Tuesday, August 30, 2011

What Obama Should Do: A Real Jobs Bill for America

President Obama came to Minneapolis to the American Legion Convention talking jobs. . . sort of. As of yet Obama has yet to propose a jobs program and in Minneapolis he spoke of a tax credit to hire a vet. As typical, the proposal was too little, too modest, and lacking vision.

Were the vet tax credit adopted it would help only a small spectrum of those unemployed, pitting other unemployed against vets for jobs, ensuring a resentment of the former against the latter. Moreover, there are questions about the job skills for many of these vets and whether military skills have civilian application. For many, workforce training, medical assistance for war injuries, and serious enforcement of the Sailor and Solder’s Act to prevent employer discrimination against vets would be even a better idea.

Yet the tax credit Obama is proposing is typical of the timidity of his vision. His 2009 stimulus bill, panned as a failure by many, did its job but was probably half the size of what it needed to be to make a real impact according to most experts. The best study of the stimulus bill, “The Net Fiscal Expenditure Stimulus in the U.S., 2008-9: Less than What You Might Think, and Less than the Fiscal Stimuli of Most OECD Countries,” by Joshua Aizenm an and Gurnain Kaur Pasricha, concluded that the federal money made available by the stimulus mostly just replaced budget cuts at the state and local level. All it did was to prevent the Great Recession from getting worse–it merely replaced state money with federal money. No significant stimulus as a result.

Thus, the vet tax break along with his rumored infrastructure bank proposal and his desire to extend the payroll tax break, will be insufficient and short of the mark. Obama will be limited in how much money he can invest in jobs, hemmed in by the constraints of the debt ceiling deal he capitulated to. No, Obama, will propose too little, compromise too much, and in the end, it will die a victim of the 2012 election politics. If by some chance a jobs proposal is adopted, it will have little impact, giving Republicans even more ammunition to argue that Keynesian economics has failed, the government is inept, and that Obama must be thrown out of office, only to be replaced by more of the bankrupt Ayn Rand economics that got America into the mess it currently is in.

The Republicans are not going to do anything to help Obama and the economy. This means instead of proposing anemic measures that will not succeed, propose a grander vision and set of ideas for jobs. Offer the alternative, run on it, and make that the theme for 2012.

What should a broader jobs vision include? Such a vision should recognize the need to produce jobs across several sectors of the economy. It needs to be sufficient in size to make a difference. It must also be sustainable.

So an infrastructure bank to rebuild roads and bridges is good. Ever since the collapse of the I-35 bridge in Minneapolis in 2007, it’s been obvious we need to rebuild our infrastructure. The American Society for Civil Engineering places the price tag for rebuilding this country’s infrastructure at $2.2 trillion dollars. Yet even if money is spent for this, only some will find jobs. Yes construction workers would be helped, but not white collar, older, and many female workers. Face it–56 year-olds unemployed by the recession for over a year are not getting construction jobs. They would be left out. As would young people still looking for a first job.

Moreover, infrastructure would do little to help the housing industry which is still ailing. Latest HUD reports find single-family home building permits down 10% this quarter compared to the same period last year; actual sales of new single-family homes were down 6%; and total delinquencies for all homes stood at 8.32%, up from the last quarter of 2010. Thus, a jobs bill needs to address many aspects of the economy and the diversity of types of people unemployed. Moreover, it needs to be big–big enough to help many of the different sectors. It needs to address infrastructure, workforce development, and housing.

But finally, a jobs program must be sustainable. Sustainable means capable of actually stimulating the economy enough so that it will actually grow. Sustainable also in that it pays for itself in the short and long term. Thus, how to pay for it? Three ideas.

First, Wall Street Journal articles report U.S. companies sitting on nearly $2 trillion in cash, unwilling to invest it in jobs. Second, Bloomberg News and other sources note another $1 trillion in offshore earnings and accounts. In the Iowa debate earlier this month Republicans proposed a tax holiday to bring the money home to invest. Again good theory but the last time the holiday occurred, businesses did not invest in jobs. They spent it on mergers and acquisitions, dividends, stock buybacks, and executive bonuses. None of these is useful for job production. Let’s require companies to use this money to invest in American jobs, or tax it and lend it to businesses that will provide jobs. Use the tax code to make corporations invest in jobs and not rely on taxpayer dollars.

