery

Even at the beginning, however, something strange happened in this country.   At the very end of his presidency, George Bush did the right thing  (for once) and in the face of disaster introduced legislation to keep the banks afloat.  Despite advice of economists, his own party refused to support him—claiming to fight socialism.  However 172 Democrats and 91 Republicans did support the bill, and by a 263 to 171 vote helped pull the country back from the brink.

The episode seemed odd at the time.  But with the start of the Obama presidency and the new Congress, it quickly became clear what had happened.   That had been a transitional moment.  The old Republican party that at least cared (conservatively!) about the well-being of the country was no more.

The new Republican party, more and more a creature of the Koch machine, had only one goal—cutting taxes on the small group of ultra-rich backers who now owned the party.   That translated immediately to a surprising position.   Mitch McConnell (always quick to know which way the wind was blowing) later summarized it as “The single most important thing we want to achieve is for President Obama to be a one-term president.”  Private statements of position were even stronger. There would be no cooperation on anything—even on recovery from the recession.  Obama wouldn’t give them the tax cut, so it was scorched earth.  Republicans at the time trotted out ideological objections to stimulus—which the current Republican enthusiasm for both presents and deficits shows up for the hypocrisy it was.   Everything that kept the country going had to be passed over Republican opposition.

Even with a Democratic majority, that limited what could be done as stimulus.   At the same time the Kochs founded and funded the Tea Party as an apparently populist, anti-spending front group.  Slow growth plus anti-establishment rhetoric plus an unprecedented dose of Koch money (enabled by Citizens United) helped Republicans gain control of the House.  Keeping the country poorer was a rousing success!

After Obama was reelected Republicans doubled down on slowing the recovery and preserving the remaining pain.  Their ploy was a commitment to balanced-budgets (today of course demonstrated to be bogus), including even a proposal for a constitutional amendment.  On that basis they deliberately blocked any further stimulus or social programs (such as Obama’s State of the Union proposals for community colleges and daycare)—starving government to sow discontent for the election.   By 2016 they had held the country hostage to their tax cuts for the full six years they controlled Congress.

Trump wasn’t their chosen candidate—too much of a loose cannon—but he would do.   He was an even better populist front than the Tea Party.  He didn’t even notice the irony in his “slowest recovery” claims.  Pence was their guy all the way, and Trump picked a cabinet full of other Koch people.  On tax cuts there was no problem managing Trump.   He already believed anything good for himself was good for the country.  The tax cut plan is now here.   It is worth more than $1B for Trump himself, and is everything the rich donors could have hoped for.

You have to hand it to the Koch machine.  All the distributed power in the power in the American political system has now been centralized and controlled.  Local, state, Congress, the Presidency, the Supreme Court—the Koch organization has money in all of it.   More to spend than the Republican party itself, and all under strict control.  A few hundred fabulously wealthy people are running the USA for their benefit.

 

Now

That’s where we are.

For the tax cut, what’s on the table is an astonishing giveaway of the country to the richest few.   The asserted benefits to the middle class are nothing but after-the-fact propaganda.  There is no logical or historical justification for claiming that upper class tax cuts produce jobs.   Business tax cuts, while they sound good, are actually no better.   Businesses hire people because of opportunities, not cash on hand.  With today’s low interest rates the cost of capital is not a big barrier to new opportunities, so tax cuts will end up going to the investors.

This is not really a stimulus package, and it’s a myopic approach to our real problems in any case.  One reason the recovery hasn’t helped everyone is that the Republicans’ past financial lock-down has prevented whole categories of problems from being addressed.  The economy is changing and issues such as skills mismatch, automation, educational opportunity and even infrastructure aren’t addressed just by throwing money at the private sector.

There’s another problem too.   All that tax cut money will now be chasing investment—a dangerous invitation to speculation.   And we’re incurring new large deficits to pay for it at the wrong time in the business cycle.  The country is out of recession, and large deficits in good times are bad.   When our speculative bubble comes to an end, it will be all the harder to find the stimulus money to get up off the floor.

There is also a real question about who’s going to be around to help.  Remember the disastrous Federal Reserve behavior in 1929 and the unanimity it took to get back from 2008.   Janet Yellen may not be retained as Federal Reserve Chairman when her term expires next February.  One prominent candidate to replace her has no specialist background in economics and opposed all stimulus after 2008 out of an unsubstantiated fear of inflation.   Trump has not chosen his nominee, but it’s something to worry about.

