Public Policy and Governance – Page 148

Proving Nick Hanauer Right

I have previously cited Nick Hanauer, the billionaire who has repeatedly pointed out that the belief–embraced by the GOP–that raising the minimum wage depresses job creation is a fallacy.

As Hanauer has emphasized, this economic theory has cause and effect backwards: jobs are created by demand. (If you aren’t selling your widgets, you aren’t hiring more people to produce greater numbers of them.) Pay workers a living wage, putting disposable income in the hands of people who hadn’t previously had any, and increased demand will boost both job creation and the economy.

I get an email newsletter from Axios, (link unavailable) and a recent one included a report on fast-food industry earnings that certainly seems to confirm Hanauer’s thesis.

Between the lines: The fast-food industry’s biggest tailwind is coming from a surprising source — the increased pay of low-wage workers.

After trailing higher-paid workers for years since the financial crisis, earnings for the bottom 25% of workers have been growing at a rate much faster than the national average, and weekly earnings for the bottom 10% of full-time workers have grown even faster, data shows.

Generally, rising wages would be seen as a negative for the industry, but coupled with stable gas prices, the increasing paychecks of low-wage workers means more money spent at fast-food and fast-casual restaurants.

Be smart: Goldman’s research team estimates 70% of the industry’s sales growth over the past 5 years can be explained by rising wages, lower gas prices and a boost from third-party apps like GrubHub and Uber Eats.

Traditional economic theory says that if I have to pay employee A more, I will have less money available and I will thus be unable to hire B. That makes all kinds of sense–all else being equal. What real life tells us, however, is that all else isn’t equal. As the Axios report shows, the increase in buying power more than compensates for the increase in payroll.

You would think that a political party devoted to the theory that cutting taxes will generate revenue sufficient to pay for those cuts would understand this.

The theories may be similar, but reality can be a cruel mistress: when the issue is raising the minimum wage, real-world outcomes demonstrate that Hanauer’s approach works, but when the issue is tax rates, the Republican approach– cutting taxes on rich people– doesn’t.

As Paul Krugman has written,

In late 2007 the Trump administration pushed through a large tax cut, whose key component was a drastic reduction in the tax rate on corporate profits. Although most economists were skeptical about claims that this would do wonders for economic growth, conservatives were ebullient. Lower tax rates, they claimed, would give American corporations the incentive to bring back trillions of dollars invested overseas, and foreign corporations a reason to invest huge sums in the U.S.

And Republican politicians bought this argument. Even Susan Collins, the most moderate Republican in the Senate (although that isn’t saying much) declared herself convinced that the tax cuts would pay for themselves.

Krugman followed those opening paragraphs with graphs and statistics demonstrating rather dramatically that the tax cuts did not pay for themselves. Not even close.

For example,Krugman says

Business investment was 13.2 percent of G.D.P. before the tax cut went into effect. It’s now … 13.5 percent. That’s a rise of around 0.3 percentage points, or less than a tenth of what the tax-cut advocates predicted.

As a result of the GOP’s 2017 tax cuts, deficits and the national debt have ballooned. Republicans would have marched on Washington with pitchforks if debt levels this steep had been generated by a Democratic Administration.

Real-world evidence says: pay working people a living wage, and everyone benefits.

Give the rich a tax cut, they sock their savings away in a tax haven, and no one else benefits.

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Maybe Government Shouldn’t Just “Get Out Of The Way”

A number of years ago, I read a book by a well-regarded libertarian academic, arguing against most government regulation. I don’t remember a great deal of it, but I do vividly recall his argument against the FAA’s assignment of air lanes (and actually, the agency’s very existence): he argued that the choice of airplane paths should be left to the airlines. Once a couple of planes collided midair and they got sued for big bucks, airline CEOs would get together to work out routes and ensure that it didn’t happen again.

Maybe I’m just a weenie, but I’d prefer not to be on one of those planes that collided.

