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Antitrust and the Technology Sector

Posted on by The Progressive Policy Institute

Can government policy encourage technology innovation in the short run? Probably not—while the government does have plenty of long-term levers, such as spending on basic research and investment in science and engineering education, there are few ways to speed up innovation over the next year.

Rather, government policy is actually quite capable of discouraging innovation in the short-run, through outdated regulation and restrictive antitrust policy that does not take the importance and uniqueness of the technology sector into consideration.

While innovation can come from any industry, the technology sector is particularly important, as it has been the main source of growth and innovation in the economy for the past 35 years. Technological advances over the last decade have facilitated the emergence of innovation “ecosystems,” or platforms on which many different companies can build products or provide services, in which mergers and acquisitions have played a large part.  Moreover, a unique feature of the technology sector is that the constant innovation companies need to stay profitable creates new markets and keeps competition active.

However, antitrust policy its current form does not recognize these characteristics. Instead, current application of antitrust regulations can impede the virtuous circle of nurturing innovation through startups and acquisitions. By slowing down or blocking acquisitions, antitrust policy can limit the exit routes for startups, potentially reducing their value and making it less attractive for investors to put their money into the next round of innovative new companies. In this regard antitrust policy has the potential to slow the speed of technological innovation, even though the benefits to the rest of the economy are connected to the speed at which new innovations are moved to market and scaled up.

In Innovation by Acquisition: New Dynamics of High-tech Competition, we explore the role of technology acquisitions in encouraging innovation, facilitating economic growth, and stimulating jobs. Specifically, we examine the question of whether technology acquisitions facilitate innovation, and in particular high-impact innovations. We argue that, when done correctly, acquisitions in the technology sector can and have encouraged innovation by bringing new products to market faster and more effectively.

What’s more, we find that acquisitions and innovation in the technology sector are positively associated with economic growth and job creation, an important consideration as we struggle to devise new, cost-effective ways to stimulate the economy and create jobs.

Looking at technology acquisitions from this perspective provides a different framework from which to assess the potential implications of excessive antitrust regulations, and current antitrust policy.

Read the entire memo.

Innovation by Acquisition: New Dynamics of High-tech Competition

Posted on by The Progressive Policy Institute

Right now policymakers are grappling with the implications of slow economic growth in the United States and the rest of the industrialized world. One response is austerity—cutting back on spending, accepting reduced living standards, and slowly digging out from the mess.

A better option, though, is innovation, which accelerates growth, creates new jobs, and makes U.S. products and services more competitive world-wide. Innovation has the potential for raising incomes, an especially important task given that real median household incomes have fallen more than 10 percent since the beginning of the recession.

While innovation can come from any industry, the technology sector is particularly important, as it has been the main source of growth and innovation in the economy for the past 35 years. The locus of innovation started with the personal computer in the late 1970s and 1980s; shifted to software and the internet in the 1990s; and now has moved to mobile, search, and more broadly communications, where U.S. companies are world leaders. Today’s technological advances have facilitated the emergence of innovation “ecosystems,” or platforms on which many different companies can build products or provide services.

The growth of tech companies stems from a combination of organic growth and business acquisitions, driven by the rapidity of innovation. It’s a virtuous circle, where successful technology companies pay large sums for small startups, which in turn induces the formation of more startups. For that reason, technology acquisitions need not diminish competitiveness, even as they accelerate innovation and job growth. Indeed, as we will see later in this paper, periods of high levels of acquisition have also been periods of rapid job growth.
Continue reading “Innovation by Acquisition: New Dynamics of High-tech Competition” →

Wingnut Watch: End-of-the-Year Standoff

Posted on by The Progressive Policy Institute

Senator KylThe end of the calendar year always means an assortment of “temporary” policies are approaching expiration, including some (e.g., upward revision of reimbursement rates for Medicare providers, and a “patch” to avoid imposition of the Alternative Minimum Tax on new classes of taxpayers) that happen every year. And then there are other expiring provisions central to the Obama administration’s efforts to deal with the recession, most notably unemployment benefits for the long-term unemployed, and last year’s major “stimulus” measure, a temporary Social Security payroll tax cut.

With the collapse of the deficit reduction supercommittee and an uncertain future ahead for the “automatic sequestrations” of spending that are supposed to subsequently occur, leaders in both parties are especially sensitive at the moment about taking steps on either the spending or revenue side of the budget ledger that add to deficits. But some of the “fixes” mentioned above are political musts, while others are highly popular or scratch particular ideological itches. It will be interesting to see whether conservative activists wind up taking a hard line against deficit increasing measures, and indeed, against any cooperation with Democrats so long as their own demands for “entitlement reform” and high-end tax cuts are ignored.

The payroll tax cut is an especially difficult subject for conservatives. While it will be easy for them to reject Senate Democratic proposals to pay for an extension of the cut with a surtax on millionaires, it is certainly possible, as Senate Republican leader Mitch McConnell has acknowledged, to “pay for” this tax cut with spending cuts, perhaps even some that Democrats would consider supporting.

Some conservatives, however, view any deal with Democrats on this and any other fiscal issues as a deal with the devil. One of McConnell’s deputies, Sen. John Kyl, has argued that the payroll tax cut hasn’t boosted the economy (i.e., it is not targeted to “job creators,” the wealthy) and should be subordinated to tax cut ideas that supposedly do. In an argument that is getting echoed across Wingnut World, RedState regular Daniel Horowitz suggests that GOPers make any payroll tax cut extension conditional on a major restructuring of Social Security, which of course ain’t happening.

Since virtually all the end-of-year measures under discussion will boost the budget deficit, and there are limited noncontroversial “offsets” available (mainly “distribution” of new savings attributed to the drawdown of troops in Iraq and Afghanistan), the key question will be which ones conservatives choose to pick a fight over and which ones slide quietly past the furor on unrecorded voice votes and last-minute agreements. If congressional Republicans seem to be acting in too accommodating a manner, it would not be surprising to see GOP presidential candidates using them as foils for their own claims to the “true conservative” vote as the January 3 Iowa caucuses grow ever nearer.

For the umpteenth consecutive week, the presidential contest remained full of surprises and volatility. Herman Cain’s campaign, already losing steam after his poor handling of both sexual harassment/assault allegations and the most recent debates, took perhaps a terminal blow from a new, credible-sounding allegation (made, interestingly enough, via a local Fox station in Atlanta, not some precinct of the “liberal media”) of a long-term adulterous affair. While Cain is again denying he did anything wrong, conservatives are not rushing to his defense this time, and the general feeling is that his campaign is done.