Too many pieces from 1929 are coming back together. The ultra-rich are getting their tax cuts.   By all evidence there is little interest in learning from the past and even less in looking out for the lot of the rest of us.

Finding Reality

pew-studyThis item grows out of a recent study noting that in the US today few people have friends on the other side of the ideological fence.

It’s easy to imagine how that happens—there are just too many subjects to avoid!   That raises the question of why all those topics are taboo.   There are many reasons, but we deal here with one specific problem:  distinguishing real issues from pretexts.

The problem is that while there are plenty of real policy issues where debate should be possible, they tend to be mixed-in with taboo topics where the policy positions are actually donor’s self-interested pretexts (“climate change is a discredited hoax”).  Public debates can be (and often are) staged to discuss issues in the taboo category, but they never get very far.  There’s not much to be discussed when the stated policy is not the point.

It’s not necessarily easy to figure out what’s real, and undoubtedly many people will disagree with the examples here.   However the idea is to focus on a few issue areas where we as a country ought to be able to make progress if we can keep track of what is real and what isn’t.

We put issues in two categories:  non-issues and real issues.  Non-issues are issues only if donors (or other political considerations) force them to be.    We owe it to the country to get past them.  Real issues are the significant questions we need to solve.

 

  1. Climate change

As just noted, climate change is a poster child for pretexts.  There is of course one primary reason this whole subject is partisan, and his name is Charles Koch.  In addition to the false hoax claim, there is a continually-morphing litany of other misrepresentations.  It used to be easier to be a skeptic.  By now more than enough is known, so that ordinary risk analysis says the time has come to get serious.

Non-issues

Climate change is real.

Burning of fossil fuels is causing it.

The people working on it are not political hacks, but dedicated scientists faced with a hard problem.

Real issues

Risk assessment and what needs to happen now.  Steps and timing.

Roles of government and the private sector, e.g. supporting the power companies.

How research, particularly energy research, can best support the private sector.

What infrastructure changes will be needed and when?  Where will the jobs go?

Coordinating the whole effort.

It is worth pointing out that there are plenty of good, multi-year working-class jobs involved in dealing with climate change.

 

  1. Environmental policy and the EPA

What is frustrating about this topic is the extent to which the whole discussion of environmental regulation has gone on without specifics.   Is it really possible to believe that all environmental regulation is bad?  Even after the Flint disaster?  It is not viable to have environmental regulation whipsawed back and forth between administrations.

Non-issues

Not all environmental regulation is bad.

Not all environmental regulation is bad for business.

Real issues

Agreed-upon standards for regulation.  Work from the current list of Trump administration actions and responses.   Criteria to avoid overreach by all sides.

What is an appropriate process to assure that both the public interest and businesses have a say?

Should there be compensation for consequences of new rules?

 

  1. Healthcare

Now that all the repeal and replace nightmares are out of our system, we really ought to be able to do something good about healthcare.   This isn’t rocket science.   Every other prosperous country has come up with something that works.

Non-issues

Obamacare works well enough to be a starting point.  Sabotaging it helps no one.

The country needs a nationwide solution.  Uniform treatment for all people is good.

Single-payer systems are used by most of the world and may have a role to play.

Real issues

Availability of plans

Cost of plans

Assuring participation and coverage

Addressing needs of businesses

Getting religion out of the debate

Controlling costs of the program

 

  1. Jobs

Thus far the whole treatment of jobs has been based on campaign slogans.  The current tax cut plan is a case in point.   The millions of affected people deserve better.

Non-issues

Decline of good, low-skill working class jobs.

Decline in workforce participation.

Decline of upward mobility in the US.

No silver bullet.

Real issues

What is and isn’t cured by growth.

Workable options for tariffs, subsidies, or other government actions on trade.

Long-standing issues with wage growth and inequality.

Role of education.

Role of government as an employer (e.g. infrastructure, climate projects).

Budget impact and tax plans.

Geographic coverage.

Protecting the next generation.

 

It would be nice to believe that the country is now ready to get down to work.   On real issues some level of bipartisan cooperation could even be the norm.

This is it!

This is it!  Finally it’s here.

After six years of holding the country hostage (no question now about the meaning of “party of no”)—

After thousands of Fox News stories full of arrogant and nasty liberals—

After untold campaign contributions—

We finally have what we’ve waited for.   The dearly-bought gift—the tax cut, our tax cut has arrived in Congress!

 

Think about what we’ve done to get here.  First some of the ground work:

– Republican Supreme Court justices Roberts, Thomas, Alito, Gorsuch.