Finally, use treasury bonds to finance capital jobs projects. Bonding is still the best way to pay for long term infrastructure. Demand is still high for treasury bonds-as evidenced by the fact that when Wall Street heaved after the S&P downgrade of the U.S. credit rating, money poured into T-bills.

Thus, here is a proposal for Obama to stimulate job production and the economy.

* Five year $2.2 trillion bonding bill to repair U.S. infrastructure.

* 100% tax credit for solar equipping all homes and buildings (the added bonus here is on energy savings and costs).

* 100% tax credit on all individual workforce training expenses for unemployed workers.

* Principal-only repayment of all existing student loans.

* Principal-only repayment on all FHA, VA, Fannie Mae mortgages.

* 100% tax rate on all cash savings by corporations held domestically unless used to hire, train, or reinvest in workers.

* Tax amnesty on all offshore corporate savings repatriated to the US if used to hire, train, or reinvest in workers. Conversely, impose a tax penalty on US corporations that fail to repatriate and invest in jobs.

The exact details of a proposal like this can be refined, but they addresses many problems ailing the economy, while also drawing significantly upon the private sector to finance or invest in producing jobs.

Monday, August 22, 2011

Touchdown! How the Vikings are buying political influence to get a new stadium

Taxpayer dollars spent to build sports stadiums for professional teams are an economic waste of money. Study after study proves this. Yet demands to provide public money to build a new Vikings stadium refuse to die. Why? The reason is simple — Zygi Wilf and the Vikings have spent millions lobbying and in political donations to persuade the governor and legislators to give them a new stadium — and the investment may be paying off.

Wilf took principal ownership in the Vikings in 2005. According to records filed with the Minnesota Campaign Finance and Public Disclosure Board, since 2006 the Vikings have spent $2.82 million in lobbying, including $1.16 million in Wilf's first year as owner. In his first five years as Vikings owner Wilf has averaged $564,000 per year lobbying.

Complete data for the first half of 2011 is not available and we will not know what the Vikings spent this year until next January. However, the Vikings did employ five lobbyists who disbursed nearly $29,000 lobbying. Lobbyist disbursements are merely a tip of the iceberg in total lobbying expenses, and there is every reason to think the Vikings spent way in excess of the $564,000 average.

But lobbying is not the only way to use money; contributions to candidates and to the legislative caucuses, too, are smart investments. Just look at 2010 alone. Zygi Wilf and his family made contributions totaling $17,000 to candidates for governor or the Legislature in 2010. They covered all the major gubernatorial candidates, including a total of $3,000 to Mark Dayton and $1,000 to Tom Bakk. Lester Bagley, principal lobbyist for the Vikings, added another $1,850 to this.

But contributions do not stop there. In 2006, Wilf and the Vikings spent a million plus dollars on lobbying but nothing on political contributions. In 2008 the Vikings, Wilf, and his family spread $18,500 among the legislative caucuses. And then in 2010, the Wilfs gave $27,600 to all four legislative caucuses. Bagley made contributions of $1,850 to the Republican House and Senate caucuses, as well as to the Chamber of Commerce and to the Third (Tom Saxhaug) and Sixth District Senate DFL (Tom Bakk) caucuses. These 2010 contributions represent a significant ramping up of Wilf's political activity to get a stadium.

Given the spending on lobbyists, political donations to the caucuses and political candidates, it is no surprise that Gov. Dayton and legislators are pushing for a new Vikings stadium. Wilf and the Vikings have spent a few million to reap hundreds of millions in public subsidies and eventually more in terms of profits from the new stadium.

Not a bad investment. It is this spending by Zygi Wilf that explains why the debate for a public stadium persists.

This blog also appeared in Minnpost on August 22, 2011.

Sunday, August 14, 2011

Nails in the GOP Coffin: Thoughts on the Iowa Straw Poll Results

Bachmann wins, Pawlenty is out. What do learn from the Iowa straw poll? Whatever political moderation existed in the Republican Party, it rapidly disappearing as the GOP is being remade in the image of Palin and Bachmann.

