Tuesday, May 28, 2013

The End of Bipartisanship (and why that may be good)

    Legislative partisanship is gone and that may be good.  It was probably overrated.
    The holy grail of politics for many is bipartisanship. Good public policy is only possible if the two parties compromise, work together, and enact laws with the aim of furthering the public good.  Such a belief suggests truth lies in the middle and that compromise is the essence of good government.  But that is not always so.
    Some lament that the 2013 Minnesota legislative session was anything but bipartisan.  Significant evidence supports this.  Consider legislation creating the health care exchanges for the Affordable Care Act (Obamacare); 99% of DFLers voted for it, 98.8% of Republicans voted against it.  Similar partisan divides existed with legalization of same-sex marriage with 95.5% of Democrats voting yes, 94.4% of Republicans voting no.  Or the House and Senate tax bills with 92% DFL yes and 98.8% GOP no.  Finally, 92% of DFLers voted for the  legislation authorizing day-care workers to unionize, no Republicans supported it.  For these four bills,  94.6% of votes cast by Democrats were yes, while 98% of the GOP votes cast were  no.  Had there been floor votes on minimum wage and the anti-bullying legislation one probably would have found similar percentages. 
    Are Democrats guilty of single-party rule?  Perhaps, but  Republicans are not innocent.  Look back to the 2011-12 legislative session at two of the biggest bills–the votes authorizing the constitutional amendments banning same-sex marriage and requiring photo ID when voting.  For the marriage amendment, 96.2% of Republicans votes yes, 96.5% of Democrats voted no.  With the elections amendment, 99% of Republicans voted yes, 100% of Democrats voted no.  Overall, 97.7% of DFL votes cast on these amendments were no, while for Republicans 98.3% were yes.  When the GOP were in the majority, the two parties were polarized.  Straight-party line votes are becoming more the norm of Minnesota politics, paralleling a similar trend in Congress over the last 30 years.  Why?  There are four major reasons.
    First, the end of the Cold War meant that the forces to drive compromise at the congressional level ended.  The battle against communism forged a foreign policy consensus and compromise that translated often into agreement on domestic policy, even at the state level.  Second, political scientists talk of the declining marginals–the disappearance of competitive swing districts that could shift control from one party to another.  This is due to gerrymandering but more importantly to a geographic sorting of where we live.  We hear of blue and red states but increasingly households and neighborhoods are politically sorting themselves out.  In Congress there may be less than 50 swing seats,  in the 2014 Minnesota House of Representative races, maybe 15 seats are competitive.  The rest are solidly partisan, creating little incentive to compromise,
    Third, American political party composition has changed.  Historically American parties were less ideological than at present.  One could point to both major parties having a mixture of conservatives, moderates, and liberals.  Such coalitions made bipartisanship possible.  But American political parties are more ideological now–with clear divides on social and  and economic issues.
    Fourth, the transformation into ideological parties is fueled by increasingly  large differences over the simple question “Why government?”  Republicans and Democrats have developed rival views on the role of government in the economy, the value of taxes and public spending, and on a range of social issues about reproductive rights and same-sex marriage.  When there is a basic disagreement over “Why government?” it is hard to compromise.  At the end of the day, there is no compromise on the right of same-sex couples to marry–you support it or not.
    These four trends have also driven politics in Minnesota to make it less bipartisan.  But additionally, Minnesota politics further polarized after the Wellstone plane crash in 2002.  His death and the events in the last few days before the 2002 Senate race–including the memorial service–exacerbated the forces already at play in Minnesota to reinforce the polarization.
    This is where we are now.  The structural forces that once drove bipartisanship are gone and the new reality is one of partisan rule in Minnesota and across many states that are legislating depending on which party is in power.  Just compare Minnesota to Wisconsin. 
    Should we worry about this?  Not necessarily.  Agreement for agreement sake is not good if it passes bad policy.   Sequestration was the product of compromise.  Minnesota Democrats and Republicans  agreed on a new campaign finance law this session that increases contribution and spending limits, weakens disclosure, and enhances the ability of lobbyists to leverage political influence.  Both were bad laws, the product of bipartisanship.
    Regardless of the desirability of bipartisanship, it is over.  Voters need to accommodate to a world of partisan rule or bipartisan gridlock.  They have to decide whose politics they like better and vote for it–giving them what appears to be real policy choices and options at elections.

Friday, May 24, 2013

Partisanship at the Minnesota Legislature–How Divided?

So how divided were the Republicans and Democrats in 2013 Minnesota Legislative session that just ended?  A quick sample of the numbers suggests a big divided.