– Citizen’s United—liberating our money as protected free speech.

– The unprecedented Koch organization—funded by billionaires and with a staff of 1600 and billion-dollar budgets to control state and federal legislatures.

– A full complement of Koch people (e.g. Pence, Pruitt) in Trump’s government.

 

Then our messaging with Fox News and Rupert Murdoch leading the way:

– First one fabulous job of divide and conquer.  We’ve made “liberals” even more detestable than “welfare queens”.   What a line we’ve got: “They’re laughing at us and think we’re stupid.   They’re stealing our jobs and our money.  Can’t believe a word they say.  Our team will bash their heads in when we win!”  We’ve even got real liberals apologizing for our stereotypes!  And then there’s racism…

– Next the subtler part—governments can do nothing, everything they offer is either worthless or for someone else.  There’s quite a list of things governments can’t do:  education, social services, medical care, even police (we just need “good people with guns”).  Funny thing about all those wastes of taxpayer money—they’re things we’re already doing for ourselves.

– Finally a bit of warm and fuzzy nonsense.  Jobs are gifts from corporations and rich people.   Make us rich and we’ll take care of you!

Sounds like a tax plan.

 

And look now at what we’ve got.  Let’s count the tax cuts:

– Estate tax.  Only helps families with at least $10 M to pass on.  Worth $1 B for Trump himself.   Just for us.

– Tax rates.  The top bracket is down to 35%, but that’s just the beginning.  We’ll really get 25% with the new passthrough loophole (our lawyers will certainly take care of any fine print).

– Corporate tax rates.   We’ve got the clout to get most of this as dividends or stock repurchases.

– Deficits.   That’s a particularly good one.   Those nonsensical growth predictions are just one more piece of the pie.  The deficits will mean cuts in services and correspondingly lower taxes going forward!

It’s actually marvelous how this has worked out.   We’ve got a tax cut before there’s even a budget!  Exactly the way the world should be.

 

Where is all this going?  Funny you should ask.   There’s an article in today’s NY Times talking about it.   It seems Mexico is actually doing something right.   They’re not wasting money on parasites.   People like us live in walled communities with their own security and service.  Some of it they pay for, and the state does the rest. And they pay practically no taxes!  The world as God created it!

 

The tax cut has come.   We are saved.

Private Sector Fantasies

This note is about a subject with perhaps more deliberately-sown confusion than any other:  the role of government in a market economy.

We start with the saint of free markets Adam Smith.   Adam Smith had no delusions that the free market system would somehow manage itself.   He saw three roles for government in a market economy:  defense, justice, and education.  Further he understood that the private sector and the free market were not the same thing—one of the roles of justice was to prevent the private sector from creating monopolies and thus perverting the free market.  In other words even as an ideal, the free market was neither self -policing (it needed to be protected against its own tendency to create abuses) nor self-sustaining (it needed government to create the population of educated workers).

With that as introduction, we want to talk more about the relations of business and government.  There are three sections.  The first two expand on policing and sustaining of the free market, as just discussed.  The third talks about scope—what objectives for society are in or out of scope for the free market. The Trump administration has positioned itself as the defender of free markets against government.  Instead they are defenders of something rather different, with real dangers as a result.

 

Policing the free market

Monopolies are bad.  they raise prices and stifle progress.  They are also by many measures growing in power.  But they are not the only area where the free market needs to be protected from itself.   For example, lack of business transparency perverts the capital markets, so the SEC plays a crucial role.

A more complicated but equally crucial role is regulation of the boom and bust cycles (with bank failures and human misery) that used to be endemic to capitalism.  Government has two responsibilities for controlling those cycles:

  1. It needs to act “countercyclically”. Despite the jargon term, this is so basic as to be biblical—save in good times to prepare for bad. In a recession the government is the only party able to stop the spiral of low sales -> layoffs -> even lower sales-> even more layoffs.  It does that by injecting money into the economy to stabilize sales.  But in a recession, tax revenues are down, and the money has to come from somewhere–preferably savings but if necessary debt.  In 2008 George W. Bush had just fought an off-budget 2 trillion-dollar war, so the cupboard was bare.  Republicans screamed about increasing the deficit, even proposing constitutional amendments for balanced budgets.  Their line “real people tighten their belts when they have to” was a deliberate misrepresentation.  Real people save for bad times; otherwise they have to borrow to put food on the table.
  2. Government needs to recognize and control the excesses that can creep in to cause havoc in the business cycle. While many factors contributed to the 2008 crash, the most spectacularly deadly was the perversion of the banking system caused by mortgage-backed securities. In the giddiness of deregulation no one was looking.  The aftermath produced the Dodd-Frank legislation as an antidote.