If Cain actually withdraws, it has long been assumed he would endorse Mitt Romney. But as a new analysis by Public Policy Polling showed, Cain’s supporters are very, very likely to move virtually en masse to Newt Gingrich, whose star continued to rise last week. His big news was an endorsement by the New Hampshire (formerly Manchester) Union-Leader, that sturdy right-wing warhorse of GOP politics. This step immediately makes Gingrich the most formidable rival to Mitt Romney in the Granite State: the Union-Leader does not simply endorse and ignore candidates; it can now be expected to undertake a virtually-daily bombardment of front-page editorials defending its candidate and treating his intraparty opponents (particularly Romney) as godless liberal RINOs.

But the impact of the endorsement goes far beyond New Hampshire, given the Union-Leader’s reputation for the most abrasive sort of wingnuttery. It materially helps him solidify his reputation for conservative ideological regularity, which is about to be brought into serious question by all the other campaigns, which are doubtless sorting through their bulging oppo research files on the talkative former Speaker, trying to decide which lines of attack are most lethal.

So far the he’s-not-a-true-conservative attack on Gingrich has been largely limited to his new, dangerous positioning on immigration, unveiled in a recent debate. Gingrich has been quick to stress that his proposal for a “path to legalization” for some undocumented workers does not involve citizenship, and denies its beneficiaries any government benefits whatsoever. But Iowa’s highly influential nativist champion Steve King has already branded Newt’s plan with the scarlet A-word of “amnesty,” and Michele Bachmann is trying to draw a new line in the sand suggesting that true conservatives favor deportation of every single “illegal.”

At this point, the presidential contest appears to be something of a race between Gingrich and his past words and deeds. There is a small window between now and the period immediately before and after Christmas (when something of a truce is imposed) when his opponents can try to bury him as a flip-flopper, an inveterate bipartisan, and a guy whose personal life (not just his marriages and divorces, but his finances) has been less than godly. If they don’t get their act together to do so, he’s looking very strong in Iowa, and even if he loses to Romney in New Hampshire, Gingrich is currently sporting large polling leads in South Carolina and Florida. Particularly for those candidates (Perry, Bachmann, Santorum; Ron Paul is in something of a class by himself) still hoping to seize the mantle of the true-conservative-challenger-to-Romney after Iowa, it’s getting close to desperation time.

Photo credit: FNS/cc

Regulators: Listen to Workers

Posted on by The Progressive Policy Institute

CWA

AT&T is a big company, which perhaps explains why federal regulators are ganging up to block its proposed merger with T-Mobile. Big must be bad, right?

That’s certainly the view of consumer advocacy groups, which routinely oppose business mergers as threats to competition. They seem to have the ear of the Federal Communications Commission, which announced last week that it would join the Justice Department in opposing the deal, citing concerns about job losses and higher consumer prices.

But there’s another important group of stakeholders that regulators should be listening to: AT&T’s workers. They are urging the government to take a broader view of the merger’s potential impact on U.S. investment and competitiveness.

At a time of shrinking private sector union membership, it’s worth noting that the company’s 42,000 wireless workers are represented by the Communications Workers of America (CWA). The union issued a <a href="mailto:https://files.cwa-union.org/tmobile/20111107_ATTTmo_Real_Story.pdf">report this month</a> strongly supporting the company’s acquisition of T-Mobile as a spur to innovation and a job-creator.

Such arguments merit attention, if only because it’s not often that you find a successful U.S. company in synch with its unionized workforce. Beyond that, however, there are compelling economic reasons for regulators to start looking at proposed mergers through the eyes of America’s producers, not just its consumers.

President Obama, fresh from a tour of the Asia-Pacific, articulated them in a recent radio address. “Over the last decade, we became a country that relied too much on what we bought and consumed,” he said. “We racked up a lot of debt, but we didn’t create many jobs at all.” Reviving U.S. competitiveness, he said, will require Americans to focus more on building things than buying them. Obama also called for “restoring America’s manufacturing might, which is what helped us build the largest middle-class in history.”

Opponents say CWA backs the merger because it has its eyes on T-Mobile’s workers, who aren’t organized. But the union’s analysis of the $39 billion deal emphasizes AT&amp;T’s plans to boost capital investment in the wireless broadband sector. It cites think tank estimates that such investment could produce up to 96,000 new jobs, not including another 5,000 jobs the company promises to bring back to the United States from overseas.

AT&amp;T has said it will merge its networks with those of T-Mobile, and invest an additional $8 billion to expand its 4G LTE wireless broadband infrastructure. It also has pledged to retain T-Mobile’s non-managerial workers. The CWA report asserts that, absent the merger, T-Mobile is headed toward extinction. Having been cut loose by its parent company, Deutsch Telecom, it lacks the capital to acquire spectrum and build its own 4G network.

Opponents of the merger—including AT&amp;T’s competitors as well as consumer groups—say the merger would give the telecom giant too much market power and lead to higher prices. Regulators ought to carefully weigh such claims. But as a forthcoming PPI report argues, mergers and acquisitions among dynamic, high-tech companies often have the effect of spurring more innovation. In the fiercely competitive telecommunications sector, prices for wireless services—voice, text, and data—have been trending downward, even as quality of these services has improved dramatically.

Even so, low consumer prices aren’t the only public interest at stake here. More important is expanding investment—in technological innovation, a highly skilled workforce and world-class infrastructure. This is the only way to make U.S. companies and workers more competitive in global markets that does not entail lowering our standard of living.

As the Progressive Policy Institute has <a href="mailto:https://www.progressivepolicy.org/telecom-investments-the-link-to-u-s-jobs-and-wages">documented here</a>, the telecom sector is leading a dynamic wave of innovation in mobile telephony and broadband that is creating good jobs in the United States. That’s no mean achievement at a time when unemployment is stuck at 9 percent—and about twice that if you take into account people who have given up looking for jobs.

While other corporations chase cheap labor by moving production offshore, we have dubbed communications companies like AT&amp;T, Verizon and Comcast “Investment Heroes” because they are making huge bets on the American economy. Surely that’s something government regulators ought to factor into their decisions.

Our country needs a new model for economic growth that emphasizes production over consumption, saving over borrowing, and exports over imports. Such a shift is essential not only to rebuild the great American job machine, but also to rebalance a global economy that has become overly dependent on U.S. consumers.

It’s time once again for America to be a global center for production—and we need federal regulators to get with the program too.

