Alexandria Ocasio-Cortez and High Taxes on the Wealthy: Do they matter?

Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman, yeah, I'm the taxman.

–Beatles, The Taxman

Taxes impede economic growth and high taxes kill the economy, right?. This is the belief among many who criticize Representative Alexandria Ocasio-Cortez’s proposal to raise taxes on the wealthy to 70% or more.  But what does the evidence really tell us?

Do high taxes really hurt the economy as much as they believe, and will lowering them have much of an impact on stimulating it? The economic literature is clear — tax breaks to encourage economic relocation or investment decisions are inefficient and wasteful. Hundreds of studies reach this conclusion. When businesses are surveyed regarding factors important to their investment decisions, taxes often come in behind proximity to markets, suppliers, and the quality of the labor force. These other factors occupy a larger percentage of a business's budget than do taxes, and all of them are far more critical to long-term success than are taxes. Businesses occasionally admit this. Nearly 62 percent of those interviewed in a California study on hiring tax credits indicated that they had never or rarely affected their decision to employ individuals.

Anecdotal stories and illustrations also confirm the tax fallacy. High tax states such as Minnesota have generally fared better in terms of economic growth, unemployment, median family incomes, and location of Fortune 500 companies than low tax ones such as Mississippi and Alabama. In many situations high taxes, and with that, government expenditures on education, workforce training, and infrastructure, correlate positively with income, low unemployment, and business retention. One needs to look not just a one side of the equation—taxes—but the other side too—what taxes buy—to see what value businesses get out of them in terms of educated workforces and infrastructure investments. Most debates fail to do this.

Bureau of Economic Analysis statistics demonstrate how economic growth is related to tax rates. One can compare annual economic growth as measured by the percent change in the gross domestic product (GDP) percent based on current dollars to the highest federal individual tax rate and the top corporate tax rate since 1930. If taxes are a factor affecting economic growth, one should see an inverse relationship between growth of the U.S. economy and higher tax rates. The GDP should grow more quickly when top individual and corporate tax rates are lower. If taxes are a major factor deterring economic growth, lines on a graph should go in opposite directions: As tax rates go up the GDP should go down.

No such pattern emerges between high taxes and GDP growth over 80 years. During the Depression of the 1930s corporate and individual taxes rates increased, but in 1934 through 1937 the GDP grew by 17%, 11%, and 14% annually. Top corporate tax rates climbed to over 50% through the 1960s, again with no discernable pattern associated with decreased economic growth. The same is true with top tax rates on the richest which were 91% into the 1960s. Conversely, since the 1980s after Kemp-Roth and then after 2001 with the Bush era tax cuts, there is no evidence that the economy grew more rapidly than in eras with significantly higher tax rates on the wealthy and corporations.  The same is true even of the much heralded 1960s Kennedy tax cuts.  While at one time economists thought they had an almost magical impact on the economy, more recent evidence questions that.

Looking at time periods when tax rates were at their highest, GDP often grew more robustly than when taxes were cut.

Pictures are worth a thousand words, but statistics are priceless. Statistically, if a tax hurts economic growth, the correction with it is -1. If they positively facilitate growth the relationship is 1, and if they have no impact the relationship is 0. The correlation between GDP and top individual taxes is 0.29, between GDP and top corporate taxes is 0.32, and among the three it is 0.14. Statistically, there is a slight positive impact on either top individual or corporate taxes or economic growth, but overall almost no connection between tax rates on the wealthy and corporations and economic growth in the United States.

But what about taxes as job killers? Again running similar statistical tests, there is little connection. Using Bureau of Labor Statistics data on unemployment rates since 1940, the correlation among top individual and corporate taxes and the annual unemployment rate is -0.02—essentially no connection at all.

The simple claim that high tax rates on the wealthy and corporations hurt economic growth and job production is false. The evidence is simply not there to support assertions that high taxes alone hurt the economy or that cutting them will have the stimulus effect asserted.  Representative Alexandria Ocasio-Cortez may be correct that increasing taxes on the wealthy will not only be more fair, but an efficient means to stimulate the economy, help the poor, and generate the resources necessary to fund a fair and equitable America.

Politics and Markets: How Governments Help and Hurt Economies

Lots of political rhetoric is spewed across news and the social media.  Most of it is just ideology, repeated and spun by pundits or posted across the social media, appearing as Facebook  facts” where propositions come to be accepted as political truths.  But they reality is that so much of passes as political fact is simply ideology; untested assertions or simply statements about the world that fail to stand up to rigorous social science scrutiny.  This is the case with assertions about taxes, or voter fraud, or a slew of many other propositions.  Two of the most cherished theories held dear to many conservatives are that the government cannot innovate and that the pathway to economic recovery is through austerity and cuts in government spending and taxes.  Both of these myths are convincingly challenged in two recent books, Mariana Mazzucato’s The Entrepreneurial State, and  Mark Blyth’s Austerity: The History of a Dangerous Idea.
    Mazzucato begins her book by constructing the stereotype of a dynamic innovative private sector where the engine that drives businesses is the “creative destruction” that economist Joseph Schumpeter once described in contrast to the dull, risk-aversive bureaucratic behavior of the government.  The myth is that government cannot innovate; it instead impedes creativity and job creation, and that the best way to foster economic growth is by limiting government activity in the economy, including taxes and regulation on businesses and creative individuals.  Government in effect crowds out entrepreneurial activity.  A wonderful theory, but how accurate is it? 
    Mazzucato offers ample empirical evidence to challenge this myth.  Her work is drawn heavily from examination of US and European economic policy and data.  What she actually finds first is that government is often a risk taker, providing a significant portion of the venture capital that has produced some of the most important technological innovations since World War II.  On one score, US research and development (R&D) tax credits and investments in military technology, the internet, and in drugs have provided most of the capital in these fields, yielding some of the most important and significant inventions in these areas.  Mazzucato points out how Apple’s Ipad, Ipod, and Iphone all were made possible by technology investments underwritten by the US government.  Agencies and programs such as the Defense Advanced Research Projects Agency, the Small Business Innovation Research program, and the Orphan Drug Act (some of which were created under Ronald Reagan) have been remarkably good at fostering innovation.
    The second point that Mazzucato makes is that the government often funds innovation at stages and in places where private sector venture capital dare not go.  Private venture capital rarely funds projects in the infancy stage where the risk is too great and the expectations of payoff are slim.  Venture capitalists are smart–they do not enter the fray until the real risks are diminished and, they invest with a short time horizon there is a likelihood of a profit.  Venture capitalists are not gamblers–they want to invest but only on good bets and when their returns quick results.  Venture capitalists invest at later stages in technology of business development and often get out quickly.
    Not so with the government.  Mazzucato points to how the government often invests at early stages where payoffs are less certain and the risks are greater, paying the way for businesses and venture capitalists later on to profit.  Government socializes early risks, is willing to underwrite more risky but long term investments, and in effect helps nurture the conditions that make private entrepreneurial activity possible.  Government thus does not so much crowd out innovation but instead facilitates first a “crowding in” and then a “dynamizing in” of investment and innovation.
    In contrast to Mazzucato who challenges the myth that government activity crowds out business activity, Blyth assails austerity as a political economic policy.  Simply put, austerity argues that during recessions or in other times when the economy is performing badly, the cure is to cut government spending, thereby freeing up capital for investment.  The idea is based on Say’s Law–supply creates demand–a staple theory of supply-side and neoclassical economic thought.  It is the idea that once enough cuts have taken place–the damage and destruction that has occurred to the economy as a result of high wages, taxes, or government spending–a new economic equilibrium were be reached whereby investors will again invest and business will hire individuals.  Yet the power of Blyth’s book both is to question the theory of government austerity and then look to its practice to see if as applied it has actually led to situations where governments can “cut their way to prosperity.”
    Blyth begins by discussing John Maynard Keynes concept of the “paradox of thrift.”  Individually it might make sense in tough economic times for one person to refuse to spend or invest and instead save.  But multiple such a policy across millions of individuals and businesses and what one gets is a recession.  With no one willing to spend or consume no businesses are willing to invest.  Merely getting tax cuts will no induce businesses to hire since no one is going to buy their products.  What results instead is a variation of a reverse prisoners’ dilemma where no one invests for fear that the economy will not rebound.  The paradox of thrift in economics is Keynes rejoinder to Say's Law;  a challenge that merely cutting taxes or placing more money in peoples’ or businesses’ hands will stimulate the economy.  Instead, so long as the risk that others will not spend or consume continues the economy will not pick up.  Thus, the need for government to stimulate demand.
    Up to this point  Austerity is no more than a forceful defense of Keynesian economics.  But Blyth goes after bigger game, challenging those, such as Tea Party advocates who single-mindedly want to cut government spending as part of a broader battle to reduce government debt.  Their argument, as Blyth describes it, sums up as “more debt doesn’t cure debt,” is assuring but simplistic and wrong for many reasons.  On a theoretical level it assumes that what is good for one individual (saving) is good as a national policy.  This is the fallacy of composition.  Second, austerity is unfair.  It asks the poor and middle class who did not benefit from the economic good times to pay for the mistakes of the rich when the economy goes bad.  By that, in 2008, it was the finance sector and the banks that brought on the recession and austerity meant that they were bailed out while the poor suffered and continue to do so by cut to food stamps and other social welfare programs.   
    Third, austerity just does not work in theory as an economy theory.  This is the strength of Blyth’s book.  Many point to Germany as an example of how austerity works successfully or conversely, why a lack thereof is the cause of Greece’s problems.  Both are exceptions.  In the case of Germany which has run a high savings export driven economy, it only works because in part other countries run deficits.  Not every country can run surpluses and be export driven.  If no one consumes then there are no exports to buy.  Germany is a unique case, as is Greece because of its  high degree of corruption.  Simply cutting debt or spending to turnaround an economy does little to stimulate investment, it places burdens disproportionally on the poor, and it fails to lift the GDP over  time.  Instead, the more successful world economies balance debt-management with investments along the line Mazzucato suggests, providing support for demand and an infrastructure that facilitates growth.
    Together Mazzucato and Blyth paint a theoretical and empirical picture that severely damages arguments that the minimalist state is the pathway to economic growth and entrepreneurial activity.  They describe a more nuanced picture of how government and business can work together to sustain  economies while producing economic fairness and equity.   They move the discussion beyond ideology where all too often many anti-tax, anti-government advocates sit.  Policy makers in Minnesota and across the country wishing to get a better understanding of what governments really do and how they can make a difference would be well suited to read these books.  The same can be said of advocates of the myths Mazzucato and Blyth attack.