I looked at four of the biggest bills that the House and Senate voted on during the 2013 session.  These four were the creation of the health care exchanges for the Affordable Care Act (Obamacare); legalization of same-sex marriage; the tax bill; and legislation authorizing day-care workers to unionize.  Arguably these were the four most important if not contentious bills the legislators had to vote on in 2013.  What I found was that for DFL in the House and Senate, 94.6% of votes cast by Democrats were for  yes on these bills, while 98% of the GOP votes cast were  no.  Had there been floor votes on minimum wage and the anti-bullying legislation I suspect we would find similar percentages.

So does this prove that the DFL is guilty of one-party rule or that they are acting in a partisan fashion when in the majority?  Maybe.  But just for comparison, I looked back to the 2011-12 legislative session at two of the biggest bills–the votes authorizing the constitutional amendment banning same-sex marriage and the one authorizing the constitutional amendment requiring photo ID when voting.  Here, 97.7% of DFL votes cast on these amendments were no, while for Republicans 98.3% were yes.  When the GOP were in the majority, the two parties also seemed very divided.

In a future blog or op-ed I will discuss what all this means and what it says about the possibility of bipartisanship.

Tuesday, May 21, 2013

Grading the 2013 Minnesota Legislative Session: C+ for DFL but F on Reform and Bipartisanship

Students across Minnesota are finishing their exams and awaiting their final grades. The 2013 Minnesota legislative session is over and now it is time also  to assess the performance of one-party rule in Minnesota.  So how did the DFL do?  If the legislative session were to be graded, it earned an overall C+ but F grades when it came to working together and in making structural reform.
    Republican State Representative Steve Drazkowski, of Mazeppa, stated it well:  "We had an election back in November. And yes, Minnesota, elections have consequences."  Had Tom Emmer rather than Mark Dayton been elected governor in 2010 Minnesota might well be a state that looks different today with more restrictive laws on voting, abortion, taxes, and perhaps on same-sex marriage.  But Dayton did win and Republicans overreached with the marriage and elections amendments and in precipitating a government-shutdown.  They were ousted, yielding the first one-party rule in Minnesota in 20 years. 
    DFLers promised a lot.  They pledged a balanced budget with no gimmicks, a bonding bill, and a host of other pieces of legislation addressing economic development, bullying, guns, minimum wage, and unionization for day-care workers.  The governor also pledged to solve the funding formula for the Vikings stadium, raise income taxes on the wealthy, invest more in schools, give some property tax relief to homeowners, and transform the sales tax system to include clothing and more services.  All this the Governor and the DFL pledged to do in a bipartisan fashion.  Such a pledge was made out of fear of overreach if they were to purse issues such as legalization of same-sex marriage.
    No matter what post-mortem is written up, this will forever be the session as the one known for legalizing same-sex marriage.  It did so largely along partisan lines and it did so in part because of intense lobbying from supporters of same-sex marriage who unleashed a drove of lobbyists at the Capitol.  It also passed because of the perfect storm of shifts in national public opinion and state views that even if not supportive of same-sex marriage they were not opposed.  Passage of it should relieve Republicans of advocating a losing issue for them, but its legalization may also give DFLers little bonus point in the 2014 House elections.
    Democrats largely delivered on Dayton’s tax pledge for the  wealthy will pay more, but largely abandoned the reform of the sales tax system, opting instead for the safer option to go after smokers with $1.60 more per pack.  This tax will be used for general revenue and to help finance the Vikings stadium.  In do the latter, the governor and the legislature are essentially using tax dollars to finance the stadium, and there is no clear indication that these revenues will be enough to offset the miserable pull-tab revenues.  The State is addicted to addiction, counting on smokers to continue to smoke and not using the new revenue to offset smoking-related expenses.
    The budget was done on time barely, and DFLers displayed terrible time-managed skills and the ability to reach consensus among themselves, revealing what came close to single-party gridlock. But whether the budget was done gimmick-free and balanced is a matter of debate.  Originally pledging to pay back the K-12 shift, that was abandoned by the DFL.  Additionally, the  nearly $800 million borrowed off the tobacco bonds last session should have been paid back, and that too is not reflected in the balanced budget.  The State failed to make any real changes in any tax law to make it more stable–such as a change in property taxes to help in-state businesses, or adjust sales taxes.
    Single-party rule also produced a stripped-down bonding bill to pay for capitol renovations,  money for Rochester and the Mayo Clinic, tax credits for Mall of American expansion, more money for K-12, a freeze of public university higher education for two years, a daycare unionization law, and some property tax relief for home owners.  One should also not forget that the health care exchanges were created to allow state implementation of Obamacare.  All of these are significant accomplishments.  The DFL failed on enacting anti-bulling legislation, a new minimum wage bill,  and significant gun legislation.  For all of these changes the DFL deserves an overall C+ grade–it delivered on many of its promises.
    Yet the legislative session failed to produce much in terms of bipartisanship.  Too many of the votes followed party lines, revealing a state largely divided.  Both the Democrats and Republicans will go to the voters in 2014 telling their side of the story, leaving Minnesotans the final  verdict regarding whether the Democrats deserve to hold on to the governorship and House majority  control.
    Finally, where the DFL really failed was in terms of structure reform.  There was no comprehensive sales or property tax reform.  There was no major reform of the way government does business.  But more sadly, the biggest story the media has taken a pass on is how this is a legislative session that not only failed to take the chance to make structural reforms but actually moved in the wrong direction and caved into lobbyists and special interests on a range of issues.  The legislature passed campaign finance un-reform legislation that would increase contribution and spending limits dramatically, allow for lobbyists to give more gifts to legislators, and also increase the level of disclosure for contributions, thereby making it easier for many, including lobbyists, to give more money but with less disclosure and transparency. To a large extent, this is a dismantling of the remaining vestiges of the Marty reforms from the 1990s and a giant step back in government integrity.  Minnesota has already had shrunk and fallen from its heyday when it was national leader in political ethics, earning failing and near failing grades from the non-partisan Center for Public Integrity in these areas. The new changes do nothing to reverse that trend.  For these reasons, the session deserves an F when it comes to structural reform, doing little to change the way the State does business for good.