Photo credit: <strong id="yui_3_4_0_3_1322506314096_1108"><a href="https://www.flickr.com/photos/katgloor/">Kat Gloor</a></strong>

MEMO TO PRESIDENT OBAMA: How to Win On Foreign Policy in 2012

Posted on by The Progressive Policy Institute

You killed Bin Laden and other al Qaeda leaders, helped oust Mohamar Qaddafi, have ended the Iraq war, and protected the country from a massive domestic attack. Voters have noticed: a November Gallup poll has your general foreign policy approval rating up five percent over disapproval, an astounding 63 percent support you on terrorism, and the numbers are good on handling Iraq and even Afghanistan.

More importantly, if you sell your foreign policy achievements in the right way, it will paint you as a strong leader. That’s critical: Americans want their president to project an image of strength, and you’re hurting there right now. Between May (when Usama Bin Laden was killed) and August, the percentage of Americans who viewed you as a strong leader slipped from 55 to 44 percent. Here’s the kicker: If you’re seen as a credible, effective Commander-in-Chief, voters are more likely to believe that your leadership can pull them out of the economic slump.

I realize that you’re not the type of guy who wants to pound the podium and out-flex your opponent. That’s okay. However, you still have to keep in mind that foreign policy is an emotional issue for voters, and that you have to connect with their gut subconscious before you can lead them elsewhere. Below, I offer four ways you can use foreign policy to increase your leadership credentials in 2012.

1. Explain your vision and your values. Having a good track record isn’t worth a damn if you don’t connect with voters. They’ve got to feel you on these issues. Even assuming the GOP nominee is the shape-shifting Mitt Romney, he’ll sell a consistent, militaristic vision of American exceptionalism that might resonate with America’s gut.

Don’t cede that ground, just tell your own version. You might not make a major foreign policy campaign address, but your stump speech absolutely must include your vision of America’s leading place in the world in the 21st century. It doesn’t have to be “rah-rah”. It does have to be convey some emotion using two frames: “strong and smart.”

Explain that you know that the threats facing America have changed since the end of the Cold War, and we must rise to meet the challenge. That requires strong American leadership, complemented by strong alliances and backed the world’s strongest military.

But it also requires a laser-focus on the long term: American strength in the 21st century means being smart, too. Safety at home is enhanced by spreading American values abroad, and that requires more robust diplomacy to expand economic and political opportunity for all. That’s a great way to connect on the economy, too: Economic strength is what drives American power, and that means we need to out-innovate, out-produce, and out-think our challenges.

2. Tell a us a story (often). Specifically, tell us the story of how you decided to send SEAL Team Six to kill Bin Laden. Voters remember stories, not policies. So give them the best you got, because it will reinforce your image as a substantive Commander-in-Chief. You could recount the version you gave CBS’ 60 Minutes in May. It doesn’t have to be overly dramatic: just calmly recount the facts and remember that details are good. The story sells itself, and shows America that you made a bold, gutsy, strong decision. Most importantly, the country, not your administration, was successful.

3. Use military veterans as surrogates: Your campaign should have the most robust veterans surrogate network in the history of American politics. In an age when Congressional approval languishes in the single digits (and yours are in the 40s), guess who the public believes? The military. A September 2011 poll reinforces a standing trend: 92 percent of Americans are confident in the military and hence, its veterans.

Remember the Swiftboat Veterans who sunk John Kerry’s campaign? They tipped the balance because they were credible messengers. This year, you’ve got to get out ahead of the game. A few days ago, I received a campaign-sponsored email from Rob Diamond, who runs “Veterans and Military Families for Obama” (full disclosure: Rob is a friend). You need to give him every resource he asks for because he needs to pack cable news, campaign rallies, and small-town newspapers in military-heavy swing-states like Virginia, North Carolina, Ohio, and Colorado with veterans supporting you as the Commander-in-Chief they were proud to serve.

4. Attack Republicans as reckless. You have to make the public’s decision on national security a binary choice. If you’re to be a strong leader and a tough, competent Commander-in-Chief, you need to define (presumptively) Mitt Romney is reckless and out-of-touch. A poll from back in 2008 found this to be an effective attack against Republicans on foreign policy, and I sense that it would continue to work in 2012.

Why? Well, Romney’s rhetoric isn’t that different from George W. Bush’s. In an October speech at the Citadel, Romney promised to reverse proposed defense cuts, resurrect the neocon missile-defense shield, and build six more navy ships per year, even though America’s wars are coming to a close and the country faces a massive debt issue. Does that sound smart, efficient and strong in the 21st century, or does it echo the reckless George Bush, a playground bully who fights but doesn’t think and remains stuck in the Cold War?

Mr. President, it’s going to be a tough election. But used correctly, you can turn a solid record on matters of foreign policy and national security into a real asset this year, and just maybe tip the balance in a few key states. And how’s this for a bonus? The GOP isn’t expecting that you’d dare try.

If you’ve read this far, you might follow me on Twitter @JimArkedis

Photo credit here.

Wingnut Watch: Supercommittee Failure and the Gingrich Surge

Posted on by The Progressive Policy Institute

The official failure of the congressional “supercommittee” came and went without much hand-wringing in Wingnut World; indeed, the prevailing sentiment was quiet satisfaction that Republicans had not “caved” by accepting tax increases as part of any deficit reduction package. It was all a reminder that most conservative activists are not, as advertised, obsessed with reducing deficits or debts, but only with deficits and debts as a lever to obtain a vast reduction in the size and scope of the federal government, and the elimination of progressive taxation. For the most part, the very same people wearing tricorner hats and wailing about the terrible burden we are placing on our grandchildren were just a few years ago agreeing with Dick Cheney’s casual assertion that deficits did not actually matter at all.

It is interesting that throughout the Kabuki Theater of the supercommittee’s “negotiations,” the GOP’s congressional leadership came to largely accept the Tea Party fundamental rejection of any compromise between the two parties’ very different concepts of the deficit problem. From the get-go, Democrats were offering both non-defense-discretionary and entitlement cuts in exchange for restoring tax rates for the very wealthy to levels a bit closer to (though still lower than) their historic position. The maximum Republican offer was to engage in some small-change loophole closing accompanied by an actual lowering of the top rates in incomes, plus extension of the Bush tax cuts to infinity. Conservatives are perfectly happy to let an on-paper “sequestration” of spending take place, with the expectation that a Republican victory in 2012 will put them in a position to brush aside the defense cuts so authorized and then go after their federal spending targets with a real vengeance.