Charity and the Poor: The Rich and Their Bah Humbug Attitudes

"Let me tell you about the very rich.  They are different from you and me.”
         —Rich Boy, F. Scott Fitzgerald


    The rich are different from the rest of us.  It is not just that they have more money.
    We already know that the rich are doing well.  Over a 30 year period their income has increased by nearly 300% while for those at the bottom it has gone up by less than 20%.  Wealth and income inequality are at record levels in the United States and social and economic mobility in America has all but halted.  Those born to rich parents are likely to stay rich, those born to poor parents are likely to stay that way.  Our educational and tax systems no long mitigate inequalities but reinforce and exacerbate them.   All this is common knowledge–at least to those who study the numbers and read the reports from the Congressional Budget Office, the Census Bureau, and scores of other organizations documenting the new class structure of America.
    Yet many justify the inequalities and tax breaks for the rich by invoking trickle down economics or by claiming that the low taxes will perhaps lead to the affluent giving to charity and providing alms to the poor.   “Government crowds out charity, depressing benevolence,” at least this is what some claim.  But is it true?  Have the rich responded to their new found excess by giving to the poor?  The simple answer is no.  Instead, what permeates their attitudes would make Scrooge smile with indifferent delight.
    Yes, the rich–those in the top quintile or top one percent income bracket do give more money overall to charity than others in society.  They have more money and therefore give more.  According to the IRS, the wealthiest 1% gave away 3.4% of their adjusted gross income in 2008–a higher percentage than any other income bracket.  But that number really is misleading.  Adjusted gross income is the income after all tax deductions are counted–deductions for mortgage interest and business losses. But what really matters is giving out of discretionary income–the money remaining after taxes and bills are paid.  Discretionary income is the place where people have choices–give to charity or hold on to the money–and this is where the rich fall down.
    According to a 2012 Chronicle of Philanthropy study the top one percent give 2.8% of their discretionary income to charity, with those making $100,000 or more giving 4.2%, and those making $50,000 to $75,000 per year giving 7.6% of their discretionary income.  Ken Stern, author of With Charity for All: Why Charities Are Failing and a Better Way to Give, wrote in the April 2013 Atlantic: “In 2011, the wealthiest Americans—those with earnings in the top 20 percent—contributed on average 1.3 percent of their income to charity. By comparison, Americans at the base of the income pyramid—those in the bottom 20 percent—donated 3.2 percent of their income.” Middle class and poor are more generous to charity than the rich.   These statistics may even undercount giving by the poor since they are less likely to itemize and therefore count their deductions in the way the more affluent do.
    The giving patterns for the rich are also interesting.  The rich are more likely to give to the arts and education whereas the middle class give to their religious institutions.  The least affluent are more likely to give to the poor–they can better sympathize with them it seems, whereas the rich cannot.  In fact, out of sight out of mind characterizes the charitable pattern of the rich.  The richest enclaves in America–areas where there are the fewest poor people and the greatest concentration of the affluent–have the worst percentages in terms of giving to charity overall and to the poor in specific.  On balance, if we lived in a more egalitarian society not only would there be less poverty but charitable giving would increase because those less than rich would donate a greater percentage of their income than the affluent.  Equality fosters charity, reinforcing government programs that do the same.  Government programs do not crowd out charity, they enable it.
     We are cutting food stamps to the poor, unemployment benefits to victims of the recession, and refusing to do charity to help the least advantaged.  How have we become a nation so indifferent to the poor?  How could people who consider the United States a Christian nation act so uncharitable? Pope Francis is admonishing the Catholic Church to return to its roots and again help the poor.. Maybe the Pope’s words will change these individuals’ minds about social policy and get the rich to open up their wallets.  Perhaps this holiday season we can begin to do more to help the needy–first through charity but more importantly through supporting social justice and government programs.

  It is also that

they don’t care about the rest of us, especially the poor.  At least this is what we can conclude when we look at charitable giving in the United States.  What we find is that the rich are stingy and

callous–Scroogelike not only with taxes, food stamps and other support for the poor–but also in how they compare to the rest of us when it comes to charity for the needy and least advantaged.