I thought about that argument when I read the Sunday New York Times article attributing the two Boeing disasters to lax government regulation. Evidently, the officials charged with oversight allowed Boeing to “self-certify” the safety of many of its components and processes–as a result, regulators had never independently assessed the risks of the software known as MCAS when they approved the plane in 2017.

When you put the fox in charge of the henhouse…..

It has been an article of faith of the GOP that there is just too much government regulation–their default position is that most state intrusion into the marketplace is illegitimate and unnecessary. They seem unable to comprehend why government regulations were ever created.

Not long after the events that triggered the Great Recession, the New York Times ran a column by Edward Glaeser, in which he discussed the importance of both the public and private sectors in sustaining a workable market economy. Among his points:

Markets are built on both private entrepreneurs and public law enforcement. For centuries, investors have relied on courts to enforce contracts. Who would buy a company’s shares if the law didn’t impose a fiduciary duty on their issuer? Every person with a bank account in the United States relies on the government to protect his or her assets. Taxpayers also trust that the government can make the costs of overseeing the banking system reasonable.

So who failed? Certainly, the shenanigans on Wall Street remind us that capitalists are not angels, and that unchecked, their mischief can do much harm. But the point of financial market regulation was to ensure that misbehavior would not imperil the entire system.

Are some regulations onerous? Stupid? Unneeded? Sure. But even bigger problems emerge from inadequate regulation and/or enforcement.

Glaeser was writing about the importance of government’s role in financial oversight, an issue that Elizabeth Warren has consistently raised. It takes only a short walk down memory lane to remind us of numerous others.

The BP oil spill in the Gulf has been attributed to inadequate inspections of drilling machinery; the collapse of the I35W bridge was attributed to deficient government infrastructure inspections; the mine collapse in West Virginia occurred because regulators failed to cite and punish the owner for refusing to install required safety equipment; the Enron, Worldcon and Madoff scandals were enabled by a lax SEC.

As a consequences of such inadequate oversight, thousands of people were harmed. Hundreds died.

We rely upon the Food and Drug Administration to ensure that our medications are safe and effective, our chickens free of e coli. (As I tell my students when we discuss regulatory processes, I’d just as soon not have to test the chicken I buy in the supermarket myself when I get it home.)

We rely on the Consumer Product Safety Commission to ensure that the toys we buy our children are free from toxic paint and dangerous parts.

We rely on the FAA to independently inspect the aircraft we fly in, and to regulate those flight paths so that we don’t meet midair.

Caveat emptor is no substitute for competent government oversight–and right now, Americans do not have a competent government.

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Toto: We Aren’t In Brownback’s Kansas Anymore

Remember Sam Brownback? When he was elected Governor of Kansas, he vowed that the GOP’s economic theology–aka “trickle down”– would create an economic paradise, and he immediately set about implementing that theology.

In 2012, with the help of Kansas’ overwhelmingly Republican legislature, Brownback completely eliminated income taxes for more than 100,000 businesses and significantly reduced taxes on the wealthy.

For years, Republicans have been telling us that such steps would boost economic growth, and that they would more than pay for themselves, and Brownback was evidently a True Believer. Ardent belief notwithstanding, Brownback’s policies not only failed to deliver the promised prosperity, they devastated the state’s economy.

State revenues fell dramatically. School years and school days were shortened, public construction projects came to a screeching halt, Medicaid benefits were reduced, and job creation simply stopped.

As Harold Myerson has reported (link unavailable),

By 2016, Kansas voters—including Republicans who objected to seeing their children’s educations shortchanged—revolted. As the Prospect’s Justin Miller reported at the time, Republican primary voters, joined by Democrats, ousted legislators who refused to repeal the tax cuts, and in 2017, the new legislature overrode Brownback’s veto of a bill repealing the cuts. In 2018, voters elected Democrat Laura Kelly as their new governor, and today, with adequate funding restored, Kansas has resumed its support for education, infrastructure, and the basics of civilization.

This month, CNBC came out with its annual list of America’s Top States for Business, a ranking on which states don’t move up or down very much from one year to the next. Which is why attention must be paid, as Americans for Tax Fairness has pointed out, to one massive exception to this rule. On this year’s list, Kansas placed 19th—which is a full 16 places higher than it placed last year.