The GOP presidential candidates have offered two opportunities during the last week for wingnuts of a particular flavor to assess their views and character. The much-awaited Thanksgiving Family Forum in Des Moines was perhaps the first candidate forum of the cycle in which no one even pretended to set aside cultural issues in favor of an obsessive focus on the economy or the federal budget. The format, involving not a debate but a serial interrogation of candidates by focus group master Frank Luntz, was explicitly aimed at getting to each contender’s “worldview,” the classic Christian Right buzzword for one’s willingness to subordinate any and all secular considerations and choose positions on the issues of the day via a conservative-literalist interpretation of the Bible (i.e., one in which phantom references to abortion are somehow found everywhere, and Jesus’ many injunctions to social activism are treated as demands for private charity rather than redistributive efforts by government).

According to The Iowa Republican’s Craig Robinson in his assessment of the event, Rick Santorum, Michele Bachmann and Rick Perry were the only candidates who succeeded in articulating a “biblical worldview” under Luntz’s questioning. Newt Gingrich got secular media attention for his Archie Bunkerish “take a bath and get a job” shot at the dirty hippies of OWS, but inside the megachurch where the event was held, the star was probably Santorum, whose slim presidential hopes strictly depend on Iowa social conservatives adopting him as their candidate much as they united around Mike Huckabee in 2008.

It is interesting that immediately after the event, Rick Perry joined Santorum and Bachmann as the only candidates willing to sign the radical “marriage vow” pledge document released back in July by the FAMiLY Leader organization, the primary sponsor of the Thanksgiving Family Forum. This makes him eligible for an endorsement by FL and its would-be kingmaking founder, Bob Vander Plaats. It appears a battle has been going on for some time in Iowa’s influential social conservative circles between those wanting to get behind a “true believer” like Santorum or Bachmann and those preferring to give a crucial boost to acceptable if less fervent candidates like Perry or Gingrich. The outcome of this internal debate, which was apparently discussed in a private “summit” meeting on Monday, will play a very important role in shaping the endgame of the Iowa caucus contest—as will the decision by Mitt Romney as to whether or not he will fully commit to an Iowa campaign (he is opening a shiny new HQ in Des Moines, which some observers are interpreting as an “all-in” gesture).

Without question, it became abundantly clear during the last week that the “Gingrich surge” in the nomination contest is real, or at least as real as earlier booms for Bachmann, Perry and Cain. The last five big national polls of Republicans (PPP, Fox, USAToday/Gallup, Quinnipiac and CNN) have all showed Gingrich in the lead. The big question is whether and when his rivals choose to unleash a massive attack on the former Speaker based on their bulging oppo research files featuring whole decades of flip-flops, gaffes, failures and personal “issues.”

Interestingly, though, Gingrich may have already opened the door to suspicious wingnut scrutiny without any overt encouragement from his rivals. During the last week’s second major multi-candidate event, the CNN/AEI/Heritage “national security” debate last night, Gingrich may have ignored the lessons of the Perry campaign by risking his own moment of heresy on the hot-button issue of immigration, calling for a Selective Service model whereby some undocumented workers with exemplary records could obtain legal permanent status if not citizenship. He was immediately rapped by Romney and Bachmann for supporting “amnesty.” We’ll soon see if Newt’s long identification with the conservative movement and his more recent savagery towards “secular socialists” will give him protection from such attacks, or if his signature vice of hubris is once again about to smite him now that he’s finally become a viable candidate for president.

Will Marshall On Supercommittee Stalemate in Politico

Posted on by The Progressive Policy Institute

The supercommittee has turned into a superdud. Chalk up another victory for the political thought police, who work hard to prevent our elected leaders from deviating from the party line, exercising independent judgment or risking their political careers for anything as trivial as the national interest.

On the right, twirling figurative billy clubs, stand “no-tax” enforcers like Grover Norquist, Dick Armey and Stephen Moore. Their job is to ensure that any Republican intrepid enough to admit it will take substantial tax revenue to solve the nation’s debt crisis will be branded a traitor — and face a well-financed primary challenger.

Read the full story here.

Policy Brief: How a Competitiveness Audit Can Help Create Jobs

Posted on by The Progressive Policy Institute

America is deep in a jobs crisis. The unemployment rate is stuck around 9 percent nationally, with states such as Florida, Nevada and South Carolina in double digits. Real wages for educated workers are still plunging, while new college graduates are squeezed between rising student loans and the toughest labor market in recent memory.

Against this backdrop, the global economy looms large as both threat and promise. There’s a justifiable fear that America has lost its competitiveness, that our jobs are being siphoned to China and India, that the wages of our young people are being depressed by a global education glut. At the same time, the rapidly growing markets of the developing world could be a potent target for U.S. exports of goods, services, and intellectual capital, creating good jobs here.

In this global economy, we need to know which industries are internationally competitive, which ones aren’t, and whether the gaps are closing or widening. Unfortunately, the reality is this data currently does not exist. And what we don’t know hurts us, because it prevents us from pursuing effective strategies for boosting US jobs.

Although the government collects reams of economic data, it doesn’t measure what’s most vital to our ability to reverse America’s jobs decline: how our goods and services stack up against those of China and other competitors in terms of price.

You can’t fix what you can’t measure. We need a new national jobs strategy that begins with an accurate way of measuring America’s competitive prowess, on an industry-by-industry basis.

This policy brief proposes that the Bureau of Labor Statistics undertake a “Competitiveness Audit.” The Competitiveness Audit will compare the price of selected imports with the comparable domestically produced goods and services. That will tell us the size of the ‘price gap’ between imports and domestic production.

Read the entire brief.

Wingnut Watch: GOP Revenue Rejection Goes Beyond Intransigence

Posted on by The Progressive Policy Institute

It was a relatively quiet week in Wingnut World, with the loudest mouths probably conserving energy for cries of “betrayal” in the unlikely case that the congressional “super-committee” actually reaches a deficit reduction agreement in time to meet its November 23 deadline.

Believe it or not, there have already been “sellout” charges aimed at super-committee conservatives based on their dubious offer to accept $300 billion in loophole-closing revenue enhancements in exchange for reductions in the top marginal income tax rate and permanent extension of the Bush tax cuts (an offer Democrats summarily rejected as “unserious”). But beyond rejecting anything that remotely looks like a tax increase, conservative activists do not seem to have a very clear party line about what their congressional allies ought to do, with some welcoming a “sequestration” of domestic and defense funds as harmless, others demanding a “back-to-the-drawing-board” cold war against domestic appropriations (with specific venom being spewed at a pending appropriations bill boosting FHA funding), and still others following Newt Gingrich’s lead in treating the entire exercise as meaningless since any defense spending “sequestrations” could be quickly reversed after a presumed GOP landslide next November. Indeed, Gingrich favors dropping the sequestration trigger altogether.