March 15–Day of Decision for Cautious Minnesota Democrats

By March 15, we will  have a better idea of what Minnesota Democrats in the legislature are made of.  But if early indications are correct, timidity, cautious, and maybe disorganized are the words that best describe the DFL majority approach to governing this year.
    First, why is March 15, so important?  This is the first committee deadline at the state legislature.  Every year the legislature agrees to deadlines for legislation.   These deadlines are referred to a committee deadlines.  For a bill to have legs or remain viable it must pass some committee in its house of origin by a certain date.  If it does not, the bill is presumed dead and theoretically it may not be taken up again.  This year the first committee deadline is March 15, for policy bills.  Thus a bill introduced in the House of Representatives must pass a committee by March 15, for it to live another day. 
    The second critical deadline is March 22.  For any bill that passed in one chamber by March 15, its companion bill in the other body must pass a committee by March 22.  Finally, March 29, is a third deadline for major appropriation and finance bills.  These deadlines do not apply to bonding, budget, and tax bills.
    What all this means is that expect to see by March 15, votes on critical issues that include guns, same-sex marriage, election reform, and a host of other issues that the DFL majorities have bee holding hearings on for the last several weeks.  What committees do with those issues in next several days will be the clearest sign so far regarding how the DFL is interpreting the 2012 elections.
    But one does not really need to wait until March 15; instead, the DFL is proving to be timid, cautious, and inept at governing and it really seems to have defined its mandate from last year as more rejection of the GOP for over-reach that a call for boldness and change.  Just consider a few examples.
    Guns.  The DFL seem all hot and bothered to legislate on guns with proposals for universal background checks and bans on assault weapons placed on the agenda.  Yet soon the assault weapon was pulled and then this last week Representative Paymar’s bill for background checks was effectively made DOA with an NRA-sponsored one that commanded 74 sponsors.  The bill follows the NRA line of targeting those with mental illness as the cause of gun violence.  Maybe it will pass, but anything that does pass will largely be ineffective or fail to address the multi faceted problems  of guns and violence in Minnesota.
    Reproductive Rights.  Perhaps the biggest disappointment this past week was a 71-58 vote in the House to ban insurance coverage for abortion for women who secure their health care coverage  under the Exchanges being set up in Minnesota pursuant to the Affordable Care Act.   Even DFLers supported this bill.  For the tens if not hundreds of thousands of women in Minnesota who will get their health care coverage through this bill it means that they will not be able to exercise their reproductive rights unless they have their own money.  This limit may very well be unconstitutional  under the Minnesota Constitution.  But regardless of the constitutionality, this shows a DFL party hardly united and supportive of women’s rights.
    Same-sex marriage.  Legalizing same-sex marriage portended to be the hot button issue of the 2013 session that would vex the DFL.   Was the demise of the Republicans last November due to overreach on the social issues and the constitutional amendments?  The DFL seems to have accepted that view and has moved very cautious on same-sex marriage.  It was not clear that the majority wanted to move on this issue and Dayton’s tepid stance on the issue–I will sign the bill if it reaches my desk–is hardly a major legislative push on the topic. 
    But now to complicate the issue a Star Tribune poll on same-sex marriage suggests that a  majority opposes legalizing it.  The poll may be flawed but regardless of that, it adds support to DFL inaction on the issues.
    Election reform.  Right from the beginning the DFL seems to be pursuing election reform issues that really will not make much difference.  It is concentrated its efforts on voting reform.  Yes,  changing absentee voting to early voting is not a bad idea but largely two major recounts in this state have shown that voting is not a major issue.   However, even with this issue the House Elections Committee seems to puttering around.  The biggest problems are in the areas of lobbyist reform, legislature disclosure, revolving door,  and unlimited soft money contributions to parties and the caucuses.  There is no movement let alone bills on this topic.  The response by the legislature?  Some legislators and the governor want to raise contributions to candidates–hardly a reform and instead more of a bill of convenience for them.
    Taxes.  Governor Dayton’s Minnesota Miracle round two is dead.  Efforts to extend sales taxes to services and clothing and services are dead as the governor has withdrawn support for both.  The misfire on taxes best describes how timid and inept the DFL politics seems to be this session.
    The tax proposals were dead even before the governor nixed them.  While the economic theory behind taxes services is good, the governor played the politics all wrong.  He never brought the DFL in from the start to get them to buy into the tax reform and it was Tom Horner and not Dayton who had originally proposed sales tax reform.  Dayton was pushing an idea he did not prepare his party for and he also pushed ideas that had significant and powerful lobbyist and special opposition to.  There was no way the DFL was going to support an issue opposed by major interests that fund their party, caucus, and candidates.
    Moreover, Dayton forgot that the DFL has a two year term and the Senate four.  House DFLers on taxes and a range of issues have very different interests in moving bills on these topics.  They will seen the voters sooner.  In addition, the DFL is still very much a coalitional party with those from the urban cores, suburbs, and Iron Range having very different interests.  Dayton who was so smart as a gubernatorial candidate in bringing these different interests together has fallen largely flat in doing that legislatively.  Finally, this is the same DFL that was consistently out-foxed politically by Governor Pawlenty–they were unable then to use their majorities effectively and the same appears true now.
    I remember my hardcore DFL friends telling me over a year ago that Dayton and the DFL  were biding their time for the second two years of the governor.  Their theory was that with the GOP out and the DFL in real change would happen.  I am still waiting.

American Politics in the Age of Ignorance: Why Lawmakers Choose Belief Over Evidence

Please note:  I am pleased to announce formally the publication of my new book, American Politics in the Age of Ignorance: Why Lawmakers Choose Belief Over Evidence, which was just published by Palgrave-MacMillan.  The book describes how lawmakers often ignore evidence when making law, are guided by political myths, and  enact policies that are known in advance to fail.  I try to explain why legislators often enacted failed policies and are guided by political myths.  I also provide a catalog of about a dozen of the most frequently enacted failed policies and political myths.

Below you shall find a short essay describing the book followed by the official Hamline press release for the book.

I hope all of you read the book, especially at a time when Congress and state legislatures across the country have come back into session.