Finally, as a last example, there are categories of risk where you can’t count on the business decision-making process to do the job.  Low-probability/high costs events (plane crashes, oil rig blow-outs) should in theory be prevented by rational decision-making, but in practice it’s hard to refrain from increasing profits by ignoring something that “really isn’t going to happen”.  So there is a role for government there too—protecting both the public and the businesses.

Current status:

– The administration’s anti-trust position remains to be seen.  Trump campaigned against mergers, but appointed an industry-representing trust lawyer to head the anti-trust division.

– There seems to be no recognition of business cycle issues.  Trump’s tax plan runs a big deficit to stimulate an economy close to full employment.  This runs the risk of repeating 2008 with an even worse debt position to fight it.  He also wants to repeal Dodd-Frank and says he won’t enforce it now.

– The general rule is that any regulation opposed by any business is bad.

=>  There is no serious recognition that the financial system needs policing.  Trump runs the show based on what he has wanted to see for his own businesses.  This is a blind dash into another 2008 or worse.

 

Sustaining the free market

Adam Smith pointed out the need for government to supply a suitably-trained workforce.   In the eighteenth century that meant simply literacy.   The definition of suitably-trained has changed over time.  By 1940 a then astounding 50% of American students finished high school.  In that era no other country approached that level of broad education support.   Then the GI bill made college possible for veterans, and public colleges expanded widely throughout the 1960’s and 70’s.  This coincided with unquestioned American economic dominance.  An educated workforce (at all levels) remains a critical national requirement.

You can take that one step farther.  Equality of opportunity is usually discussed in terms of social effects, but there is a corresponding benefit to the free market.   Business and the market benefit when all persons are able to achieve up to their capabilities.  The United States used to lead the world in upward mobility, but with rising inequality it now ranks behind most developed countries.

There is one more government role that fits here as well, namely research.  Government support of research produces people to be hired by cutting-edge businesses, and also supports the creation of new businesses to exploit the progress of science and technology.

Current status:

– For college, the student debt crisis speaks for itself.  A whole generation of students can’t imagine when they will be able to get out of debt.  This is compounded by De Vos’ support of shady lenders and weakening of controls on fraudulent educational institutions.

– For K- 12 education, states have retreated in funding, and De Vos is proposing a voucher system that will abandon the broader population.  Vouchers will be fixed in dollar value, to be augmented by surcharges at the now-privatized schools.   If you want a good education you pay for it; if you can’t, there is no guarantee of what you get.  This is institutionalized separate and unequal.

– Trump’s budget essentially abandons the government’s role in research, and his appointees have attempted to minimize the role of science.

=> There is surprisingly little recognition that government has an important role here at all–except to privatize it!

 

Scope of the free market

Adam Smith felt that the private sector could not be trusted even to defend free markets.  So it is not surprising that there are other aspects of society that need defending as well.

We give a few examples:

– Well-being of workers.   Smith describes effects of supply and demand on workers, and he even points out that adequately-paid workers may be more productive, but he makes no claim of utopia from the free market.   In fact in Smith’s description, workers’ welfare depends on a market for labor in which individuals have little bargaining power.

– Resources and the environment

Enterprises will use the environment for their own benefit, unless there are rules to the contrary.

– Infrastructure

Public resources such as roads, bridge, airports, internet, etc. should be built and maintained as needed by everyone.

Current status:

– Trump has pushed to limit OSHA workrules, opposes unions, and has no plans to raise the minimum wage.

– The EPA is being severely cut and redirected to helping businesses.

– The stated approach to infrastructure is via private investment, which will go where the money is.

=> There is no recognition that areas such as these can be out of scope for the private sector.  Instead there is a blind belief that growth solves everything.

 

From this summary it should be clear how far we are from free market economics.

The current national policy is that the private sector just needs to be encouraged to go do its thing.   We don’t have to care about policing its risk, we can let it take care of education and research, and nothing other than its success is needed to solve every other problem in society.  Just make sure it’s flush with cash and let it go.

That was the history of the nineteenth century, and for vast part of the population it was no picnic.  And it is worth remembering that 1929 really did happen.

Even thinking of the more recent past there’s an eerie familiarity about our situation.  We have a supremely confident lunatic fringe with the power to run amok.  The last lunatic fringe to take control of our government (remember the neocons?) gave us the Iraq war—which destabilized the Middle East and bankrupted the country—and the crash of 2008.