On a less murky topic, predictably enough, municipal police actions against Occupy protests around the country have been greeted with much satisfaction in Wingnut World. Some conservative commentators, like Michelle Malkin, have been liveblogging the clashes in New York with something of the air of Romans watching the Christians versus the lions. Others, like Washington Times commentator Charles Hurt, took a less playful view of the protesters:

[R]ight about when their parents were sick and tired of them stinking up their basement playing video games all day, they realized there was an economic crisis going on.

So they gathered up their tents and sleeping bags, drifted to government property, took it over as if it were their own and gave themselves a name that perfectly reflects their ideology. “Occupiers.” As in Occupied Europe when it was being defiled by the Nazi Empire. The rampant anti-Semitism at their rallies has been shocking to behold, especially since these protesters profess to be the “open-minded” liberal types.

And ever since, they have been advancing their syphilitic cause, spreading disease, stealing, allegedly raping young women, leaving their trash around. And always quick to snap up any free services such as the chow line or testing for venereal diseases.

All righty, then!

Meanwhile, out on the 2012 presidential campaign trail, the much-predicted slowdown of the Cain Train has finally begun showing up in polls, alongside an equally-predictable rise in the fortunes of Newt Gingrich, who is now actually in the national lead according to at least one new survey (by PPP). And despite an ever-growing chorus of pundits deeming Mitt Romney the certain nominee, Romney continues to show little or no direct benefit from the serial collapses of his rivals.

Since actual voting will begin in Iowa in less than seven weeks, that is where the strange dynamics of this strange nominating contest will first begin to sort themselves out. At the moment, it’s anybody’s game: a new Bloomberg survey of likely caucus-goers showed a virtual four-way tie among Cain, Gingrich, Romney and Ron Paul (who has been running TV ads in the state for quite some time). Gingrich has pledged to spend 30 of the next 50 days in Iowa. But the big question remains what Romney does in that state; just yesterday, Gov. Terry Branstad warned him that he’d better start spending quality time in Iowa, or caucus-goers will punish him with a humiliating low finish. And that shot may in part be attributable to Romney’s decision to skip the next big Iowa event, this weekend’s “Thanksgiving Family Forum” sponsored by a trio of hard-core social conservative organizations (Iowa’s own FAMiLY Leader, the anti-gay marriage group the National Organization for Marriage, and CitizenLink, a Focus on the Family affiliate). Moderated by message-meister Frank Luntz (who will follow up the forum with a focus group of “Iowa moms”), the event will not be a traditional debate, but instead an interrogation of the candidates aimed at divining their “worldviews,” a buzz-word in Christian Right circles indicating their willingness to adopt of a rigorous “biblically-based” approach to every issue.

The “Thanksgiving Family Forum,” which will be held in a Des Moines megachurch, is transparently designed to provide a focal point for a consolidation of social conservative support around a single candidate of the kind that lifted Mike Huckabee to an unlikely victory in 2008. Since only two candidates, Rick Santorum and Michelle Bachmann, agreed to sign the FAMiLY Leader’s controversial “Marriage Vow” pledge document earlier this year, the odds are good that one of them will get the nod, though Gingrich has long-standing ties to Iowa social conservatives as well.

The candidate who not that long ago was thought to represent the best conservative option for denying Mitt Romney the nomination, Rick Perry, has adopted an interesting tactic to regain his own mojo. He’s made a large ad buy on Fox TV, apparently aimed at convincing a national conservative audience that he hasn’t been beaten down by his latest debate disaster. And he’s also released a new package of proposals to radically change all three branches of the federal government, including a shutdown of three major cabinet agencies (the subject, of course, of his debate “brainfreeze”) and elimination of lifetime appointments for federal judges (a very old wingnut hardy perennial). Perry’s campaign also made it clear he supported “personhood” constitutional amendments (banning all abortions and some types of contraception) like the one just overwhelmingly defeated by Mississippi voters. Clearly, Perry thinks the only way to get back into this turbulent race is to re-establish himself as the favorite candidate of Wingnut World.

 

Photo Credit: Kynan Tait

Italy Boots Berlusconi

Posted on by The Progressive Policy Institute

BerlusconiA funny thing happened on my way to an international forum on democracy and human rights in Rome last week: the Italian government fell. It was hard to concentrate on the business at hand with crowds gathering in piazzas to demand the head, figuratively speaking, of the man who has dominated Italian politics since 1994—Silvio Berlusconi.

What sparked the crisis was a sharp spike last week in Italian bond yields, which raised doubts about Italy’s ability to service its $2.6 trillion debt. The prospect of a default by Europe’s fourth-largest economy sent tremors throughout the euro zone. Forget about Greece: If big countries like Italy and Spain can’t pay their debts, European banks that hold all that sovereign debt will fail. Then someone—most likely Germany—will have to finance a massive bank bailout just like the United States did in 2007. Otherwise, a financial collapse would likely throw Europe, and probably the United States, into a bona fide depression.

Fortunately, this prospect seems to have concentrated minds in Italy. Arriving in Rome on Thursday, I found its usually fractious political class galvanized by the crisis and resolved to put a new government in place before the markets open today.

On Friday, the Italian Senate passed a budget with an initial set of reforms (including a hike in the retirement age) tailored to European Union specifications. On Saturday, Berulsconi resigned, as gleeful crowds chanted “Bye Bye Silvio” and sang the “Hallelujah” chorus outside the Quirinal palace. And on Sunday, Mario Monti, a widely respected technocrat, agreed to form a unity government.

As our own Congress dithers endlessly over debt reduction, it was nice to see democratic politicians somewhere acting purposefully and with dispatch. How long the Monti government will last, however, is anyone’s guess, especially since it must pass painful reforms aimed at paring down bloated state bureaucracies and stimulating private enterprise. But Rome’s tumultuous weekend seems to have made several things clear.

First, Italy’s sovereign debt crisis probably has driven a stake through the political heart of Berlusconi. In recent years, he has presided more than governed as Italy’s once-vibrant economy slowed down and its borrowing soared. Like a latter-day Nero, the 75-year-old Berlusconi, Italy’s richest man, seemed more interested in fiddling with underage girls in “bunga-bunga” parties than tackling structural reform of Italy’s economy.