American Politics in the Age of Ignorance

Elections portend opportunities for change.  Change often involves both people and policy. As a nation we face critical questions about taxes, debt, and stimulating the economy and producing jobs.  Similar problems confront Minnesota legislators as they tackle a $1 billion plus debt.
    Unfortunately, despite the changes in people, many of the policies proposed, adopted, and implemented are not new and they will fail.  This will be true in 2013 both in Washington, D.C. and in Minnesota where nearly a quarter of the legislators will be new.
    This is not for lack of knowledge about their likely impact.  Instead, often ideas or public policies are proposed despite the fact that the best evidence indicates that they will be unsuccessful and ultimately fail.  Unmasking some of these proven failures and explaining why American politics seems condemned to enact them is the topic of my new book, American Politics in the Age of Ignorance: Why Lawmakers Choose Belief Over Evidence (MacMillan-Palgrave, December 2012).
    Hope is great when it comes to miracles. Belief is terrific when it comes to the Tooth Fairy. But neither hope nor belief should guide the making of public policy to solve our nation’s or Minnesota’s pressing problems, especially now. The making of good laws and government programs should be driven by facts and good evidence regarding what does work, otherwise taxpayer dollars maybe wasted.  Unfortunately, often that is not the case.
    Elected officials often enact failed laws and are captured by political myths. There is a pack mentality among legislators who often turn to trendy and often untested ideas and the  need for quick fixes to make it look like they are doing something as elections approach or to  appease an impatient electorate.  Many elected officials are part time, with limited knowledge, expertise, and ability to gather critical information necessary to make good decisions.  Additionally, the power of money in politics, partisanship, special interest pressures, and sometimes simply ideology or even blindness to the facts–often willful–all contribute to situations where so called new ideas are really recycled old ones already proven to have failed.
    In almost every aspect of our lives we are taught to act upon the best available evidence at hand.  Successful  businesses are guided by data.  Sound medical diagnosis demands it.   Victorious military commanders need intelligence.  Public administrators are taught to use best practices when managing.  The public wants government to be successful and do what works at the most efficient price possible.  But there is a knowledge gap in American politics.  Social science and scientific research, as well as experimentation and past successes and government failures provide significant  evidence regarding what works or not, yet public officials often ignore this information when making policy.
    Neither of the two major political parties seems exempt from ignoring facts when making policy.  Republicans currently  seem particularly prone to make these mistakes.  Governor John Huntsmann, perhaps captured it well at the September, 2011 Reagan Library presidential debate: “Listen, when you make comments that fly in the face of what 98 out of 100 climate scientists have said, when you call into question the science of evolution, all I'm saying is that, in order for the Republican Party to win, we can't run from science.”   Republicans seem convinced, despite the best evidence, that tax cuts are the solution to almost any economic ill there is.  Or that immigrants are an economic drain on the economy.  Or that voter fraud is rampant, corrupting the integrity of U.S. elections.
    Yet Democrats are not innocent.  Despite the best evidence that taxes incentives are hugely  inefficient in terms of affecting business relocation decisions, they often support them.  Or despite overwhelming data that public subsidies for professional sports stadiums or conventions are bad economic investments, Democrats embrace them as tools of job production and revitalization.  Democrats have also joined Republicans in believing that “three strikes and you are out” criminal  penalty laws for repeat offenders deter crime, when again the best evidence contradicts this. 
    Faith, hope, or simply myth and ignorance often describe what the art of politics has become these days.  Evidence-based policy making is what the legislative process  should be about.  This is why legislators hold hearings–they are supposed to be gathering information to help make better policy.  Instead, the hearings are often charades, with policy makers having already made up their minds and the outcome of the proceedings already predetermined from the onset.
    Clearly  no one has all the answers.  Decisions are often made with limited knowledge, and experimentation  is a good idea and way to improve decision making.  Yet all this is different from the current practice of simply ignoring what the evidence says.  And the evidence does speak loudly.  American Politics in the Age of Ignorance documents  a dozen of the most frequent failed policies and political myths that are repeatedly repackaged and enacted.  They include:
*    Tax incentives are a good way to affect business relocation decisions.
*    High taxes serve as deterrent to work or business activity.
*    Enterprise zones are an efficient means to encourage economic development.
*    Public subsidies for sports stadia are a good economic development tool.
*    The building of convention and other entertainment centers are successful tools for economic development.
*    Welfare recipients migrate from state to state simply to seek higher benefits.
*    Three strikes laws and mandatory minimums are effective deterrents to crime.
*    Sex education causes teenagers to engage in sexual activity.
*    Legalization of drugs leads to increased drug usage.
*    Immigration and immigrants take jobs away from Americans and serve as a drain on the economy.
*    Voter photo identification is needed to address widespread election fraud in the United States.
*    Legislative term limits will dismantle incumbent advantages, break ties to special interests, and discourage career politicians.

For the most part, all of these ideas are false based upon significant evidence.  In many cases, enactment or support for these ideas has produced the exact opposite effect from what was intended.
    Be warned–look to see many of these ideas again recycled, proposed, and reenacted again this year in Minnesota and across the country.  But the persistence of this failed policies and myths should not be read as a wholesale indictment of government or of democracy.  Government in America has accomplished a significant amount, ranging from putting a man on the Moon, winning several world wars and the cold war, helping find a cure for polio, and so much more.  The list is impressive and often overlooked.  The Marshall Plan, the building of the interstate highway system, clean water, sewers, fluoridation, Head Start, the Tennessee Valley Authority, and countless other famous and mundane activities demonstrate the capacity of governments to be successful and make meaningful differences in the lives of Americans.  Yet despite these accomplishments, government can still improve.  It can execute better if simply if does what seems to make sense—learn from the past and from the evidence to make future choices better informed.


FOR IMMEDIATE RELEASE:                                                                                         CONTACT:
January 10, 2013                                                                                            Gail Nosek: 651-523-2511
                                                                                                                            gnosek01@hamline.edu

HAMLINE UNIVERSITY PROFESSOR DAVID SCHULTZ AUTHORS
AMERICAN POLITICS IN THE AGE OF IGNORANCE

ST. PAUL, Minn. (January 10, 2013) – Hamline University professor David Schultz, noted expert on elections, politics, and public policy, has released his latest book. In American Politics in the Age of Ignorance: Why Lawmakers Choose Belief Over Evidence, Schultz explains why he believes elected officials are frequently captured by political myths and enact laws that are known to fail.

"There is a pack mentality among legislators who often turn to trendy and untested ideas and the need for quick fixes.” Schultz said. “The power of money in politics, partisanship, special interest pressures, and sometimes simply ideology or even blindness to the facts all contribute to situations where so-called new ideas are really recycled old ones already proven to have failed."

In American Politics in the Age of Ignorance, Schultz speaks to a knowledge gap. He argues that social science, scientific research, experimentation, past successes, and government failures provide significant evidence regarding what works and what doesn’t, yet public officials often ignore this information.

In addition to explaining why policy makers often ignore good research, American Politics in the Age of Ignorance also documents a dozen of the most frequent failed policies and political myths that are repeatedly repackaged and enacted. Among the myths and failed policies examined are: the role of taxes in economic develop, public subsidies for sports stadiums, illegal immigration, voter fraud, and abstinence-only sex education. The book can be found at Amazon.com, though the publisher, and other bookstores.

Schultz is a professor of public administration and government ethics at Hamline University School of Business. He has taught classes on American government and election law for more than 25 years. Schultz is the author and editor of 25 books and 90 articles on American politics and law and is a frequently quoted political analyst in the local, national, and international media.  Schultz drew on these experiences, plus him time working in government and on political campaigns, to write American Politics in the Age of Ignorance.

Hamline University attracts a diverse group of 5,000 undergraduate and graduate students who develop their passions working alongside professors invested in their success. Challenged to create and apply knowledge in local and global contexts, students develop an ethic of inclusive leadership and service, civic responsibility, and social justice. Hamline students are transformed in and out of the classroom to discover truths that shape the way they see and are able to change the world.