This time it could well be worse.

The NFL and the EPA

Nothing more needs to be said about the cowardly and calculated attacks launched by Trump on individual NFL and NBA players.  But it’s hard not to be shocked by the deliberate appeal to racial hatred—we know all about those traitorous bastards.

However, the main subject here is the attack on the NFL itself and what’s behind that one.  For anyone who has somehow managed to escape it, here is the quote:

“Today if you hit too hard—15 yards! Throw him out of the game! They had that last week. I watched for a couple of minutes. Two guys, just really, beautiful tackle. Boom, 15 yards! The referee gets on television—his wife is sitting at home, she’s so proud of him. They’re ruining the game! They’re ruining the game. That’s what they want to do. They want to hit. They want to hit! It is hurting the game.”

The first thing about this quote is that it was not made up off-the-cuff; he told exactly the same story a year ago so he knows what he is saying.  In that case he made the conclusion explicit:  the problem with the NFL is that “it’s become soft and our country has become soft.”

What does that actually mean?  He is asserting that it shows our moral superiority as a nation if one of our most widely-watched activities is a spectacle in which people are maimed for life.   Why would he say that?  Part of it may be cultural I suppose, but not all of it.   In this particular context he’s talking about working conditions and attitudes of viewers.   There should be no constraints on what people are asked to do, and it shows weakness to care about it.

The “working conditions” comment is not far-fetched.   This is exactly what is proposed for OSHA—businesses should be able to get away with whatever they deem necessary.  Bosses should tell workers what has to be done, and workers need to be tough enough to go do it.   It’s like the army.  Of course you’re going to be shot at—stop being a sissy.

But implications go farther than that.  The latest event at the EPA was the nomination of Michael Dourson–whose career has been spent helping businesses fight restrictions on toxic compounds in consumer goods—as lead chemical regulator for the EPA.  We the public need to suck up that pollution stuff and be tough too.  Business needs to be able to do what is necessary to get the job done.  If anyone gets in the way it’s because “our country has become soft.”

It’s a great world where you can order people around, and anyone who doesn’t agree is a traitor or a sissy.  There are people with a lot of money trying to make it happen.   If we don’t watch out they will.

No Plan

The latest Republican healthcare proposal is such a horror, it is hard to think about anything else.   There is in fact no plan—just a scheme that gives money to the states for them to figure it out.  It is underfunded (the non-participants in Medicaid expansion are now covered too but with overall less money); there is no longer any guarantee of a minimal level of coverage (including for pre-existing conditions); and in the longer term it shuts the door on Medicaid entirely.  It increases the complexity and uncertainty of the system to such a degree even the insurance companies are upset—and it’s not just their problem.   We’re talking about small, more expensive risk pools and significantly greater administrative costs.

Since this level of incompetence is just about unthinkable, one asks how anyone could come up with it.  There are three immediate answers—all bad:  Trump’s pledge to get rid of Obamacare, the proposal’s massive shift of funding from blue states to red, and the simple fact that this is the last chance to pass something before the special 50-vote rule expires September 30.

Let’s focus on the first point—what did Trump voters think they were voting for?   They were told he had a much better, cheaper plan.   After all he was a businessman and great negotiator.  Since the current proposal is no plan, we now know beyond all doubt that what Trump sold was a lie.  That fact by itself is an under-reported outrage.

We need to explore the scope of that outrage.

It’s not just Trump.  The Republicans have been repealing Obamacare for six years.   They clearly never had a plan either, just lies.

It’s not just healthcare. What do Republicans want for the country?

That actually has straightforward answer.  It is slightly different for Trump and the Congress:

– For Trump it is simple:  “What’s good for me is what’s good for the country.”

– For the Congress the target extends only a little wider:  reduce taxes for very rich people.   Based on contributions this is the Koch brothers’ Congress.   The Koch’s political organization (not just their own money) employs 1600 people and has a larger budget than the Republican party itself.  They are the dog wagging the Republican party tail.

What’s the plan for jobs—reduce on taxes on the rich (with no serious look at whether that addresses real problems)

What’s the plan for infrastructure—reduce taxes on the rich (private financing takes infrastructure off the budget and assures spending will go where the money is)

What’s the plan for healthcare—reduce taxes on the rich here too (defund medicaid & push other care to the states with declining funding)

That is the plan.  There is no plan.  Just lies.