Second, Berlusconi’s fall and Monti’s government of national unity have the potential to rescramble Italian politics in useful ways. Beneath a top layer of supposedly apolitical technocrats, Monti is expected to fill key sub-cabinet level posts with leaders from the center and center-left, shutting out the right-wing Northern League as well as the left’s unreconstructed Communists and Socialists. This could spur the emergence of a new coalition of the progressive center dedicated to reviving Italy’s global competitiveness rather than rehearsing old ideological arguments. Such a coalition might include pragmatic progressives like Rome’s former Mayor, Francesco Rutelli and Gianni Vernetti, whose Alliance of Democrats organized a fascinating, if overshadowed, conference featuring democracy activists from the Middle East, North Africa, China, and elsewhere.

Third, the imbalance between the power of global markets and the weakness of European governance has reached a sort of tipping point. The markets are now punishing spendthrift governments like Greece and Italy that have borrowed massively to cover the growing gap between public spending and anemic private sector growth. For these and other European countries, joining the euro-zone in 2002 was an opportunity to relax fiscal constraints, because such profligacy would no longer lead to currency devaluations. It turns out, however, that a common monetary union also requires common fiscal policies, and the 17 members of the euro-zone have no institutions for setting or enforcing such policies.

At its heart, then, the euro crisis is really a political crisis. I heard many Italian political leaders over the weekend argue that the salvation of the euro lies in “more Europe.” This means a resumption of the stalled march toward more comprehensive economic and political integration, which of course means EU members must surrender more sovereignty. This won’t be easy, especially if to average Europeans it means the pain and sacrifice of a thorough-going fiscal retrenchment, or bailouts for countries that have evaded the consequences of irresponsible policies by free-riding on the euro.

Italians, nonetheless, seem ready to cast their lot with Europe, even as they search for more effective political leadership to revitalize their economy.

Photo credit: Downing Street

Wingnut Watch: Ballot Initiatives Reject GOP Ideology

Posted on by The Progressive Policy Institute

Yesterday was Election Day in scattered parts of the country, and it was not a terribly successful election night in Wingnut World. Two ballot initiatives of special importance to hard-core conservative activists—Ohio’s Issue 2, an effort to overturn the state’s anti-public-union legislation, and Mississippi’s ballot item #26, an initiative to define legally protected human “personhood” as arising at the moment of conception—both went pretty solidly the wrong way from their perspective. Another less-visible initiative, in Maine, aimed at restoring same-day voter registration, which conservatives invariably oppose, passed easily, though Mississippi voters did approve a new voter ID law.

Statewide elections went as expected. Democratic KY Governor Steve Beshear was comfortably re-elected despite last minute charges by his Republican opponent that his presence at a Hindu ceremony connected to an Indian company plant opening indicated he didn’t love Jesus. In Mississippi, Republican Lt. Gov. Phil Bryant, a strong supporter of the Personhood initiative and a wingnut in good standing, nonetheless easily won the governorship over Hattiesburg mayor Johnny DuPree, the state’s first African-American gubernatorial nominee.

Downballot, Democrats easily won an Iowa special election to hold onto control of the state Senate (Republicans control the House and the governorship), but in Virginia, lost enough Senate seats to throw control of that chamber into a deadlock (there, too, GOPers control the governorship and the House), probably compelling a power-sharing arrangement.

But the big national news of the night involved the ballot initiatives in OH and MS. Repealing Gov. John Kasich’s S.B. 5, which radically limited collective bargaining rights for public employee unions, was a major national priority for labor, and also attracted a high-dollar pushback from out-of-state business and conservative groups, especially in the last few days before the vote. The margin of victory for the “No on 2” forces, 61-39, exceeded most expectations, and could affect anti-labor initiatives in other states. Given Ohio’s pivotal position in presidential elections, the vote will also be viewed by some as a trial heat for GOTV efforts in 2012, and as a reminder that the GOP’s success in 2010 was not necessarily part of a multi-cycle trend.

Mississippi’s Personhood ballot initiative also had considerable national implications, representing the most audacious goals envisioned in the anti-choice movement’s ongoing drive to undermine abortion rights at the state level. Aimed at defining human life as beginning at the moment of fertilization, Personhood initiatives are broadly understood as aimed not only at a total, no-exceptions abortion ban, but at an ultimate ban on birth control methods (the day-after pill, IUDs, and arguably oral contraceptives) that act after fertilization. A Personhood ballot initiative in Colorado failed dismally in 2010, but its proponents figured a state like Mississippi would be (if you will excuse the expression) more fertile ground, and succeeded in obtaining overwhelming support from GOP elected officials in the state, and even some Democrats. The 58-42 margin of defeat for the initiative on what was otherwise a fine day for Mississippi conservatives showed significant defections by GOP voters. In Harrison County (Biloxi), for example, a county where John McCain won 63 percent of the vote in 2008, and where voters yesterday gave a conservative voter ID initiative 64 percent, only 35 percent voted for the Personhood initiative.

While Personhood initiatives may continue to pop up, the Mississippi results will probably convince anti-choice activists to refocus on the more incremental strategy of “fetal pain” legislation and other restrictions based on the timing and nature of abortions, which are still in a constitutional limbo until court challenges are heard, along with an intensified effort to elect a Republican president in 2012.

The interest in yesterday’s elections provided a small and probably insignificant respite for presidential candidate Herman Cain, whose political condition has worsened dramatically thanks to the emergence of one of his two original sexual harassment accusers, and the appearance of a third woman who claims Cain committed what amounts to sexual assault. The Cain campaign’s poor handling of the allegations has continued, with the candidate holding a widely derided press conference yesterday to issue a series of wild conspiracy accusations, and a potentially self-destructive offer to take a polygraph exam. The saga shows no signs of ending soon, and although Cain has maintained his national and early-state first- or second-place standing in most of the scattered polling conducted after the allegations first emerged last week, there are signs it’s beginning to take a toll. Just as importantly, Cain’s erratic handling of the mess is beginning to embolden conservative opinion-leaders to break ranks and either challenge his account of his behavior, or simply write him off as too politically inept to be taken seriously as a presidential candidate.

Assuming Cain either weakens or crashes, the big question is whether that development will (a) cause Republicans to begin to unite around Mitt Romney as the safest choice in an exceptionally unstable field, (b) fuel a comeback by Rick Perry, from who Cain harvested the bulk of his October polling surge, or (c) lead to a late pre-Iowa surge by some other candidate with Tea Party appeal, such as Newt Gingrich or even Rick Santorum (whose monomaniacal grassroots campaign in Iowa is drawing some positive attention).