10 Reasons Why the Fiscal Cliff Deal is Bad for America

    Repeatedly one hears the definition of “compromise” as one where no one gets all that they want.  Perhaps this is true in some cases, but generally compromises also mean that the deal struck is beneficial in some ways.  If that is the case, this did not happen here.
    First, did the deal raise taxes on the top two percent of the population?  In theory it did raise taxes on some, but with the new tax beginning at family incomes of $400,000 and individual incomes of $200,000 it is closer to the top one percent.  But that is in theory.  Wait for the dust to settle to reveal that with deductions and loopholes even this new tax on the top one percent is less than meets the idea.
    Second, did the deal really raise much in terms of revenue?  Except for the Social Security  payroll tax, not really.  There is very little new revenue generated here that will do anything substantial to help with the deficit.
    Third, Congress did nothing to address the budget deficit.  They kicked the can down the road for two months by delaying the automatic spending cuts.  This solved nothing.
    Fourth, did the deal do anything to ease the tax burden on the poor and middle class?  Not really.  While the Bush era tax cuts were preserved for many, the Social Security payroll tax goes up by 2%.  Best estimates are that most Americans will be paying more taxes this year than last because of this.  Middle class America will see average incomes fall by about 1.5%. Expect to see smaller paychecks except for the rich.  Remember, Social Security taxes cap out at approximately $110,000.   For the rich, anything above this number is not taxed. 
    Fifth, if the goal of the deal was to stimulate the economy, that it will not do.  The deal had no fiscal stimulus and the tax increases for Americans will potentially affect GDP growth (According to the Tax Analysts Blog) by about .6 of the GDP.  In effect, the deal hurts the economy.
    Sixth, the deal failed to deal with the debt ceiling and that issue will come due soon.
    Seventh, since the deal is short term uncertainty regarding the future has not been addressed and it will continue to hurt the economy in terms of business investment and consumer confidence.
    Eighth, The deal to avert the fiscal cliff neither produced much in terms of short term  benefits nor long term solutions.
    Ninth,   The deal revealed the face of what we may expect in a second Obama administration. Obama yet again demonstrates an inability to negotiate.  He had more political leverage now than ever yet he got very little.  Come January 20, he is a lame duck.
    Tenth, overall, the deal was horrible and failed to secure any of the stated objectives.  Commentators will turn to the complaints by both the conservatives and liberals as a sign that this must be a good deal.  This is the wrong approach for two reasons.  First, both sides are correct that the deal is bad.  As noted above, it does nothing to address any of the pressing problems the Fiscal Cliff represented.  Second, the issue is not whether Democrats or Republicans liked the deal.  Unlike private parties whose negotiations are supposed to be of benefit to them, here the two parties are working for the people.  The public or the public interest is the third party beneficiary or victim of their deal.  Here the public loses. 
    What Congress and the president have failed to understand is that  what they do in Washington is not about what benefits or makes the two parties happy and upon which they can agree.  It is about serving the public.  Somewhere along the line Congress and the president have confused what they can agree to with what is good for the American public.  Agreement for the sake of agreement is not good policy.  This is goal displacement.  We have now reached a sad point where we think simply getting a deal or appeasing the two parties is what the purpose of legislating is about.

It’s Worse than you think: Quick Thoughts on the Minnesota Fiscal Forecast

Official reports list the upcoming budget deficit for the State of Minnesota as $1.1 billion.  This according to the state economist and the fiscal forecast.  Yet while $1.1 B is bad enough it is really worse than that, and could deteriorate.

Consider some basic facts.

When the 2011 government shutdown was averted $2.4 billion was borrowed from K-12 and the state also borrowed approximately $700 million from the tobacco endowment.  These were both one time revenue sources that need to be paid back.  Add these two obligations to the $1.1 and the real deficit is closer to $3.8 B.

Critics will say that the $3.8 B figure is wrong, asserting that the fiscal forecast does indicate that about $1.3 B will be shifted to pay back K-12 from current surplus.  this is on top of $3.2 M already paid back (but for the sake of argument we will ignore this even though it should be counted toward a larger state obligation for revenue).  But as my grandmother used to say money does not grow on trees and it comes from somewhere.  That $1.3 is coming out of something,a present one time surplus in the current budget cycle that one cannot necessarily count on in the next cycle.  This money represents an obligation to the state and therefore money is stilled owed and must be paid back.  The same can be said about the tobacco bonds.  Thus the $3.8 is a fair figure on the obligations owed by the state beyond current projected revenues to meet spending in the next budget cycle that is roughly the same as it is now in the current one.

It gets worse.  The forecast also notes that the anticipated gaming proceeds to help finance the new Vikings stadium are significantly behind projections.  If they do not pick up then the State (taxpayers) are also on the hook for this additional obligation which could potentially been a few hundred million dollars.  This makes the bad deal for the state look even worse.  Stay tuned on this.

But it gets even worse.  If the fiscal cliff kicks in and hits the state or even if the economy simply slows down, revenues decrease and the deficit gets even worse.  Even the fiscal forecast tells us that.

Thus, the $1.1 B deficit may very well really be one that is over $4 B.  We are back to where we were two years ago.  No surprise.  The last budget was done with gimmicks and tricks.

 We cannot continue to repeat the mistakes and tricks of the lack decade and continue to push the problem down the line.  Yes tax increases may be needed to address the problems here but that is probably not enough.  New revenue sources are needed but cuts may also be needed.  The question will be who carries the burden or takes the cuts.  Will it come from the poor?  Healthcare?  Education?  Higher ed?  Cities?

The issue now is how honest does the DFL want to be in confronting the reality of the budget.  Will it use real numbers, eschew gimmicks, and base projections on realistic assumptions?  This is the challenge for the Governor and the legislature.

After the revolution? Recommendations for the Minnesota DFL

Note:  This blog originally appeared in Politics in Minnesota on November 15, 2012.  Please consider subscribing to that publication for news on state politics.

You say you want a revolution?  Well it was not quite that, but November 6, gave Democrats control of the Minnesota legislature and governorship for the first time since 1990.  In fact they occupy all the constitutional offices. Dayton can move his agenda and the DFL can push its priorities.  But less one think that it is now Christmas time for the DFL, there should be some caution in the moves that the Democrats take.
    Yes, the DFL should move an agenda that is Democrat.  Single-payer health insurance, legalizing single-sex marriage,  and commitments to education should guide what the DFL do.  But the political revolution is less than meets the eye.  It is less a mandate for the DFL than it was a rejection of the Republicans.  Republicans overreached.  Kurt Zellers and the Republicans promised that it would simply be jobs and the economy and they failed.  They failed first to get the state’s fiscal house in order.  Yes Republicans claim they balanced the state budget without taxes increases but that is wrong. To “balance” the budget they borrowed approximately  two billion dollars from K-12 and another $700 million from the tobacco endowment.  All this was one time revenue that must be repaid.  The budget deal did nothing to solve a structural deficit problem and the State walks into the 2013 with a yet to be determined real deficit of several billion dollars. Moreover, the balance they claim came with a government shutdown and a loss of the state’s triple A rating.
    But beyond failing at jobs and the economy, the Republicans overreached.  They debated social issues and placed a Marriage Amendment on the ballot.  They sought to rig elections  in the future with a voter Id amendment.  They also debated amendments on abortion, right-work laws similar to those enacted in Wisconsin, and taxes.  The Republicans, hungry for power, saw their legislative majorities as the opportunity to pander to every one of their constituencies and enact every crackpot idea their supporters had.  They foolishly thought 2010 was a mandate when it was simply a rejection of Democrats.  The Republicans sought to take over the state for their own interest, not to govern or lead it for all of us.  And they paid the price on November 6.  Everyone can see this except for the outgoing Republican leadership who are still in denial about the election and their bad performance.
    The Democrats need to avoid the same mistake. They need to lead and govern and not pander.  They too will have pent up demand for many groups wanting it to be their turn now.  The first advice is that Democrats must prove that they can be trusted with the taxpayer’s money.  They must show they are better at handling the state’s finances and economy than were the Republicans.  Given the last biennium, this is a low bar.  But this is the time for the DFL to do the budget right, make the tough choices, and really clean up the budget without any shifts or gimmicks that have been the norm for over a decade.  What might this include?
    The first order of business is developing a honest budget process.  Repeal the foolish 2002 law that counts inflation for the purposes of revenue but not obligations.  Additionally, ban shifts and other short term or one time revenue fixes.  These gimmicks hide the real structural deficit in Minnesota which is probably in excess of $4 billion.   Part of creating a honest budget process may go so far as completely reforming it from scratch.  Change the timing when the fiscal forecasts are issued so that budget work can start sooner. Set earlier committee deadlines or fiscal targets.  Follow the practice of Wisconsin and create a joint legislative committee to do the budget.  Or even change the budget from even to odd years to give legislators one year to learn their job before doing the budget.  Right now we have too many rookies doing a major fiscal job in ignorance.
    But other budget fixes could also include creating an automatic continuing resolution that keeps the current budget in place if no agreement is reached.  This is what they do in Wisconsin and it will avert future government shutdowns.  But reform to the governor’s unallotment authority is also needed to prevent future power grabs as seen under Pawlenty. Fiscal reform also means paying back the money to K-12 and on the tobacco endowment.  If the Democrats can do all this, they have accomplished a lot.
    But all this structural reform requires real budget choices too, while at the same time advancing DFL priorities that serve the interests of Minnesota. Governor  Rudy Perpich got it right when he said it wanted Minnesota to be the brainpower state.  He wanted Minnesotans to be the best educated state in the country.  There are powerful correlations between education and economic development.  The single best investment a state can make is in education.  Thus, repaying money owed to K-12 makes sense, but it is not a blank check.  Minnesota has horrible racial disparities in terms of graduation and learning outcomes.  The racial disparity overlaps with class and poverty.  Better education is not simply about class size, it is making sure that students come to school prepared to learn.  This means healthy, clothed, and well-fed.  Attend to the social service side of education.  Attend also to funding early-childhood education and give students the head start they need.
    But do not ignore workforce training for adults.  The State needs better partnerships with business and higher education and community colleges to make it affordable for people already in the workforce to get new or additional training. Here is where adjustments to the Minnesota tax code make sense.
    Minnesota also has an aging infrastructure.  We already wasted money on a Vikings stadium that could have been better spent on roads and bridges.  Do bonding to alleviate the increased congestion in the Twin Cities making commutes increasingly time consuming and commerce difficult.  But bonding to improve the internet infrastructure in greater Minnesota is also essential.  Level the playing field between brick businesses in Minnesota and Internet businesses by passing the Amazon.com bill that was debated last session.
    What else should the DFL consider? It is inevitable that the wealth should pay more in taxes to fund the state.  There is little empirical evidence that such taxes will hurt or deter job growth, and a lot of evidence that they are in the best position to help foot the bill for many amenities from which they benefit.  The DFL should also move forward to fully implement the Affordable Care Act and perhaps even other reforms to provide more health care for all in Minnesota. 
    The advice for Democrats is thus simple: Do not confuse Republican rejection with Democrat mandate.  Don’t overreach, attend to the economy and budget first, remember your principles, and use them to build a foundation for other changes once broad support has emerged.