The headline clearly is that Bachmann received nearly 29% of the vote. No surprise there. Bachmann has narrative that clearly appeals to a demographic of social conservatives and Tea Party members. For months I argued that mobilizing this vocal and active segment of the part would make Bachmann a major force in Iowa. With a divided field she had captured a large bloc of voters and she used this appeal along with her Iowa connection and strategy to do well in that state. Her challenges of course will now be to move beyond Iowa, reach out to others beyond her base in the party across the country. Moreover, as the field of GOP contenders winnows (Pawlenty exists) and expands, will she pick up supporters or lose them? Bachmann is definitely the headline of the party but challenges persist.

Look beyond Bachmann. She received 28.6% of the vote, Paul 27.7%–together they accounted for 56% of the straw poll. These are two candidates who represent perhaps the most extreme agendas among the GOP field. Add to them Santorum who polled at 9.8% and one finds that nearly two-thirds of the straw poll went to what would appear to be non-mainstream candidates. Pawlenty, perhaps the most mainstream and establishment candidate who participated in the field, polled barely 14%. This is a party that has moved dramatically to the right of the one that picked Romney as the Iowa straw poll winner and McCain as their nominee in 08. The GOP had redefined itself. It is–as I have argued for months–no longer the party of Ronald Reagan. Sarah Palin successfully remade the party into one captured more firmly by the Tea party and owing much of its ideological allegiance to a blend of Barry Goldwater, Pat Robertson, and Ayn Rand. Paul and Bachmann represent different wings of this new party, but Bachmann is better poised to run within this new party because her rhetoric and narrative are less pedantic and more appealing that Paul’s cerebral musings about the gold standard.

Romney is in trouble. In theory the frontrunner, but he is the frontrunner in a GOP party that no longer exists. He is part of the old Reagan Republican Party (along with Pawlenty) now fading. As the Party has shifted look to see it be more difficult for him to maintain his lead. Bachmann represents the new center of the new Republican Party. She and Paul may not be the fringe, Romney and Pawlenty are.

No surprise he is dropping out. He never had a chance. He never had a narrative and he was a Reagan Republican running in a Palin Party. He tried to fake being more conservative than he was, coming off as inauthentic and phony. He made Iowa make or break and he broke. Bachmann helped seal the deal and yet again unended her Minnesota rival. But Pawlenty was doomed even without her–he just lacked appeal as a candidate and he never created a rationale for he presidency. It also does not help to have a non-existent legacy as governor besides bankrupting it.

Perry changes the equation for Bachmann. They will fight out for many of the same supporters and the challenge will be to see what happens. Perry is Bachmann but with executive experience. But Perry’s support demonstrates again how far to the right the GOP has moved.

But what does it all mean?
Commentators state the challenge is for Bachmann to capture swing or centrist voters within the party. She may not need to do this. First, her bloc approach may be enough to help her for a long time. Second, the moderate GOP voters may be leaving, going the route of while males who abandoned the Democratic Party in the 1970s and 80s. If the Reagan Revolution redefined the GOP and Democratic Party membership, then the Palin-Bachmann redefinition will do the same. Some will leave the Party, perhaps leaving it a much more conservative one that even before. Within a party of vanishing moderates, Bachmann can win.

Friday, August 12, 2011

The Scream! Thoughts on the Iowa Republican Debate

No question about it–the lunatic fringe has taken over the Republican Party. The August 11, Ames, Iowa Fox debate featured calls for the return to the gold standard, the right to choose light bulbs, criminal prosecution for doctors who perform abortions to save the lives of mothers, obtuse readings of the Tenth Amendment, and petty and personal squabbles attacking one another and the media. All we needed was for someone to assert that the Earth was flat and that it was located at the center of the universe. It was enough to make one what to scream!

The debate lacked substantive and constructive ideas. It was devoid of facts, researched ideas, and any sense of real research across the areas of economics and law. While all the candidates were correct in contending that Obama lacked a economic plan for America, none of them offered anything of substance either based upon research and evidence regarding what works or not. It was all pure ideological pandering to a crowd, with sound bites crafted by speech writers. All seemed to think that the only solution was more tax cutting, giving businesses even more breaks than they have now. It was a collective pep rally for trickle down economics, contending that too high of corporate, capital gains, or other taxes were the cause of the economic slowdown. Cain at least was honest in saying that he was not bothered if the tax cuts to corporations resulted in them paying more dividends and not investing. So much for the veneered justification of supply-side economics as a jobs producer.
Moreover, other candidates had equally dismal and shallow assertions about economics. Paul wants to dismantle the central bank and return the US to the gold standard. Pawlenty thinks we can achieve 5% economic grown for many years if we enact his nonexistent economic plan. Bachmann thinks she can turn the economy around in 90 days. Gingrich blames it all on Dodd-Frank and Sarbanes-Oxley–repeal them and all will be fine. Huntsman and Romney simply said trust me–I was in business and I know how to create jobs.