Strange Revisionist History

You can almost call it a conspiracy.   The right and the left have decided to rewrite the history of the last election in remarkably similar ways:

The Right:  The election was a thumping rejection of everything liberals stand for.  The public was finally given the opportunity to say so, and it rejected the administrative state and all its policies, both foreign and domestic.

The Left:  The election was a thumping rejection of centrism and its coddling of the right.  Trump’s core voted for him, because the Democrats have become too close to Republicans in outlook.  Other traditionally Democratic constituencies either went to Trump or didn’t vote for the same reason.   The only way to save the country is for the party is to return to its ideological roots on the left.

For starters, one of the most outrageous events in the history of the United States has disappeared from the narrative—the FBI’s deliberate effort to throw the election.   They got away with it, and we may never know what was behind it.   What’s more, of all the elections in recent history, this has got to be the one least fought on the issues.   By all reports, Hillary Clinton’s emails were the only subject on the news for the last two weeks prior to voting.  In fact one of the many national myths that died in this election was the place of truth in our much-vaunted free press.  Finally the Trump phenomenon itself has been whitewashed out of existence.

This is not a trivial matter, because it affects where we as a country go from here.  What follows is a quick summary (from the outside) of what the election was about and what conclusions should be drawn from it.

 

The basic story of this election was simple.  The Clinton campaign tried to make Trump’s character the major issue in hopes of attracting bipartisan support.  Other specific issues came out primarily during the debates, where she was successful (Clinton won the first and third, and tied the second), but not so often after the debates were over.  The focus on character seemed to work well at first, in particular with the discovery of the Trump sex tape.  But it was undermined by the (unsupported) innuendo of the first FBI letter—she was just another crook.  By then it was too late to change tactics, because the press was obsessed with her emails.  More innuendo in the second FBI letter sealed the deal.

For Trump voters this election was a religious experience.  For the rest Clinton’s emails were the issue.  Republicans now voted Republican, the effect of the Russian leaks was amplified, Sanders voters and misogynists had their fears confirmed, and the belief that Clinton would win made for general Democratic complacency.   With the character issue gone, too many people bought Trump’s simplistic economics—“he’s a businessman, I’ll make a buck” or else just didn’t vote.   One example statistic—at Penn State less than half of students registered prior to the election actually voted.  In swing states Clinton lost 4.5 percentage points of advantage in the two weeks following the FBI letter and lost the election by less than 200,000 total votes in four states.  This was so close that even Jill Stein was significant in most of them. (See here for a detailed discussion of factors influencing the election.)  Republican control of Congress was another side of the same coin.

It remains to talk about the Trump phenomenon.   Donald Trump is a demagogue outside the limits of what either party has produced in the recent past.   He is a professional huckster and promised salvation.  He created scapegoats and whipped up his audiences so that they were ready to kill. You can argue that Democrats should have done more for his target population (although the Republican Congress essentially shut down the government for six years), but in the election no honest proposal would have competed with Trump’s lies.  Demagogues are a real problem in a democracy.  A chilling thought is that in Athens, our original model for democracy, once they elected a demagogue it was never possible to go back.

 

This is not to deny that the Clinton campaign made mistakes, but that wasn’t why she lost.  This is my list, always easy after the fact:

– Excessive focus on Trump’s character.  I would have liked more issue-oriented ads.  People needed to fear Trump’s “change”.  (But that would have complicated a non-partisan appeal.)

– Handling the FBI letters.  Clinton should have taken the high ground—welcomed the examination of her letters as a way to settle the email issue once and for all.  Contrast with Trump’s taxes.  (But the innuendo was still there, and at the time no one could believe that the FBI itself was corrupt.)

– Despite Trump’s comment, Clinton wasn’t nasty enough.  She and the Obamas liked to say “when they go low, we go high”.  This was not a time for class.  She should have gone after Trump as a businessman, with testimonials from the people who denied him financing.  At the end of the campaign Clinton talked about bringing the country together; Trump talked about locking her up.

– Countering Trump’s tweets.  This is a strategy problem going forward.   Tweets seemed to keep Trump on people’s minds much better than traditional grass-roots organizing.

– Top-down campaign.   As canvassers we were told not to change a word of the canvassing scripts, and there was little interest in our impressions of the voters’ concerns.  Trump’s people had ears to the ground.

 

Some Conclusions

– This was not a campaign on the issues, and we shouldn’t pretend it was.  There was no mandate to take the country to the land of the alt-right, and also no proof that the Democratic Party does or doesn’t need ideological changes.