Constitutional contempt: The GOP's rush to amend is out of keeping with traditional Minnesota values

This blog originally appeared on Minnpost.

What are we to make of the sudden rush by Minnesota Republicans to place several constitutional amendments on the ballot this November? Quite simply, they are out of character with Minnesota's history, true conservatism, and they demonstrate a contempt for the political process and a trivialization of the state’s Constitution.

Think about what we learned about constitutions in school. First, they are a general blueprint for the structure of the government. They describe the different officers or branches of government and how they are elected or organized. They define how a bill becomes a law, what powers each of the branches of government have (separation of powers), and the abilities of each to limit one another (checks and balances).

Second, constitutions not only declare the powers of government, but also limits on what it can do via a bill of rights. A bill of rights declares the rights of citizens, such as freedom of press or religion. Together, a constitution and a bill of rights define the rules of the game for governing. We think of a constitution as something more permanent, relatively stable, and not something that we generally amend unless there is a good reason to do so. This is at least how we think of our U.S. Constitution and Bill of Rights.

State Constitutions such as Minnesota's serve the same purposes, but also differ in several ways. Minnesota's Bill of Rights offers more protection for individuals than found at the federal level. We protect freedom of conscience and privacy more vigorously than does the U.S. Bill of Rights. We also protect some rights — hunting and fishing, and peddling farm produce — that are not found at the federal level. We have constitutionalized our commitment to education, the construction and maintenance of a highway system, and support for the environment and the arts. Such rights reflect our culture and who we are.


119 amendments adopted in Minnesota
Finally, Minnesota's Constitution is different from the federal one in the ways and numbers of times amended. The federal Constitution has been amended 27 times (including the Bill of Rights) and it is done by a combination of two-thirds votes in both Houses of Congress and ratification by three-fourths of the states. Since ratification of the Minnesota Constitution in 1858, there have been 211 constitutional amendments proposed to the voters, with 119 adopted. Until 1898, constitutional amendments required a majority of both houses in the Legislature to propose them to the voters, with a simple majority of those voting on the amendments to approve them.

In 1898 the amending process was changed, thereafter requiring a qualified majority of all who voted in a specific election to ratify an amendment. Voting in the election, but not on the amendment, counts as a no vote. Amending the Constitution was made more difficult because critics claimed special interests and groups were using the process to further their politics. The argument also was that amending the Constitution should be done sparingly, and not used as a tool that substituted for normal lawmaking.

What does all this say about the rush to amend the Minnesota Constitution this year?  Let's look at the proposed amendments. Already on the ballot is one to ban same-sex marriage. Others would require a photo identification to vote, change the legislative voting procedure to make it harder to raise taxes, make it more difficult for poor women to terminate a pregnancy, and declare Minnesota to be a right-to-work state and thereby make it more burdensome for unions to collect dues. With the exception of the tax proposal, the rest are all policy and not about structure and process. They are about efforts to make permanent specific policy views of the Republican Party and its supporters. They are partisan preferences raised to the level of constitutional permanence.

Sure, this has happened in the past. Minnesota's history reveals times when clusters of amendments are offered at the same time, often pushed by one party. But there is something unique in what the Republicans are doing now.

Rights usually expanded, not contracted
Minnesota history reveals that most amendments expand and do not contract rights. Of all amendments adopted, only one has restricted voting rights and five expanded them. The current amendments to require voter identification and limit the rights of privacy of poor women are out of character with Minnesota history.

Moreover, among the 50 adopted amendments dealing with finance, 17 authorized new taxes, bonding authority, or spending, and only six restricted or made it more difficult for public spending.

Minnesota has a tradition of facilitating government investment to help the state. The current proposal to make it more difficult to tax is out of step with that tradition, and it runs Minnesota down the road toward the same problems encountered by California and Colorado, which adopted similar proposals years ago and which have contributed to their current fiscal problems. Third, the right-to-work amendment restricts rights of unions and it aims to make constitutional another policy that best should be left to the legislative process. Overall, these amendments are out of step with a Minnesota tradition of respecting and enlarging rights and supporting individuals.

But more important, what is upsetting about the amendments is that they display contempt for the political process. Instead of trying to use the normal legislative process to push these ideas, they want to bypass it. Because they cannot win by normal politics they want to take their political bat and ball and go home. In effect, they cannot win under the normal rules so they are changing the rules.

A go-for-broke strategy
It is, moreover, a go-for-broke strategy: If we cannot win by normal politics let us try to do so by way of the Constitution and then if we are ousted in November, we have cemented in place policies that live beyond our majorities in St. Paul. Moreover, this contempt for individual rights and disrespect for our constitutional tradition is the very opposite of what conservatism is about. True conservatives should be loath to change the Constitution in this way.

Finally, what is disturbing about this kind of politics is that it not only plays to prejudice but it interjects divisive social issues into constitutional battles. Amending the Constitution should be done for noble reasons, not cynical ploys to pander to constituencies or make permanent partisan preferences. Minnesota is a better state than that.

The Truth About Taxes: A talk hosted by River Valley Action

Contemporary American politics is dominated by too many myths.  On January 31, 2012, the River Valley Action hosted a talked at the Woodbury Peaceful Grove/United  Methodist Church entitled "Debunking Common Myths."

The talk was attended by nearly 100 individuals.  Three myths were tackled that night-- that taxes are a major detriment to economic growth, that regulation kills jobs, and that voter fraud is rampant.   I spoke on the topic of  taxes.  My Powerpoint presentation is on my web page.