Friday, May 17, 2013

The End of Ethics Reform in Minnesota (or how the governor and legislature just weakened campaign finance reform and made it easier for special interests to buy influence)

Minnesota's 2013 legislative session will forever be known as the one that legalized  same-sex marriages.  Yet while many were celebrating this act the governor and the legislature are on the verge of adopting legislation that takes a giant step toward undoing political reform in the state and significantly increasing the chances that special interest money will further damage the Minnesota elections and law making process. The result is more money out of the taxpayer wallet funding special interest projects while legislators get free meals and gifts from lobbyists.
            Stories about campaign finance reform, lobbyist disclosure, and gift ban legislation are not sexy.  They are inside baseball stories that the media generally does not cover anymore, especially at the end of the legislative session where stories about the budget taxes, paying for the Vikings' stadium, or addressing unionization for daycare workers or spending  on education dominate.  But there is a common thread connecting all these stories.  There is a reason why the Vikings got their way, why powerful businesses were able to kill off B2B taxes, why energy companies watered down laws that would have required more power come from renewable sources, and why  day care unionization was pressed so hard.  It is all about money in politics.
            Archibald Cox, former president of Common Cause and the special prosecutor fired by Richard Nixon in the famous 1973 Saturday Night Massacre, described the laws about money in politics as the rules that determine the rules of the game.  Who is allowed to give, how much, and whether the public knows about it, go a long way toward determining the winners and losers in the game of politics.  The rules about money and politics are outcome determinative. 
            Up until the early 1990s Minnesota was a national leader when it came to political ethics.  Its public funding for campaigns was a model for encouraging small donors and mitigating special interests.  The gift ban law was a progressive instrument to break lobbyist-legislator connections.  And state laws mandating economic disclosure for legislators and reporting by lobbyists and the interests they represent were powerful tools of transparency.  But by 1995 it all ended after what has come to be called the Marty reforms (name after DFL Senator John Marty) were adopted in 1994.  Since this many of the old time legislators have remained resentful of the fact that they can no longer accept gifts and goodies from lobbyists and party again like it was 1993.  New legislators do not remember the old days when lobbyist roamed the halls with gifts, and lobbyists themselves are distraught that they cannot schmooze legislators at a party over a glass of beer.  Overall, many forces have come to conspire to thwart new reforms. Minnesota has rested on its laurels and since the 1990s it has done next to nothing, resulting in it now no longer leading the pack but pulling up the rear in terms of ethics in government.  But now thanks to bills sponsored by Ann Rest in the Senate and Ryan Winkler in the House, it will only get worse.
            The House and Senate have passed bills that will dramatically increase contribution limits to candidates.  For example, individual contribution limits to gubernatorial candidates would increase to $6,000 per election cycle, and it would be $4,000 for the other constitutional officers.  For the House and Senate, current law caps contributions to $500 in an election year and $100 in off years, the new law calls for the Senate election cycle limit to be raised to $3,000 and the House to $1,500.  Expenditure limits for the gubernatorial and legislative races would approximately double.
            Governor Dayton along with Rest and Winkler contend that these increases are needed for two reasons.  First, contribution and expenditure limit have not increased in years.  Second, candidates need to raise and spend more money to offset third party spending.  However, there are problems with these arguments.
            First, few of the legislative races exceeded the current expenditure limits and there is no indication that the vast majority of candidates had any difficulty raising the money they needed to run an effective campaign.  Supports of the new limit point to how expensive the Downey-Franzen race was last year, but it was an exception.
            Second, the  new contribution limits dramatically open up candidates to the potential influence of big contributors, undoing one of the long-standing goals of Minnesota's campaign finance system.  Imagine how much more money Zygi Wilf can pump into the Minnesota political process on top of the millions he already spent lobbying.
