Category Archives: Random Blogging

Myths Die Hard

Andrea Neal’s editorial in the Indianapolis Star yesterday was a reminder that evidence is no match for strongly-held beliefs.

Neal seconded Governor Pence’s ill-considered call for a ten percent reduction in Indiana’s income tax. Even the Republicans in the General Assembly have recognized how harmful such a tax cut would be in a state where cities and towns are already strangling, thanks to the even more ill-considered tax caps Mitch Daniels managed to enshrine in the Indiana constitution.  Neal made a familiar argument: lower taxes will lead to more economic growth and more job creation.

This argument sounds logical. Leave businesses with more cash and they’ll spend it to expand and hire. I remember being persuaded by that theory myself when I first became involved in policy and political life. The problem is, the evidence refutes it.

A recent report by the Institute on Taxation and Economic policy confirms previous research. As the Institute reports,

States that levy personal income taxes, including the states with the highest top rates, have seen more economic growth
per capita and less decline in their median income level over the last ten years than the nine states that do not tax income.
As any economist will confirm, the factors facilitating economic growth and job creation are varied; despite the almost religious belief in the supernatural power of tax policy, most studies suggest that tax levels are only one of a large number of factors that influence business decisions. The availability of an educated workforce, a location near suppliers or large customers, the existence of a market for one’s goods or services, cost of living, and the general quality of life  all play a part.
For many employers, the availability of public transportation so that employees can get to their place of work is extremely important; indeed, decent public transportation would do far more for the Indianapolis economy than a tax cut that further erodes public services and the quality of life.
Think about it: how low would taxes need to be before you’d move your business to Mississippi?
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Worthwhile Reminders

I finally got around to reading “Healing the Heart of Democracy” by Parker Palmer yesterday, and was struck by his observation that it isn’t disagreement that makes our politics so contentious–it is demonization.

Back in the day, as they say, I remember Dick Lugar responding to challenges by saying “That’s an issue upon which people of good faith can differ.” By the time he was attacked by Tea Party purists, that simple recognition–that otherwise good people can differ in their analysis of a situation–had become heresy in some precincts.

When we de-humanize those who disagree with us, we make conversation–and conversion–impossible. I’ll grant that some folks are so rigid, so afraid to consider facts that might be contrary to their own worldview, that reasonable debate is not possible. (As a friend of mine used to say, you can’t reason someone out of a position they never reasoned themselves into.) But those tend to be folks on the fringe. When we write off everyone on the other side of an issue, we abandon any possibility of productive discourse.

Alexander Hamilton addressed this very human tendency in Federalist #1: “So numerous indeed and so powerful are the causes which serve to give a false bias to the judgment, that we see wise and good men on the wrong as well as on the right side of questions of the first magnitude to society. This circumstance, if duly attended to, would furnish a lesson of moderation to those who are ever so much persuaded of their being in the right in any controversy….In politics, as in religion, it is equally absurd to aim at making proselytes by fire and sword. Heresies in either can rarely be cured by persecution.”

Later in that same essay, he points out that partisans are unlikely to sway others to their opinions or to increase the “number of their converts” by the “loudness of their declamations and the bitterness of their invective.”

As difficult as it may be in an era positively dominated by invective and loudness, those of us who care about the conduct of public affairs need to work on substituting vigorous but respectful disagreement for demonization. Otherwise, the public square will be entirely dominated by the “true believers” of all sorts who are so vested in labeling and attacking that they cannot participate in anything remotely resembling democratic discourse.

In an era where every ideologue claims fidelity to the Founders, maybe we should actually listen to one.

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Forgetting the Basics

Back when I first became politically active,and especially after I joined the Hudnut Administration as Corporation Counsel, I was schooled by then-County Chairman John Sweezy. John’s favorite admonition was “Good government is good politics.” For someone serving as the City’s chief lawyer, that meant hiring people because they were best qualified, not because the party “owed” them. A lot of people were disbelieving when I told them that party officials never interfered with such decisions, but it was true. That same adage meant that administrators and City-County Councilors alike should act in the public interest, as they saw that interest.

Much of the long run of GOP dominance in Marion County can be attributed to this very basic premise that voters will reward sound stewardship–that good government is good politics.

I thought about that adage, and my own experience, when I read Charles Blow’s column in this morning’s New York Times. Blow reports on recent Pew polling showing that most Americans have negative opinions of the GOP–62% say the party is “out of touch” with the American people; 52% believe the party is too extreme; only 45% think the party is looking out for the country’s long-term future, and even fewer–39%–believe the GOP is open to change.