A great summary of the meeting is provided by Dick Bernard.

The crowd was terrific except for a few hecklers who came not to listen but to disrupt the meeting.  The huffed and puffed and shouted and in general acted like goons.  One big guy kept badgering me and just simply refused to let me talk.  He proved an old adage--but to keep you  mouth shut and have people think you are stupid  than open your mouth and prove it.

The MN League of Women Voters produced a lethal video on why we do not need voter ID.  It is a must for all to watch.

Great forum.

The Hype on Taxes: They Don’t Matter Much

Taxes impede economic growth. This is the belief among the Republican presidential contenders as they offer plans to cut taxes as a panacea to stimulate the economy. Herman Cain’s “9-9-9” assumes lower income tax rates for corporations and individuals will stimulate the economy. Newt Gingrich wants to cap top rates at 15% and Rick Perry has called for a national flat tax of 20%. Mitt Romney has a 59 point plan that includes tax cuts. Ron Paul wants a constitutional amendment to eliminate income and estate taxes. Michele Bachmann wants a return to the Reagan era tax cuts. All want to make the Bush era tax cuts permanent.

Yet do high taxes really hurt the economy as much as they believe, and will lowering them have much of an impact on stimulating it? The economic literature is clear — tax breaks to encourage economic relocation or investment decisions are inefficient and wasteful. Hundreds of studies reach this conclusion. When businesses are surveyed regarding factors important to their investment decisions, taxes often come in behind proximity to markets, suppliers, and the quality of the labor force. These other factors occupy a larger percentage of a business's budget than do taxes, and all of them are far more critical to long-term success than are taxes. Businesses occasionally admit this. Nearly 62 percent of those interviewed in a California study on hiring tax credits indicated that they had never or rarely affected their decision to employ individuals. Speaking at a recent chamber of commerce event, I asked business leaders whether the Obama tax cuts would encourage them to hire. Unanimously the response was no—they were unwilling to hire until such time that consumers were willing to buy their products and services.

Anecdotal stories and illustrations also confirm the tax fallacy. High tax states such as Minnesota have generally fared better in terms of economic growth, unemployment, median family incomes, and location of Fortune 500 companies, than low tax ones such as Mississippi and Alabama. In many situations high taxes, and with that, government expenditures on education, workforce training, and infrastructure, correlate positively with income, low unemployment, and business retention. One needs to look not just a one side of the equation—taxes—but the other side too—what taxes buy—to see what value businesses get out of them in terms of educated workforces and infrastructure investments. Most debates fail to do this.

Bureau of Economic Analysis statistics demonstrate how economic growth is related to tax rates. One can compare annual economic growth as measured by the percent change in the gross domestic product (GDP) percent based on current dollars to the highest federal individual tax rate and the top corporate tax rate since 1930. If taxes are a factor affecting economic growth, one should see an inverse relationship between growth of the U.S. economy and higher tax rates. The GDP should grow more quickly when top individual and corporate tax rates are lower. If taxes are a major factor deterring economic growth, lines on a graph should go in opposite directions: As tax rates go up the GDP should go down.

No such pattern emerges between high taxes and GDP growth over 80 years. During the Depression of the 1930s corporate and individual taxes rates increased, but in 1934 through 1937 the GDP grew by 17%, 11%, and 14% annually. Top corporate tax rates climbed to over 50% through the 1960s, again with no discernable pattern associated with decreased economic growth. The same is true with top tax rates on the richest which were 91% into the 1960s. Conversely, since the 1980s after Kemp-Roth and then after 2001 with the Bush era tax cuts, there is no evidence that the economy grew more rapidly than in eras with significantly higher tax rates on the wealthy and corporations. Looking at time periods when tax rates were at their highest, GDP often grew more robustly than when taxes were cut. Visually, the attached graph simply fails to demonstrate that tax rates negatively impact economic growth. (Click on the graph to get a better view of it).

Pictures are worth a thousand words, but statistics are priceless. Statistically, if a tax hurts economic growth, the correction with it is -1. If they positively facilitate growth the relationship is 1, and if they have no impact the relationship is 0. The correlation between GDP and top individual taxes is 0.29, between GDP and top corporate taxes is 0.32, and among the three it is 0.14. Statistically, there is a slight positive impact on either top individual or corporate taxes or economic growth, but overall almost no connection between tax rates on the wealthy and corporations and economic growth in the United States.

But what about taxes as job killers? Again running similar statistical tests, there is little connection. Using Bureau of Labor Statistics data on unemployment rates since 1940, the correlation among top individual and corporate taxes and the annual unemployment rate is -0.02—essentially no connection at all.

The simple claim of Perry, Cain, and others that high tax rates on the wealthy and corporations hurt economic growth and job production is false. The evidence is simply not there to support assertions that high taxes alone hurt the economy or that cutting them will have the stimulus effect asserted.

Class Warfare and the American Dream

Note: This piece appeared in Politics in Minnesota, Capitol Report, September 29, 2011.

America is the land of dreams. The United States is lauded as the land of opportunity, the place where anyone can go from humble beginnings and become a millionaire. It is the tale of rags to riches, of the Horatio Alger story, of a nation where we can rise as far as our talent takes us. Yet dreams die hard. The reality is that America is a nation of increasing poverty, economic inequality, and decreased social mobility; at least according to a series of recent studies and reports documenting the economic woes of the United States.

The first study is from the United States Census Bureau in 2010 describing poverty and income in America. In 2010 the richest five percent of the population accounted for 21% of the income, with the top 20% receiving over 50% of the total income in the country. This compares to the bottom quintile accounting for about 3% of the total income.

A second study by the Center on Budget and Policy Priorities in 2010, drawing upon Congressional Budget Office research, found that income gap between the top one-percent of the population and everyone else more than tripled since 1973. After-tax income for the top one-percent increased by 281% between 1973 and 2007, while for middle class or middle quintile it increased by 25%, for the bottom quintile it was merely 16%. Looking beyond income to wealth, the maldistribution has not been this bad since the 1920s. According to the Institute for Policy Studies, in 2007 the top one-percent controls almost 34% of the wealth in the country, with half of the population possessing less than 3%. The racial disparities for wealth mirror those of income. Since 2007 the wealth gap has increased as the value of American homes–the single largest source of wealth for most Americans– has eroded. Studies such as the Survey of Consumer Finances by the Federal Reserve Board have similarly concluded that the wealth gap has increased since the 1980s.

But Americans dream and believe they can rise to the top–get lucky, be the Horatio Alger rags to riches story; thus our fascination with buying lottery tickets. Yet social mobility in America has ground to a halt. A 2010 Organization for Economic Cooperation and Development study found that social mobility in the United States ranked far below that of many other developed countries. Nearly half of the economic advantage parents have in the United States is transmitted to their children; a number nearly two-and-one-half times that of Australia and Canada. The biggest cause of social immobility according to the report is declining educational opportunities for many students. Other studies, including those in 2005 and 2010 in the Economist similarly point to declining social mobility in the United States that makes it difficult for individuals to rise from one social economic status to a better one. In fact, there is better than a 95% chance that children will not improve their social economic status in comparison to their parents. Few really can move on up.

Conversely poverty in America has increased. In FDR’s second inaugural speech in 1936 he spoke of a nation that was one-third ill-clothed, ill-housed, ill-fed. In the 1950s due in part to the New Deal anti-poverty programs, the poverty rate fell to 22%, with over 39 million poor persons living at or below poverty level. By 1969 Great Society programs reduced the poverty rate to 12.1%, with a further decline to in 1973 where the poverty rate was 11.1%, representing 23 million.