            Third, there is no evidence from other states that raising contribution and spending limits decreases third party spending or encourages third parties to shift from outside spending to candidate contributions.
            Fourth, the net result of the increased contribution and spending limits will simply be to put more money into the political system.   Special interests already can give unlimited amounts of money to the political parties and party units and to the legislative caucuses, and they can spend unlimited amounts on their own.  The Rest-Winkler legislation simply opens the door to more spending without getting any reforms out of it.
            Were that not bad enough two other proposals in the Rest-Winkler bills are even worse.  One would raise the disclosure level for individual contributions from the current $100 to $200.  This means that no one--not even lobbyists--would have to disclose contributions under $200.  This is a major step back in terms of transparency.  With 1,300 lobbyists paid to influence legislation in Minnesota, think about how they and other special interests will exploit the law and public will never know who is giving legislators money.  Finally, the bills would allow lobbyists to give gifts (meals and drinks for example) to legislators if given to all legislators. Terrific, bribery is ok so long as everyone in the legislature gets their fair share.
            Minnesota does not need more special interest money and gifts but less.  It does not need less transparency but more.  The best accounting of the current sorry state of Minnesota’s political ethics laws comes from the non-partisan and well respected Center for Public Integrity.  In  two  recent reports Minnesota comes off badly compared to other states.  In its 2009 study on legislative financial disclosure laws, Minnesota receives an F grade, coming in 40th among the 50 states.   In 1999 the same study ranked Minnesota 35th and in 2006 39th.  A steady fall.  Minnesota is deficient in the range of disclosure it asks of legislators and also in terms of them updating that information.
            A second 2012 study by the Center measured political accountability and risk of corruption in the state.  Minnesota received a D+ grade, finishing 25th among states.  Notable in this study, Minnesota receives a D- when it comes to effective conflict of interest laws, a D on political financing, and an F on lobbyist disclosure.  Minnesota simply failed to make the grade when it comes to political ethics before the Rest-Winkler bills, and now it will fall even further back.
            The hidden story of the 2013 legislative session is how the governor and the legislature took a major step back in terms of political reform.  While the media and the public was covering same-sex marriage, the budget, and the Vikings funding package, the story about undoing reform got away. Think about that next year when campaigns get even more expensive and the next time another special interests goes to the legislature and get their way.

Monday, May 13, 2013

The Day After Reform–What Happens Now that Same-Sex Marriage is Legal in Minnesota?

    With Governor Dayton’s signature on Tuesday at 5 PM on Tuesday May 14, same-sex marriage will be signed into law.  The question though is what’s next, and what will change as a result of legalization of same-sex marriage?  Here is what we know based on Minnesota law and what has happened in the other 11 states that have already legalized same-sex marriage.

Nothing Changes
Don’t expect same-sex couples to be able to marry come Wednesday.  The law does not take effect on August, 1, the usual default date for legislation signed into law in Minnesota.

Expect some groups opposed to same-sex marriage to challenge the law in court, claiming either that it violates the First Amendment Free Exercise clause, the Minnesota Constitution’s Liberty of Conscience clause, or some other provision of the federal Constitution.  These challenges will fail.

Opponents of same-sex marriage will vow political reprisal and revenge against those who voted in favor.  For the most part, this revenge will not occur.  There is little evidence that votes for same-sex marriage have hurt legislators, although Republicans voting for it may be more vulnerable in party primaries.  Among Democrats, there are no more than 14 House members who are vulnerable in 2014 and they are so because of close elections in 2012.  Of those 14, perhaps ten might lose as a result of their vote, but 2014 elections are 18 months off and many other factors will affect the fate of these 10 House members.  The Senate in not up for election until 2016 and thus not affected by the vote in 2014.