There’s a lesson there, but some people–and political ideologues–refuse to learn.

Trump and Mitch McConnell repeated what I’ve come to call the “Brownback Argument” to justify what Myerson dubs “the Great Federal Tax Giveaway to Corporations and the Rich Act of 2017–18.”

In consequence, share buybacks have soared to new heights while wages and infrastructure investment have barely risen, when they’ve risen at all. The federal government, of course, can run deficits, while states are constitutionally prohibited from doing so—which is why the Trumpistas have chiefly engaged in targeted rather than across-the-board cutbacks in federal spending. (The targets, of course, have been the poor and minorities.)

Brownback was politically run out of town on a rail—resigning early in 2018 to become the Trump administration’s Ambassador at Large for International Religious Freedom. (Unlike Tsarist Russia, our government lacks a position like Procurator of the Holy Synod, a sort of directorship of pogroms, though Stephen Miller at times seems to have become that position’s functional equivalent.) Is it too much to hope that American voters relegate Trump to history’s dustbin as their Kansas compatriots did to Brownback?

We can hope–for reasons including but definitely not limited to idiotic economic policies.

If there is one thing that the cult that is today’s Republican Party has repeatedly demonstrated, it’s that both religion and political ideology rely on faith rather than evidence.

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Republicans Ask: Should The Majority Rule?

Last month, in the wake of the Supreme Court’s refusal to protect its previously articulated principle of “one person, one vote” by limiting the degree to which Congressional districts can be dishonestly drawn, Talking Points Memo published an essay about the GOP’s embrace of an explicitly anti-democratic philosophy.

Josh Marshall identified the issue, and emphasized that it is separate from the Founders’ well-documented concern about the “passions of the majority.”

Much of American constitutionalism is bound up with protecting the rights of minorities against untrammeled majorities. Here though, I’m focused on something distinct and separate: the creation of anti-majoritarian ideologies, fully articulated arguments for why democratic majorities should not in fact, as a matter of principle, hold political power.

Marshall quotes Scott Walker, the former (sleazy) governor of Wisconsin, who now heads up a GOP committee defending gerrymandering (because of course he does); Walker claims that what Democrats call “fair” maps aren’t really fair because they advantage urban areas where more voters live. He argues that counting each vote equally gives urban areas “too large an influence.”

This is a bracingly candid statement of the position: We need to reevaluate how we define “fair”. Because if “fair” means whoever gets the most votes (i.e., proportional representation) then Republicans are at an inherent disadvantage “because of their national popular vote edge.” I don’t think my explication really goes beyond Walker’s statement really at all: what Democrats call “fair” is the candidate with the most votes winning.

As Marshall says,

Beyond the opportunism and the fact that city vs non-city has a deeply racial dimension, at a basic level Walker wants to see city and non-city as two contending entities which deserve to contend on equal terms. But of course these concepts, city and non-city or city and rural areas have no existence in American law. Nor does the idea even have a factual grounding. There are plenty of Republicans in cities and Democrats outside the cities. It is simply a broad brush way of capturing a political division in American society which Walker – and a growing number of Republicans – has formalized to explain why laws and districts should be changed to ensure that his preferred candidates win even when they get fewer votes.

Given the fact that twice in the last 16 years, the candidate who lost the popular vote–in the case of Trump, massively–became President, Americans have increasingly focused on the anti-democratic elements of our Constitutional system.

Thanks to the Electoral College, and population shifts over time, it currently takes four urban votes to equal three rural votes.

The composition of the Senate is equally undemocratic: every state has two Senators, irrespective of the state’s population. Today, a majority of Americans live in nine states that collectively have 18 votes in the Senate. The rest of the country–with a minority of the population– has 82.

These anti-democratic elements have been around a long time. What’s new, as Marshall points out, is that “the big state/small state divide has seldom lined up so clearly with the broader partisan division in the country.