– A major influence on this election was corruption in the FBI—an unimaginable failure of our criminal justice system—and we had better worry about what that says.  If we don’t watch for it, it will happen again.   (Anyone who questions the corruption should reread the Comey letters. There have been many explanations of why the letters were written, but none explain the carefully crafted—and unsupported—”she’s a crook” innuendo.)

– The core Trump supporters are not going to change allegiance any time soon regardless of what we propose.  They’ve been promised salvation, and they’ll wait a long time for it.   As one book on group violence puts it, fanatical allegiance may grow out of economic issues, but once it gets going it has a life of its own.  We should understand their problems,  but they’re not going to help in 2018.

– Not all Trump voters are the same.  Those is a good chunk of traditional Republicans who were given a reason to ignore what he is.   Those people are harder to get now that they voted for Trump, but they’re not like the Trump core.  Even for 2018 if they are worried enough, they will come.

– Many things had to go wrong for Democrats to lose this election, starting with the FBI.  The election was so close, just about any one of them effectively decided the vote.   Here is one list:

– First FBI letter

– Russians and Wikileaks

– Misogyny

– Bitter Primary fight

– Second FBI letter

– Obama’s decision not to mention the Russian investigation of Trump

– Belief that Clinton would win (further suppressed vote)

There is no question that an inclusive Democratic party can win.  The biggest issues going forward are voter restrictions (Kobach) and gerrymandering.

– We should not take this election as proof that we need to remake the Democratic Party based on what made Trump successful.  Trump won by lying, not because he had a better solution.  What we do need to do is be preemptively sensitive to all constituencies who have problems.   By the time there is a Trump in the picture he will be hard to beat.

– We have a responsibility to address the problems of Trump core voters, and those problems are both hard and pervasive.   Trump’s win is clear evidence that this is fertile ground for demagogues (here and elsewhere).  It is a real challenge to develop workable, salable economic policy.

– Finally, on a more mundane level, there is clear evidence that campaigns have changed.  The effectiveness of Twitter shows we need to go back to first principles about what works.  This has become a scary, high-tech business, and we had better be sure we’re equipped for the fight.

Living with the Dark Side

There has been a lot of talk recently about possible Democratic cooperation with Trump.   There is of course little basis to that yet, but it is interesting how quickly we’ve gone from hoping the Republican Party would save us from Trump to the other way around!  With that as motivation it is worth thinking a little more about the players and issues in this game.

First about the choice of evils:

On one hand we have the Republican Party:

– This has become largely a Koch brothers organization.  Low taxes for the very rich is the only real objective.

– Opposed to all social programs (no accident they couldn’t do healthcare).

– Pro-business, but perhaps not completely nuts on economic issues.

– Can find individuals to work with.

On the other hand we have Trump, with two sometimes contradictory impulses:

  1.  Sees everything as though he were still managing his own businesses

– Cut taxes on businesses and rich people

– No interest in unemployed people or other “losers”

– All regulations are bad; anything of value happens in the private sector

  1.  Sold himself as a “populist” and wants to believe he is delivering on it

– Primary focus is jobs via tax cuts and tariffs.  Not much has actually happened.

– Support for coal miners, abandonment of Paris Agreement, killing DACA

– Not much else yet; AHCA would not have been a winner

The business side of Trump is only subtly different from the Koch brothers agenda, and separating Trump’s two sides is tricky.  His speech on exiting the Paris Agreements was all about the populist side, but everything behind it was driven by Koch brothers people (Pruitt, Pence).  Similarly, AHCA was nominally populist, but really an excuse to cut taxes for rich people.

Thus far Trump hasn’t done much for the populist side, but he keeps talking about it.   That’s actually what has thus far stopped healthcare.  Republicans spent six years repealing ACA with no worries about who would lose coverage–but that became an obvious issue now.  Even though Trump supports AHCA, it’s not so easy for Congress just to laugh off the coverage.

Ideally that is an opening to find Democratic proposals of obvious benefit to Trump’s core constituency that are somehow salable to Trump.  We have to accept these will only get mileage if they are presented as Trump’s initiatives.  If it all fails, that will at least point out the hypocrisy of the populism.

There are some obvious possibilities:

  1. Healthcare

Anything here is conditional on Republicans really giving up on the AHCA nightmare. If that happens Trump will need something.  That could conceivably be whatever comes out of the bipartisan work on ACA, but Trump may want something really different to put his name on.

It should be pointed that this is not just an issue for the Trump core.  Business needs it too, even more than the tax cut if you if you believe Warren Buffett.  A good solution here could incorporate elements of a single payer system into a public option based on Medicare.  For that it is important to realize that the existing Medicare infrastructure is actually administrated by the private sector.