The United States Supreme Court’s two decisions on same-sex marriage (DOMA and the California Prop 8) will have no impact on what happens in Minnesota, practically no matter what they decide.  If anything, legalization of same-sex marriage in Minnesota may mean that other states may recognize marriages performed here or that Minnesota will recognize same-sex marriages performed elsewhere.

Opposite-sex couples will continue to marry, have children, and get divorces at the same rate as they did before same-sex couples could get marred.

Couples will still have the option to have civil ceremonies or marriages performed in churches, temples, or synagogues, and religious officials will still have the option to refuse to perform ceremonies or marry people, just like they did before.

Legalization of same-sex marriage does not mean polygamy should be legalized or that soon (or at all) people will be able to wed animals, children, or that child molestation will increase.

Do not expect society or the state in Minnesota to degenerate into anarchy or immorality.

The federal and state constitution still protects freedom of religion.

Everything changes
Up to 10,000 same-sex couples will be eligible to marry in Minnesota with estimates that 30% will  do so within one year and 50% within five years. 

Same-sex couples from around the country will  visit or relocate to Minnesota to marry.

Same-sex couples will marry, adopt and raise children, and divorce.

The wedding, hospitality, and tourism industry will benefit from the right of same-sex couples to marry and added tax revenues from these activities will offset any costs to the state in terms of expenditures for benefits for same-sex couples.

Minnesota businesses may find it easier to recruit younger workers to the state because of the legalization of same-sex marriage.  Richard Florida and others note a positive connection between GLBT-friendly policies and economic development.

As a result of legalization in Minnesota, more people will support same-sex marriage (in opinions polls) by the 2014 elections than they do now.

Minnesota becomes the 12 state to allow for same-sex marriage, but it is unclear how many more states will legalize it short of court decisions.  California, New Jersey, Illinois, Oregon, and maybe Colorado may be the next states to act, but after that it is hard to see may other legislatures legalizing it.

Saturday, May 11, 2013

Same-Sex Marriage and the Beginning and End of Minnesota Politics: A Tale of Four Circles