But perhaps the most interesting part of the debate was when pressed about a bipartisan deal to cut the deficit and asked if they would sign off on a deal that would have 10:1 spending cuts to tax increases. None supported it.

None of the candidates seemed to have a sense about job creation or about a role for government investment in the economy to build infrastructure. In doing so, they forget even that Adam Smith in the Wealth of Nations called for this. Or that this is what Alexander Hamilton called for in creating the national bank and in supporting credit and manufactures. All seemed to endorse Ayd Rand economics, a libertarian free for all market place of the survival of the fittest.

But economics was not the only place where crackpot theories prevailed. Constitutionally, they were all horrible. Bachmann stated that the Constitution does not allow the government to require individuals to purchase anything such as insurance. She was unable to square that with her reading of the Tenth Amendment which gives states broad power to regulate, even traditional topics such as marriage. By her logic, states could not require individuals to purchase auto insurance and perhaps even licenses for practicing medicine or doing anything else. Moreover, despite all her defense of the Tenth Amendment, she would take away the power of states to pass legislation allowing for same-sex marriage. At one point the debate degenerated into a discussion of whether the Tenth Amendment would allow states to enact slavery or polygamy.

In 1984 a challenger to Senator Fritz Hollings demanded the senator a take a drug test and release the results. Hollings replied by stating that he would take such a test if his opponent took an IQ test and made it public. Last night’s debate gave me new appreciation for Hollings’ suggestion. Candidates for the presidency should be better informed about the world of economics, politics, and the law. We talk so much about civics education and literacy tests for citizens. Maybe candidates should be required to pass such a test as a condition for running for office.

Final Thoughts: Bachmann v Pawlenty: Pawlenty’s Sexism

The Bachmann/Pawlenty feud is the media highlight of the debate. Both came off looking petty and small. Pawlenty is correct that Bachmann has no real legislative record, Bachmann is correct that Pawlenty has switched on many issues. Leave it there. But both felt they needed to dig at one another, underscoring the deep animosity the two h ave always had toward one another, not only enhanced by their rival Iowa strategies. Yet Pawlenty came off worse. He was given a second chance to criticize Romney and again soft-peddled it. Thus, he was too weak against Romney and too aggressive and petty against Bachmann. This attack reveals a deeper sexism with Pawlenty.

Recall in 2006 his attacks against DFL Lt. Gubernatorial candidate Judy Dutcher when she blanked on a reporter’s question about E85. At one point DFL Gubernatorial candidate Mike Hatch stated about Pawlenty: “Look at how desperate he is, he is attacking a woman.” Hatch took heat for that statement but in retrospect he seems prescient. Pawlenty’s sexism is his inability to confront and challenge men, preferring to pick on others he perceives as weak, such as women. This is the the wimp factor.

Conversely, Bachmann competed for the dumbest answer of the night. When asked to defend her legislative record against Pawlenty's criticisms, she replied: "I introduced the Lightbulb Freedom of Choice Act so people could all purchase the lightbulb of their choice." I am not sure what is worse, that this is the sum of the legislative record that she is proud of, or that she wants to give individuals more choice to select light bulbs than gay people to marry or women to control their reproductive choices.

The Winners are...?

Who won?

Gingrich had real policy answers even if they are wrong. He was correct to trash the super-committee as a lack of leadership and at least his comments about Sarbanes-Oxley and Dodd-Frank, even if wrong, were real ideas.

Romney wins since no one attacked him and escapes with no bullet holes.

Huntsman has the single best answer of the night. When asked about his support of civil unions he said he stood by his position. But more importantly, when criticized for accepting Obama’s request he become ambassador to China, Huntsman replied: "I’m proud of my service to this country. If you love your country, you serve her. During a time of war, during a time of economic hardship, when asked to serve your country in a sensitive position where you can actually bring a background to help your nation, I’m the kind of person who’s going to stand up and do it, and I’ll take that philosophy to my grave." If we had more answers and people like that our country would not be in the shape it is today.