This is a low probability, but you never know–he might bite if it really does save money for business.

  1. Infrastructure

Trump has said he wants to do this, but a pure private sector approach won’t work for poor areas.  Appalachia is not going to benefit without some kind of compromise approach.

  1. Transitional job assistance (retraining and support)

Thus far Trump has put all his eggs in the “growth = jobs” basket.  His target budget killed any assistance programs, including a successful one in Appalachia.   However, it is now clear things are going to take longer than he expected.  If this is viewed as transitional, we may actually be able to help people.

  1. Early childhood education; cost of college

All polls I’ve seen of Trump’s base say that they want something better for their children.  Paul Ryan Republicans have been disastrous for such programs.  These would be clear benefits for the working class.

  1. Tax reform

Trump likes to talk about reducing the current 35% corporate income tax.   However, the average effective rate is more like 24 %, in large part because of special provisions delivered by lobbyists for particular corporations.  A lot of Trump support is from small businesses who aren’t so lucky.   A fair system may not appeal to Paul Ryan, but there is more reason for it to appeal to Trump.   No one is supporting 15%, but 25% with real tax reform would not break the bank and would recall an achievement under Reagan.

  1. Promoting American jobs

Trump has made high tariffs the miracle solution to all problems for everyone.   That’s not true, but it doesn’t mean there is nothing sensible to do.   Trump probably doesn’t know anything else.   We may be able to help.  This is not the Republicans’ area of expertise.

  1. Climate Change

This is so crazy it’s hard to give up, even if it means fighting the Koch brothers directly. There’s both a carrot and a stick involved here, with recent developments for both:

– Harvey is the most recent example of what worsening weather can mean.  As noted in the previous post, no reasonable business faced with such a large potential risk would choose just to ignore it.

– The reality of climate change will create enormous business opportunities—wholesale migration to electric cars is just one.  With current policies we could very well cede all that to the Chinese.  This would not be the only time that a first mover like Tesla would lose out in the end.

In all these areas, in contrast to the Republican healthcare fiasco, Democrats should be able to offer real proposals.  So you never know….

Hurricane Harvey and the Burden of Proof

 

Hurricane Harvey was an extraordinary event.   The rainfall totals and flooding were without precedent even in the hurricane-prone Texas Gulf region.  The New York Times pointed out that fully 40% of the flooded buildings were in areas classified as “of minimal flood hazard.”

Scientists have been very circumspect about what part of this to attribute to climate change.   Michael Mann gave a careful summary of contributing factors, principally sea-level rise and water temperature.  The message is that climate change didn’t cause the hurricane, but did make it worse.  No one can quantify just how much worse, and certainly out-of-control development in Houston contributed to the destructive effects.

However, the fact remains this was an unimaginable storm.   It was out of the range of what anyone thought to see from weather, even from hurricanes.  That is the threat of climate change.  Weather isn’t limited to what we know and understand.  Once we perturb the system, the power of the elements can surpass anything we are used to—that is what’s at stake.  We can’t even guarantee the changes will be gradual.

The evidence behind climate change is considerable and increasing.  A previous post here discussed one particular way of looking at it.  Any reasonable business, faced with a risk of this magnitude, would be doing its best to quantify that risk, so as to take appropriate action.   Businesses that choose to ignore disruptive new technologies or entrants are the ones that disappear—along with their disparaging comments on how the new stuff will never amount to anything.

That’s us.   Coal and oil interests (Koch brothers and their cohorts) are horrified that anyone would even think about keeping their assets in the ground.   With this administration anything that any business doesn’t like is bad–and for climate change we actually have Koch representatives (Scott Pruitt, Mike Pence) running the show.  So climate change doesn’t exist.  Can’t even talk about it.   Come back to me when things are so bad I can’t laugh at you.

What is the burden of proof here?  We are long past the stage of serious concern.   We haven’t reached the stage where people with something to lose are ready to give in, but that’s not going to be until their businesses blow up in a storm.   With climate change you have to act early if you want to prevent a future of weather run amok.   Carbon dioxide in the atmosphere just adds up.  If you wait for things to get bad, they will go from bad to continually worse through all the years it takes to get off coal, oil, and gas—and then stay that way for many decades more.

We are at the stage where the appropriate response to risk is action.  Research and the Paris Agreement process are imperatives.  CEO’s of failed companies can always go on to the next one, but with climate change there’s nowhere to go.