The best thing that could happen to the Republican Party of Minnesota (RPM) if not the national Republican Party,  is for same-sex  marriage to be legalized.  Its legalization would remove from the agenda one that the Republicans are losing on, and one that is continuing to alienate them from younger millennial voters and moderates.  Legalization of same-sex marriage would permit Republicans to move away from social issues and concentrate on their core economic and limited government message.
    Assuming Monday’s passage of same-sex marriage by the Minnesota Senate the state will have come full circle four ways.  The first circle to close is  Baker v. Nelson, 291 Minn. 310, 191 N.W.2d 185 (1971).  Minnesota is home to the first case in the nation adjudicating bans on same-sex marriage.  In Baker at issue was whether a state law lacking  an express statutory prohibition against same-sex marriages signaled  a legislative intent to authorize such marriages. The Minnesota Supreme Court declared not, contending furthermore than the ban on same-sex marriage did not violate the First, Eighth, Ninth, or Fourteenth Amendments to the United States Constitution.  Legalization of same-sex marriage in Minnesota would thus overturn Baker, bringing to an end the first and original precedent standing against marriage equality.
    The second circle to close involves Congresswoman Michele Bachmann, Minnesota’s Defense of Marriage Act, and same-sex marriage.    Bachman’s political career is intertwined with opposition to same-sex marriage.  In 1997 the Minnesota legislature adopted Minn. Stat. § 517.01, Minnesota’s Defense of Marriage Act (DOMA) restricting marriage to that of couples of the opposite sex.  DOMA and Baker should have been enough to persuade social conservatives that same-sex marriage would not become the law of the land in Minnesota.  But it was not. 
    Bachmann’s 2000 run for the Minnesota Senate and successful defeat of a Republican moderate was premised as much upon opposition to gay rights and same-sex marriage as it was on her anti-tax positions.  Once elected she sponsored first in 2003 and then in 2005 state constitutional amendments to ban same-sex marriage.  Her fear?  A Minnesota Supreme Court would overturn Baker and DOMA.  Fear of  same-sex marriage played well as a springboard and theme in her 2006 election to Congress in a deeply conservative Catholic district.    Adoption of same-sex marriage in Minnesota, as well as the turning of the tide on the issue across the country, undercuts one of the defining themes of her political career.  She may continue to get elected as defending an embattled minority, but she will look increasingly anachronistic and shrill, making it even more difficult for her to win re-election in 2014.
    The third circle to close is on the RPM’s failed marriage amendment in 2012.  While Bachmann was no longer in the Minnesota legislature, her opposition to same-sex marriage lived on in a political party.  When the RPM was swept into control of the Minnesota Legislature in the 2010 elections the Republicans declared that the economy was job one.  Speakers Zellers pronounced it was all about jobs and not social issues.  Yet soon they strayed from that message.  Minnesota witnessed a budget gridlock and state shutdown and the defining theme of Republican control became their overreach on social issues, including the elections and marriage amendments.  Both went down to surprising defeats in 2012.
    The reasons for the crash of the marriage amendment are many.  It was about over-reach by Republicans and a misreading of their mandate (their mandate was actually more rooted in the 2010 opposition to Obama and the Democrats than in anything they offered).  It was about the cynicism  of some legislators saying that pushing the two amendments was a way to turn out their base in the 2012 elections, seeking to yet against rekindle the successful formula Karl Rove and the Republicans had used since 2004.  It was almost about the failure to see how the issue of same-sex marriage was a defining issue for the Millennials and how public opinion had shifted.  Republicans just did not see how the issue of same-sex marriage would counter-mobilize.
    Going into the 2013 legislative session many Democrats and Republicans argued that the 2012 results were not a mandate to support same-sex marriage but instead simple opposition to a constitutional amendment against it.  Some cautioned that pushing same-sex marriage would run the risk of DFL overreach, and initially Democratic leadership seemed to agree.  But others contended that were it not for the issue of same-sex marriage the Democrats would not have won in 2012 and therefore they had to deliver on the issue less than alienate their base.  The latter theory prevailed.  But it did so in a self-fulfilling way.  The momentum to oppose the marriage amendment was quickly turned around to support for same-sex marriage and quietly and slowly support for its legalization  was built.  Thus, the third circle–from a failed marriage amendment to legalization of same-sex marriage–also closes.
    The last circle is the re-redefining the RPM. The DFL wins on this issue, but potentially not as big as the RPM could.  DFLers were expected to push this issue and they delivered.  That is good for them.  But with the legalization of same-sex marriage the GOP loses a thorn it its side.  This issue drove many away from their side.  They had lost an entire generation of young people because of this issue.  Take same-sex marriage off the issue and it opens up new possibilities for the RPM to redefine a base that is old.  Of course the real danger for Republicans is that the social conservatives will seek retribution in the 2014 primaries and conventions, but what are they really able to accomplish?  They can destroy the party with unproductive infighting, or they too can move on.  For Republicans who voted to legalize same-sex marriage, if they can survive intraparty fights, they may emerge as the new voice of a redefined  GOP in a post-same-sex marriage world that focuses more on economics and small government than social issues.  This is where the party was a generation ago when the Arnie Carlsons and David Durenbergers were the face of the RPM.

Monday, May 6, 2013

Clothing Taxes and Hotel Subsidies: Dumb and Dumber

Two items in the news point again to foolish decision making by some elected officials, especially when it comes to economics and business.

The first is continued insistence by Senator Tom Baak and the DFL to impose a sales tax on clothing.  Recall that the governor initially suggested this idea earlier this year in his tax plan version 1.0.  He proposed it along with a B2B tax on various services.  Both the clothing tax and the B2B were so unpopular that he repudiated both.  Now the Senate wants to move forward with the clothing tax even though the governor and the House DFL are opposed.  This political opposition should be enough to suggest it is a bad idea, but there are other reasons to oppose the clothing tax.

First, while a tax on clothing is not unheard of in other states, it is not something that has been done yet in Minnesota.  Perhaps the public could get accustomed to it over time, but right now there is a lot of resistance to it among the public.

Second, even if extending sales tax to clothing can be done at a lower rate and thereby make the overall sales tax rate lower, this is a regressive tax being proposed by the DFL.  If clothing is taxed but there is no extension of the sales tax to B2B services then this is definitely an overall less progressive tax than before. This is a tax that will weigh more heavily on the poor.  It is a tax that soccer moms will notice when buying school clothing for their children. 

Third, this is a tax that might also hurt Minnesota businesses.  Currently many Minnesota businesses are hurt by Internet companies which do not have to collect sales tax.  With clothing not taxed the impact for sales of this type is less.  However, enact a clothing sales tax and businesses with a physical presence in Minnesota will be hurt because Internet businesses will have a tax advantage.  Perhaps this tax advantage will disappear if the US Congress agrees to allow states to tax Internet sales.  However, at present the change in tax law seems foolish and it risks hurting places like Mall of America which do a brisk job in terms of tourist and destination sales.