All of this is part of the central dynamic of our time: Republicans increasingly turning against majority rule and a widely shared franchise because majorities, when not sliced up into gerrymandered districts or state borders, increasingly favor Democrats. That’s why we have voter ID laws. It’s why we have resistance to early voting, felon voting and basically everything else that doesn’t keep the voting electorate as small as old and as white as possible. Most of these strategies have focused on things like election security, or cost or convenience or whipped up fears about voter fraud. But that’s starting to change. The explicit embrace of special advantages for Republicans outside major urban concentrations, the explicit embrace of majority rule not being the essence of electoral fairness, is coming to the fore.

Defenders of anti-majoritarianism protest that we are not and never have been a democracy; we are a representative republic. That’s accurate as far as it goes. Certainly, as Marshall notes, the Founders had a well-grounded concern that minority rights would suffer if popular majorities were left unrestrained. Even if we must close our eyes to some of the less laudable concerns that prompted creation of the Electoral College and the composition of the Senate, the protection of minority opinion justifies a degree of anti-majoritarianism.

The question is: how much?

The tension between individual rights and majority passions–the need to find the proper balance between the two– has been a constant theme throughout American history.

Too much majoritarianism threatens individual rights. Too little–as when a minority is empowered to elect candidates rejected by the majority– threatens government legitimacy.

Persistent rule by the minority is an invitation to revolution.

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Ethics–Dan Coats’ Fatal Flaw

According to Axios, Trump is planning to dump Dan Coats as Director of National Intelligence.

President Trump has told confidants he’s eager to remove Dan Coats as director of national intelligence, according to five sources who have discussed the matter directly with the president.

The state of play: Trump hasn’t told our sources when he plans to make a move, but they say his discussions on the topic have been occurring for months — often unprompted — and the president has mentioned potential replacements since at least February. A source who spoke to Trump about Coats a week ago said the president gave them the impression that the move would happen “sooner rather than later.”

Despite finding him personally pleasant, I have never been a fan of Dan Coats, for reasons not relevant to his performance in his current position. I always saw him as a nice enough man with whom I had substantial policy disagreements. A co-worker of mine said it best, many years ago, when Coats was first running for Senate: “I’d vote for him for neighbor, but not Senator.”

In the Age of Trump, however, Coats has been a star of sorts– an ethical standout among the swamp creatures that populate this appalling administration. Unlike Bob Barr, he hasn’t twisted facts to fit a political agenda. Unlike those on Trump’s Cabinet, he isn’t trying to destroy the agency he leads. Unlike the feckless Senate Republicans, he hasn’t remained silent when the President’s lies have misrepresented reality.

According to Axios

The big picture: Coats has rankled Trump more than once with his public comments, according to sources with direct knowledge.

He angered Trump when he appeared to criticize the president’s relationship with Russian President Vladimir Putin during an on-stage interview with NBC’s Andrea Mitchell at last year’s Aspen Security Forum.

He drew Trump’s ire again in January when he told a Senate panel that North Korea was unlikely to give up its nuclear weapons, contradicting the president’s cheerier assessments.

There have been unsubstantiated reports that Coats previously had to be talked out of resigning; whatever the accuracy of those rumors, he has responded to what appears to be an intentional leak aimed at undercutting his effectiveness:

In a statement provided by the ODNI, Coats said, “I am focused on doing my job, and it is frustrating to repeatedly be asked to respond to anonymous sources and unsubstantiated, often false rumors that undercut the critical work of the Intelligence Community and its relationship with the President. I am proud to lead an IC singularly focused on the vital mission of providing timely and unbiased intelligence to President Trump, Vice President Pence and the national security team in support of our nation’s security.”

Trump has made it quite clear that he has no interest in the receipt of “timely and unbiased intelligence,” and that he sees no value in the ODNI itself.

As usual, Juanita Jean’s blog had the best snark:

Trump is now saying that he’s eager to fire Dan Coats, the Director of National Intelligence, then eliminate the position altogether. That fits, right? Because if there is one word that doesn’t describe Trump, it’s intelligence.

So true.

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