Yet after that, and especially beginning with the Reagan era’s retrenchment on social welfare programs, the poverty rate has continued to climb. In 1983, the poverty rate was 15.2%, in 1992, the rate was 14.5%, representing 36.8 million, and in 2003, 12.5%, representing 35.9 million. Moreover, in 1992, the poverty rate for female-headed families with children was 48.3%, and 21.9% under the age of 18 were in poverty (14.6 million children). In 2009, 14.3%, or nearly 40 million in poverty, and now the latest Census figures point to a poverty rate in 2010 of 15.1%, representing a record 46 million in poverty. The numbers are equally grim when one looks at women, children, and people of color in poverty–all record or near record numbers.

One could recount in even more detail the picture of an America with growing class differences that are fixed. We live in a world where there are clear rich and poor, with the income and wealth differences played out in terms of racial and gender disparities. We live in a nation where the privileged few go to better schools, live in safer neighborhoods, have better access to medical care, and therefore are healthier and live longer. As F. Scott Fitzgerald once stated in his play The Rich Boy: "Let me tell you about the very rich. They are different from you and me.” Yes they are–they are privileged.

Many reasons explain the growing gap between the rich and poor and America. But at the core one can point to the emasculation of the New Deal and Great Society programs that once provided income transfers to the poor. There is the dramatic cuts on effective tax rates in America that prior to the 1980s were 70% but now are less than half that such that the poor and middle class, as Warren Buffet pointed out, pay a greater percentage of their income in taxes than he does. Similar tax cuts have been gifted to corporations. As a result, the rich are asked o contribute less to society and economic inequalities that exist are not offset by tax policies and income transfers.

Moreover the war on organized labor has had its toll. Unions from the 1930s until the 1980s had a significant impact on increasing wages, benefits, and the quality of life for America. But first beginning with Reagan’s firing of the PATCO air controllers in 1981 and continuing to Wisconsin governor Scott Walker’s assault on public employees this year, unions have come to be depicted as the new welfare queens in America, blamed for declining American competitiveness and budget deficits. Never mind that successful nations such as Germany pay higher wages and benefits, many believe that the only way to future prosperity in this country lies with immiserizating the American worker.

A couple of weeks ago Republicans lambasted President Obama’s call for tax increases on the wealthy as class warfare. The Republicans deserve credit–at least they recognize that there are class differences in America and that a war exists. However, only one class is fighting–the corporate rich–while the rest society sits idly by immobilized.

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.

The Politics of Constitutional Amendments: Lessons from Minnesota's History

All indications are there will be at least one if not multiple state constitutional amendments on the 2012 ballot for Minnesotans to consider. Possibilities include a ban on same-sex marriage, photo identification for voting, a requirement for a 60% legislative vote to raise taxes, and perhaps others.

Supporters of these proposals contend the public has a right to vote on them, critics respond no; asserting that resorting to amending the Minnesota Constitution is unprecedented and inappropriate. Who is right? There may be no definitive answer, yet state history reveals 150 plus years of amendments, yielding interesting conclusions about constitutional politics.

Since ratification of the Minnesota Constitution in 1858, there have been 211 constitutional amendments proposed to the voters, with 119 adopted. Until 1898, constitutional amendments required a majority of both houses in the legislature to propose them to the voters, with a simple majority of those voting on the amendments to approve them.

In 1898 the amending process was changed, thereafter requiring a qualified majority of all who voted in a specific election to vote in favor the amendment. Voting in the election but not voting on the amendment counted as a no vote. Amending the Constitution was made more difficult because critics claimed special interests and groups were using the process to further their politics.

Over time, interesting patterns have developed regarding when amendments have been offered and adopted.

Era	Dates	Proposed	Adopted	Percentage Adopted
Nineteenth Century	1858-1898	66	48	73%
Progressive Era	1900-1918	45	10	22%
1920s	1920-1928	15	7	47%
Depression and WW II	1930-1944	20	8	40%
Total	1958-2010	211	119	56%

During the 19th century, 73% of the 66 proposed amendments were adopted. After changes in the amendment process, the Progressive Era—a period supposedly notable for significant social and economic reform in the Minnesota and across the country, only 10 of 45 or 22% of the amendments were adopted. Many amendments were offered during this time but few were accepted by the voters. Conversely, since WWII, and especially since the Constitution was reorganized in 1974, nearly 70% of all proposed amendments were adopted.

Constitutional amendments come in bunches. Many times in Minnesota history three, four, or more amendments have been on the ballot at the same time. The record is 1914, 11 amendments proposed, one adopted. Because of frequent amending, no definitive pattern emerges regarding whether they encouraged turnout, but there is no doubt than in their day proposals to let women vote or authorize gambling drove excitement and turnout. Moreover, in years when more than one amendment appeared on the ballot, usually one dominated the public’s attention, sometimes damaging the prospects of the other amendments from passing.

Looking at the types of amendments proposed, they fall into four groups. There are structural amendments addressing the organization of government, such as the length of the legislative session, giving the governor the veto, or regulating the size of the judiciary. Financial amendments include authorizing the state to impose taxes, bond, give special bonuses to military veterans, or otherwise to spend money. Rights amendments deal with matters of individual rights, such as franchise and jury trials. Finally, regulatory amendments dealt with various aspects of regulating private corporations, such as the liability of its officers.

Of the 211 amendments proposed, they can be classified as follows:

Type	Proposed	Adopted	Adopted Percentage
Structure of government	97	51	53%
Finance (taxes, bonding)	82	50	61%
Individual rights	17	12	71%
Regulatory (corporations)	15	6	40%
Total	211	119	56%

What do we learn about the content of the amendments proposed and passed? Clearly many addressed contentious issues of the time. No, they did not address abortion or marriage and surprisingly none sought to ban alcohol sales. These are today’s hot button issues, or ones that we might consider contentious. But controversial is relative to the times, and amendments dealing with regulation of railroads during the robber baron era, or giving women or Blacks the right to vote were the headlines of the day. Resorting to constitutional amendments as a populist political strategy has been a part of Minnesota politics from the beginning.

But looking at the content of the amendments adopted, some interesting patterns emerge. Among the 12 adopted Amendments addressing individual rights, five of them expanded voting rights. In the entire history of the state only one constitutional amendment, in 1896, restricted voting rights. Here it limited the practice in place until then that allowed aliens or non-citizens to vote in Minnesota. This practice encouraged and welcomed Scandinavians to Minnesota.

Three other amendments also limited rights, addressing issues surrounding use of juries in civil and misdemeanors. The message is clear—amendments to the Constitution have generally expanded rights, especially voting, and not contracted them.

Second, among the 50 adopted amendments dealing with finance, 17 authorized new taxes, bonding authority, or spending, and only six restricted or made it more difficult for public spending. Of those six, four in the nineteenth century restricted the ability to use public money to help the railroads (again seeking to limit the power of the robber barons), one in the nineteenth century barred the spending of public money for religious schools (Minnesota’s Blaine Amendment, similar to those adopted in many other states about the same time), and then one amendment during the Depression prohibited the taxing of personal property and farm equipment. Minnesota’s history thus demonstrates more a pattern of enabling spending to build schools and undertake public projects than to restrict it.

Votes and not history will decide whether amendments on the ballot in 2012 will pass. Yet the current amendments directed toward restricting rights, voting, and public financing seem out of sync with Minnesota’s history. But for good or bad, resorting to the amendment process is a part of Minnesota history to address politically charged issues of the day.