The second issue is a call for the City of Minneapolis to subsidize the building of a new hotel in the city.  The city aspires to becoming a major convention city and some believe that adding another 1,000 rooms will do that. 

In many ways the City is becoming captured by subsidy fever.  First the public pays for Target Filed and now it is going to be on the hook for the new Vikings stadium.  The Convention Center loses money and the Target Center would like a handout too.  With all of these demands for the public  to subsidize it is not a surprise that a hotel wants the money too.

However, remember that hotels are private businesses.  The public should generally not be in the business of giving tax dollars to private businesses. If there truly were a market for another 1,000 units it would be profitable for private investors to build it.  If the public were to subsidize this hotel what is likely to happen is what has transpired in other cities–the other hotels suffer and often close.  It gives unfair competition to one developer or hotel over another. 

The logic of the subsidy here is a Field of Dreams “If you build it they will come” belief.    It is a belief that by building another hotel more tourist will flock here.  Yes, to Minnesota, a state with a cold six or more months of winter that wants to compete against San Antonio, Texas and other Sunbelt cities.

There is little evidence that Field of Dreams development strategies work.  As I have pointed out in my recent book, many other cities have built convention centers, aquariums, and other tourist attractions with the hope of luring people to their cities.  One city doing this makes sense, multiple cities doing it dilutes the effect and increases the competition, thereby lessening the chance that such a tourism strategy will work.  This is where Minneapolis is headed too.  Some seem to believe that instead of investing in neighborhoods, schools, and quality of life.  sports, convention centers, and hotels are the key to the city’s economic development.  Any strategy  relying heavily on public subsidies is questionable. 

Saturday, May 4, 2013

News of Michele Bachmann’s Vulnerability are Greatly Exaggerated

Alex Seitz-Wald of Salon recently penned that three pending ethics investigations surrounding Congresswoman Bachmann could doom her in the next election.  At least this is the hope of the Democrats and many other observers. Of course this is an interesting thesis but  Democrats are too quick to assume that she is as vulnerable as they think.

No doubt Bachmann has a close scare last year against newcomer Jim Graves. Perhaps had he received more money and better support earlier from the DCCC  maybe he would have won.  Running again in 2014 Graves brings many advantages in terms of name recognition and better campaign skills.  and the ethics accusations surrounding Bachmann add additional cogency to his campaign.

But one should not forget that 2012 was a unique year that will not repeat itself in 2014.  Nationally 2012 was a presidential year with higher turnout.   It featured an incumbent president running against a weak Republican.  Romney was especially weak in MN, having done badly here in the caucuses. Minnesota’s turnout was approximately 75% and it also featured Senator Klobuchar running for reelection.  On the ballot were two controversial constitutional amendments (a ban on same-sex marriage and a Voter ID Amendment) that strongly drove DFL turnout and backlashed against Republicans in Minnesota.  None of this will exist in 2014.

In 2014 there will be a governor’s race and Senator Franken is up again.  Both may draw Democratic attention and away from Bachmann.  Moreover, Democrats nationally will be battling to hold on to the US Senate whereas there seems little chance to regain the House.  These factors may divert money and resources away from a Bachman race.  Furthermore, some believe Representative John Klein is also vulnerable and that race too may divert resources and attention.

 Second, midterm elections generally do not favor the President’s party and in Minnesota and across the country expect a significant downturn in turnout.  Constitutional amendments will not be on the ballot either.  Overall, expect there to be voter turnout in the mid 50s and not 70s in 2014, with such turnout favoring a more Republican voting block.

Moreover, Bachmann will not be unprepared this time.  She has way more in her campaign war chest now than Graves and she has already launched ads attacking Graves.  Her fundraising skills are still excellent with a terrific network of supporters across the country.  While Bachmann did not use it well in 2012, her district is not about plus 6 or 7 GOP, again giving her a real advantage in her district, again especially in the off-year elections.  In 2012 Bachmann’s congressional campaign suffered from her presidential adventures, including spending most of her first year of her term in Iowa.  This will not occur this time.

Finally, for many years her district has been forgiving and even embraced her often controversial and fact-challenged statements and there is no reason to think that they may discount them again in 2014.

Overall, Bachmann may be vulnerable in 2014 and perhaps the patience of her constituents is running out.  Her opponents have gotten it wrong in the last two election cycles against her, overestimating her weakness in 2010 and underestimating it in 2012.  Being burned twice is a note for caution.