Friday, August 5, 2011

Lessons of the debt deal -- politics in the age of American decline

Today’s blog also appeared in Minnpost on August 5, 2011.

Lessons of the debt deal -- politics in the age of American decline
By David Schultz | Friday, Aug. 5, 2011
The deal to raise the debt ceiling damaged the United States in many ways. It did little to address the long-term economic problems of the country while exposing the fragility of American political institutions and the factional nature of this country's political system. It reveals the politics of America in the age of decline.

Time magazine founder Henry Luce once declared post World War II dominance of the United States the American Century. America's economic dominance financed its political and military supremacy, giving it the leverage to affect world politics. Too often pundits declared the American Century over, yet these proclamations seemed premature. The American supremacy that historian Francis Fukuyma proclaimed with the fall of the Berlin Wall in 1989 was supposed to reveal an America as the sole economic and political superpower in the world. That did not happen. Now whatever one can say about the debt agreement, it did little to reverse the threats to American dominance.

The debt deal needed to confront two issues: the debt financing the empire in the past, and the debt financing its future. Paying an increasing percentage of the federal budget to debt management is bad accounting. Yet the agreement really did little to confront either. The debt ceiling was raised — partially averting one problem — but the real choices about how to finance long term spending commitments were ignored. Creating a super committee pledged to find $2 trillion plus in savings merely postponed the tough choices for the future. As such, the agreement was more symbolic than substantive.

Four broad issues challenge U.S. financial future
Yet long-term spending and its economic impact are not the only issues that need to be addressed. Collectively, four broader forces challenge America's financial future, hampering its leadership role in the world.

• The first is the declining economic performance of the country, both short and long term. Short term, the economy is headed to a double-dip recession, simultaneously decreasing tax revenues and increasing demand for government services. Longer term, America needs to reinvest in its infrastructure, schools and workers, modernize its technology, and transition to new energy sources. The debt agreement makes it difficult for the United States by choking off investments required for any of these. Lacking investments in the economy, it will never grow fast enough to generate the tax revenues necessary for the American empire.

• Second, demographics will continue to challenge the United States as its population ages, demanding more health-care expenditures and retirement benefits at a time when the number of workers to sustain their parents decreases rapidly. Health-care reform in 2010 did little to address cost containment, and there is no indication that the debt-reduction super committee will tackle these problems in the coming months, especially as the 2012 elections approach.

• Third, the current tax system is unsustainable. It is inefficient, failing to support economic growth and job production. It is also inequitable, pushing less of a demand on corporations and the wealthy to pay their share. All this was predictable. Nine months ago Obama caved into an extension of the Bush-era tax cuts. Now to pay for them, the poor and middle class must sacrifice. Merely repealing the Bush-era tax cuts would get the United States a long way toward dealing with its longer term debt. Better yet, return the corporate tax rates to what they were in the 1960s, a time when U.S. corporations were their most profitable, and lift the income cap of Social Security taxes, and most of the longer-term debt problems disappear. Instead, the opposite is occurring — the American empire is a corporate one financed more and more by cuts to the poor and middle class.

• Fourth, much of the recent debt is the cost to pay for military excursions abroad in places such as Afghanistan and Iraq. America continues to spend unsustainable amounts to fund its military and foreign-policy objectives. The debt deal did nothing to rethink these priorities and instead threatens military spending as an incentive to make cuts elsewhere.

Fewer resources for U.S. priorities in the world
The debt deal thus does little to generate for the United States the resources it needs to maintain its economic and military position in the world. It is vastly overcommitted already, unable to sustain its current objectives let alone take on new ones in the world. For the future the United States will have fewer resources to pressure for human rights in Syria and Iran, to confront global terrorism, and to economically compete in a world becoming better educated and more productive than America.

The debt-management deal could have addressed the problems facing America but did not. It failed because of a collapse of domestic politics. The American Century was held together by a bipartisan consensus sustained by economic growth. Take away that growth and the consensus disappears. Thus, the factional politics and serious dissensus between President Obama and the Republicans in Congress over the debt ceiling and reduction was so intense because of a basic dispute over how to finance American commitments in an era of declining resources. Lacking economic growth, politics has become a zero-sum game, with clear winners and losers. Here, the debt deal revealed little in terms of a victory to reverse the decline, thereby suggesting an intensity of politics for the foreseeable future.