The only candidate who seems to have been gaining in the polls during Cain’s unraveling is Gingrich; a battery of new PPP polls in Mississippi, Ohio, and the Iowa state senate district holding a special election yesterday, all showed something of a Gingrich surge (he’s actually leading the field in MS).

The prospect of what he called “The Newtening” was so shocking to shrewd political analyst Jonathan Chait that he concluded: “It is probably time for me to stop making predictions of any kind about this race.” At a minimum, the pre-election candidacy crisis in Wingnut World should deter us all from betting the farm on any specific outcome.

Photo Credit: bjmccray

Can Unions Open Burma?

Posted on by The Progressive Policy Institute

PPI Special Report

The following is a guest column from PPI friend and sometime contributor Earl Brown, Labor and Employment Law Counsel for the American Center for International Labor Solidarity.

BurmaIf you want to see what a society without law or civic space looks like, go to Burma. A half century of military misrule has devastated this once fertile center of Asian science, scholarship, law, commerce and civic debate. But in this desert, Burmese activists are preparing to seize the potential democratic space recently opened up by the new regime. Last month, it issued a new labor law, the Labor Organization Law, which appears to allow independent unions to register and function legally for the first time in memory.

The new law allows the creation of new unions, with a minimum of 30 members. Burmese trade union activists are now using this new labor law and filing papers to establish free trade unions. In the past few weeks, groups of woodworkers, garment workers, hatters, shoemakers, seafarers and other trades, including agricultural workers, have registered openly as trade unions. After decades of unceasing international pressure and sanctions to little discernable effect, outside watchers of Burma are eager to see positive movement and are praising this new law. They see the new labor law as part of other highly publicized initiatives by the regime to open up Burmese society. For example, Burma’s new president has recently received the leader of the Burmese democracy movement, Daw Aung San Suu Kyi, in a highly publicized audience. The Burmese regime released 200 political prisoners in October and has also cancelled a huge dam project with Chinese construction firms that was fiercely opposed by villagers.

Whether these apparent openings—including the new labor law—are real is a matter of debate by those following events in Burma. All are watching to see the reaction of the Burmese regime to the efforts by Burmese industrial workers as they organize under the Labor Organization Law. Will the regime actually allow free unions?

Autonomous unions were once among the pillars of the robust civil society in Burma that had grown up in the face of British rule, fueled by a fierce desire for independence and democracy. Unions helped build this vibrant and diverse civil society by giving voice to industrial workers. Alongside associations of scholars, students, professionals in various disciplines, including lawyers, religious folks in temples and churches, ethnic and political parties, unions laid the basis for Burmese democracy. So did the Burmese bar.

True, many of Burma’s laws were repressive imports from colonial India. But the independent and anti-colonial Burmese bar was populated by talented advocates and drafters, employing both Burmese and British traditions and languages. In this bar, a skilled group of labor lawyers waged vigorous advocacy for both sides of the industrial relations equation, for unions and employers.

When General Ne Win seized power in the 1960s, however, he launched an attack on the diversity and vigor of Burmese civil society. Using the slogans of socialism, General Ne Win sought to replace peaceful debate about and advocacy of divergent interests with the dreary and artificial “harmony” of military rule. The honest articulation of any interests beyond those of the military was suppressed in the name of order. In this imposed order, unions, and lawyers as vehicles of advocacy and debate became targets. After 50 years of suppression, these once proud traditions of democratic trade unionism, of legal advocacy, and of civil debate eroded and eventually disappeared.

The demise of a vigorous civil society and civic debate did not steal the impulse for democracy. But it did eliminate robust traditions of independent trade unionism and law. Unions and legal institutions, such as independent lawyers, could have helped check the repressive hand of Burma’s military junta. That is why they, and most other independent civil society organizations, became targets of the military.

In her 2010 speech to the Community of Democracies on civil society, Secretary of State Hilary Clinton explained why dictators are impelled to suppress unions, lawyers and the other building blocks of that civic pluralism and robust advocacy so essential to sustaining democracy beyond elections:

Our democracies do not and should not look the same. Governments by the people, for the people, and of the people will look like the people they represent. But we all recognize the reality and importance of these differences. Pluralism flows from these differences. And because crackdowns [to civil society] are a direct threat to pluralism, they also endanger democracy.[1]

Freedom of association and expression is the air that union movements and lawyers must have to breath. Guaranteeing those rights is thus one first step to rebuilding the pluralistic Burmese civil society so necessary to democracy and economic development. Unions and lawyers are clearly key to recreating the vigorous democratic civic world and discourse that have been suppressed and degraded for so long inside Burma, and so necessary to any Burmese revival.

If you worry, like so many Americans, about excessive regulation, just check out recent Burmese history—where military officers can get a piece of your enterprise or endeavor at their whim. Talk to the Burmese entrepreneurs who without consent, compensation or process acquired new and rapacious military “partners” in their businesses. That’s what a world without rules and regulations looks like. A world without law, process, or lawyers does not have the diversity of interests needed to insure governmental accountability.

The International Confederation of Trade Unions (ITUC) has just completed an analysis of the new labor law, pointing out its many defects. It allows for the complete suppression of strike activity for wages, hours and working conditions. This important economic law was issued without any consultation with unions, independent scholars or employers. It is poorly drafted, and not harmonized with other Burmese laws or the new Burmese Constitution. It lacks clarity and important detail, and sadly reflects the deterioration of Burmese legal traditions such as draftsmanship. But, despite all these negative features, this new law seems to allow for registration of autonomous trade unions. The woodworkers and other workers who are registering under the Labor Organization Law will give the outside world, and Burma itself, a real test of whether this initiative in the direction of a freer civil society is genuine.

We, on the outside, will not only be able to see if the apparent opening of civil society is real, we may also see the recreation of a robust civil society with unions and other civic associations as new soil for the growth of democracy and the rule of law inside Burma. All concerned with the rule of law and democracy in Burma and Asia should keep their eyes on the efforts of the Burmese woodworkers, garment workers, seafarers and others to register free unions. Their efforts will tell us all if the openings are cosmetic for outside consumption or real for use by Burmese civil society.

[1] Clinton, H. (2010, July). Civil Society: Supporting Democracy in the 21st Century. Speech presented at the Community of Democracies, Krakow, Poland.