Perhaps also the ethics issues will hurt her, but it is also possible by November, 2014  the story has run its course and Bachmann can again assert that it is a liberal media that is driving the attacks. Democrats have mis-estimated her political skills and they again may do they to their misfortune in 2014.  Much like Mark Twain once declaring that news of his death were greatly exaggerated, so too might be news of Michele Bachmann's political career.

Friday, May 3, 2013

Acting Legally, Behaving Ethically

The 1973 movie Paper Chase depicted the brutal image of law school as Professor Kingsfield (actor John Houseman) begins to interrogate students with the Socratic method.  Students are flustered and intimidated by questions, even the most simple ones. Bob Hudak was my 1L Contract law professor, old line and cut from the mold of Kingsfield.  Yet on the first day of class he turned to all of us and said there would be times when he would ask us questions and we would panic.  His advice was to take a deep breath, look us in the eye and then say what makes the most sense.  But more importantly he added, if that is not the right answer then there is something wrong with the law.  His comments forever resonated with me.
    What Hudak was talking about was about the relationship between the law and what political philosopher John Rawls would call our considered moral judgments.  Specifically, the law should in some way support or reflect our deeply held convictions about ethics and justice.  Hudak was not the first to argue that there should be a connection between law and morality.  St. Augustine contended that unjust laws are no laws at all.  Henry David Thoreau protested slavery laws by contending they were unjust, and Martin Luther King, Jr., similarly reached that conclusion when it came to segregation.  All three asserted that  unjust laws lacked a binding moral quality that often  justified civic disobedience.
    But there is a different facet to the relationship between law and morality and it comes in terms of doing the right thing.  It asks not when or whether one has a right to disobey an unjust law but instead whether the law empowers individuals to do what is ethically correct.  Often times individuals may wish to act ethically but are prevented by the law.
    Consider a classic scene from 1994 when the CEOS from the seven major tobacco companies  in the United States testified under oath before Congress.  When asked if cigarettes were unhealthy all said no.  We know they lied.  Internal documents from the tobacco industry proved that.  Yet they  have been legally require to lie.  Under state incorporation laws, they all were under an obligation  to serve the best interests of their business and maximize shareholder value.  Testifying under oath  at a time when thousands of law suits being filed, truthful testimony may have bankrupted their corporations. Lost would have been billions in shareholder value and pensions, untold jobs may have been lost, and many communities devastated.   I suggest to my students that in a perverse way, the law may have required them to lie to Congress.  Of course this is farcical, but it speaks to a gap between ethically what is the right thing to do and what the law may demand.
    But in may situations the law does not always encourage us to do what it ethically correct but instead create incentives to act unethically.  The legal norms of Nazi Germany are the most extreme example.  But across the board one can point to numerous less extreme examples.  For CEOs, decisions to outsource jobs to another country, close a factory and move to avoid pollution laws, taxes, or maximize revenues, or even to agree to a merger may not reflect what is in the best interests of a country, community, or people, but state corporate laws may demand it under threat of shareholder suits.  Public officials may be required to enforce laws they think are unfair, and those working in across many occupations may feel they have no choice but to act unethically because of  the possible legal sanctions that would follow if they were to do what society would regard as correct.
    Economist Milton Friedman most famous essay is his 1970 New York Times “The Social Responsibility of Business Is to Increase Its Profits.”  The title says it all.  Here he denies the capacity and obligation of businesses to act in a socially responsible fashion, instead arguing for the simple duty to maximize shareholder value.  The Friedman essay is one of the most read and influential articles in MBA programs across the United States.  It captures so well a narrow and wooden belief about what businesses should and should not do–and the law reflects those roles.  The law often fails to permit companies to be good corporate citizens and act in an ethical fashion.
    But why is all of this discussion of the law important here?  One of the most fascinating questions to ask is why good people and organizations do bad things?  Why do erstwhile or apparently ethical individuals suddenly act badly?  There are many reasons, but we should not forget the role that the law may play.  There may be circumstances where the law not only fails to support acting ethically but it also discourages it.   Case in point, the initial decision by the Obama administration not to read the accused Boston Marathon bomber his Miranda rights.  The law may have authorized the initial decision due to a Supreme Court created public safety exception, but had the FBI continued to press on with questioning without Mirandizing it would have run adrift of concepts of justice, fairness, and democracy that get dangerously close to the type of questioning many criticized the Bush administration as advocating. Maybe here the law did not necessitate doing the wrong thing, but it should not have facilitated it.
    The law affects behavior in a myriad of complex ways.  But it should not work to encourage unethical behavior.  This was the message that Bob Hudak gave all us law students. It is also a message we should remember when it comes to the construction and management of our society .