There are numerous reasons for these dismal ratings, but the most recent is Congressional Republican willingness to allow the sequester to take effect rather than agree to “revenue enhancements” in the form of either tax increases or the closing of tax loopholes.

An insistence on protecting the pocketbooks of the very wealthy no matter what the consequences for the country as a whole (the Director of the Congressional Budget Office has estimated that the sequester could cost 750,000 jobs in 2013) has become the primary image of the GOP. That image of fat-cats and influence-peddlers unconcerned with the circumstances of regular folks is not helped by the party’s other image as culture-war politicians hostile to women’s rights and dismissive of the claims of gay Americans, immigrants and minorities.

The Republican party I served in the 1970s and 1980s didn’t do everything right, but it understood that it was neither good government nor good politics to protect donors’ pocketbooks while disregarding the interests of ordinary citizens. While the party had its share of bigots and misogynists, both the Hudnut Administration and the County party rejected the politics of division and the extremism of the culture warriors, and actively recruited women and minorities. From time to time, I run into old friends from those days, and we bemoan the loss of that Republican party and its civic-minded leadership.

If it is sad to see the Grand Old Party devolving into a group of angry old white heterosexual men, it is profoundly dangerous for the country. The United States needs two reality-based parties. Neither the nation nor the Democratic Party are well-served by the absence of intellectually and morally honest conservative opposition.

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Perverse Incentives

I know this chart has probably been floating around the Internet for a while, but I recently came across it, and it really made me think.

The chart lists 30 major corporations, their profits for 2011, the amount of taxes each paid that year, and the amounts they paid lobbyists. A majority of those listed  paid zero taxes on massive profits, thanks to various provisions of the tax code. Many of them actually got money back, again, courtesy of those same arcane provisions. Virtually all of them spent millions of dollars lobbying the federal government; in every case, the amounts spent to influence policy far exceeded the amounts paid in taxes.

What’s wrong with this picture?

There are often sound reasons for using the tax code to encourage behaviors that benefit the greater society. If we want more energy, for example, and we recognize that the costs of exploration and the risk of coming up dry are high, it makes sense to provide a tax incentive to ameliorate that risk. If we want businesses to modernize, to invest in equipment that will make them more productive, offering them the ability to write off those investments over the useful life of the equipment is reasonable. There are many other examples.

The problem comes when the incentives bear no reasonable relationship to the behaviors they are intended to encourage–when those well-compensated lobbyists manage to persuade lawmakers to favor their clients by inserting special provisions in the law or special treatment in the tax code. In the case of oil and gas, for example, companies have not only benefitted from obscenely favorable tax provisions, but have negotiated leases of public lands on terms that have been widely criticized as giveaways.  Here in Indiana, Leucadia–a politically well-connected energy company–will benefit from a 30-year agreement with the state that effectively shields the company’s new coal gasification plant from unfavorable market conditions. 

Leucadia is hardly an isolated example. There’s a reason someone coined the term “crony capitalism.”

The well-connected and powerful have always been able to influence policy. To a certain extent, it’s an unavoidable aspect of human society. But in 21st Century America, we are dangerously close to corrupting the system, eviscerating checks and balances, and institutionalizing a caste system. Recent studies have documented America’s depressing loss of social mobility. Headlines routinely report the self-dealing of Wall Street bankers and financiers, along with the outrageous salaries and bonuses that bear no relationship to their performance. Jack Abramov, the disgraced lobbyist whose name has become synonymous with K-Street and Washington deal-making, is trying to rehabilitate his reputation in interviews sharing “chapter and verse” of influence-peddling in the nation’s capital, and the picture he paints is not pretty.

Local business-people, shop-owners, mom-and-pop enterprises and other middle-class Americans go to work every day, follow the rules, and pay their taxes when due. They don’t have agents working the halls of the legislature to get them special deals. They don’t have hundreds of thousands of dollars to contribute to Super-Pacs, and Citizens United didn’t free them to donate megabucks to buy a Congressman or two.

Shouldn’t the major corporations that are profiting so handsomely also be paying taxes to the country that makes those profits possible? Those companies depend upon workers educated in our public schools. They rely on our courts to enforce their contracts. Their trucks drive on roads paved by American taxpayers. Tax-supported police and fire-fighters protect their warehouses. Why do they prefer to pay millions to lobby for special advantage rather than simply using that money to pay their fair share of the costs to maintain our physical and social infrastructure?

What are the incentives that lead those who are already rich and privileged to seek even more by gaming the system?

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