Wingnut Watch: Cain’s Latest Problem

Posted on by The Progressive Policy Institute

Herman CainAs the November 23 deadline for congressional action on a “supercommittee” package to reduce budget deficits by $1.2 trillion and avoid automatic domestic and defense cuts approaches, conservative activists have been steadily ramping up the pressure on supercommittee Republicans to hold a hard line against any tax increases. This missive from Heritage Action for America is pretty representative of the drumbeat:

Unfortunately, the “super committee” is veering off course and the odds are growing that massive tax hikes will be part of a final deal. Even worse, not all Republicans are willing to take massive tax hikes off the table. According to news reports, more than 100 House members–Republicans and Democrats alike–sent a letter to the “super committee” urging a “big, grand bargain–taking nothing off the table.” In Washington, that is code for a tax increase.

A few anti-supercommittee conservatives are willing to come right out and say that allowing across-the-board defense cuts to be enacted is an acceptable price to pay for avoiding tax increases. The most common rationalization is that these “sequesters” would not take effect until 2013, and a newly triumphant Republican president and Congress could fix the problem after the 2012 elections. Using the same kind of arguments, many activists have long claimed that a “grand bargain” that included major changes in federal retirement programs in exchange for tax increases would be unacceptable on grounds that Democrats would never keep their promises on spending in the future.

At an earlier point in the process, it appeared conservatives might allow some “wiggle room” for the supercommittee on taxes by considering the idea of a package that includes base-broadening “tax reforms” without raising actual rates on the wealthy or any major category of corporations. But the renewed popularity of sweeping, radical tax system overhauls, as reflected in the adoption of variations on the regressive “flat tax” idea by presidential candidates Herman Cain, Newt Gingrich and Rick Perry, has undermined what little support existed on the Right for revenue-raising elimination of “loopholes” under the general framework of the current tax code.

The same wingnuts who are having little trouble sticking to their no-compromise guns on deficit reduction are having a bit more trouble settling on a presidential candidate. A week ago, the big debate in Republican political circles was whether presidential polling front-runner Herman Cain would transform himself into a serious if unconventional candidate with a real organization and a consistent presence on the campaign trail, or instead would fade in the wake of either a comeback by Rick Perry or a sort of resigned acceptance, first by conservative elites and then by the rank-and-file, of Mitt Romney as the nominee. The betting line was not in Cain’s favor.

Then came Politico’s October 30 bombshell story revealing that the National Restaurant Association had settled two claims of sexual harassment against Cain during his presidency of the trade group in the last 1990s, and a couple of days of shifting stories from Cain and his campaign in reaction to the allegations.

Although the mainstream media has concluded from almost the very beginning that the Politico story means curtains for an already implausible Cain candidacy, it looks very different from Wingnut World. Though a few conservative opinion-leaders (mostly those thought to be friendly to Mitt Romney) have either kept their mouths shut or suggested Cain should come clean, the general reaction has been to defend him, with varying degrees of heat. The most common conservative media meme, one that Cain himself has encouraged, is to compare him to Supreme Court Justice Clarence Thomas as an outspoken African-American conservative who is being smeared by the “liberal media” and “the Left” generally, who are fearful that he will liberate his people from the “plantation” of subservience to Big Government and the Democratic Party.

Beyond the chattering classes, the very initial evidence is that rank-and-file conservatives are inclined to give Cain the presumption of innocence, and perhaps of innocence persecuted. Politico itself posted a headline today reading: “Iowa yawns at Herman Cain allegations.” The story attached to it had this very revealing passage:

Gregg Cummings, the Tea Party Patriots’ Iowa state coordinator, said among tea partiers the story of Cain’s sexual harassment allegations pales in comparison to the desire to have a conservative—“not Romney”—win the caucuses and the nomination.

“Hardly anybody is talking about it,” he said. “It’s not a big issue, in other words. I think the urgency of making sure that we get a conservative candidate to win the primaries is of greater concern to most of the tea party folks right now.”

More tangibly, the first poll taken entirely after the original Politico story broke, by Rasmussen in South Carolina, showed Cain with a ten-point lead over Mitt Romney and the rest of the field, his best showing to date in any South Carolina poll.

Sometimes damaging information about candidates just takes a while to build up steam in an array of media outlets and then penetrate the public’s consciousness. So Cain is hardly out of the woods, aside from the fact that more graphic details of his behavior, or indications of a cover-up, could soon emerge. But given the impulsive reaction in Wingnut World, it’s also possible, ironically, that this is exactly what the Cain campaign needed to distract attention from his lack of interest in world affairs, his waffling on abortion, or the details of his tax plan, and instead make him a martyr to the “constitutional conservative” cause that is still in search of a champion against Mitt Romney.

Photo credit: roberthuffstutter

It’s About (the) Time: Ending the Nonstop Campaign

Posted on by The Progressive Policy Institute

Somewhere in the last two decades, politicians began to believe that the way to win an electoral majority is not to prove that you can govern well, but to prove that you can campaign.

Today, politicians are caught in an ever-escalating, never-ending, 24-hour, 365-day campaign cycle dominated by the burden of raising enough money to wage a campaign creditably. For incumbents, the heft of a candidate’s war chest is what keeps potential challengers at bay—which means that even the safest members need the insurance of a sizeable sum of cash on hand. And for every candidate, last quarter’s results are just about the only proxy by which a candidate’s viability is judged.

The constant horserace over money (not ideas) has taken its toll on the quality of governance. For example, the Rasmussen report released a poll in July finding that 85 percent of Americans view members of Congress as “just out for their own careers.” Almost every poll finds Congress’s approval rating in the single digits.

Second, serious debate about any issue—e.g., the federal budget or taxes—is virtually impossible because there is no “safe period” in which an issue can’t be turned into a political football. Moreover, politicians simply have no time to devote to learning the arcana of policy. They are too busy attending fundraisers. As Republican freshman Richard Nugent said, “As soon as I got to Congress, people started asking me if I had started fund-raising,” Nugent said. “I was amazed at that. It seems to me that a person ought to get some results first before you start getting too focused on re-election. Otherwise, what on earth are the voters sending you to Washington to do?”

 

Supercommittee Puts GOP on Spot

Posted on by The Progressive Policy Institute

Is the supercommittee President Obama’s revenge?

After last summer’s showdown over raising the debt ceiling, Obama was roundly criticized for agreeing to a deficit-reduction deal that was all spending cuts and no tax hikes. Democrats, disconsolate over this seeming capitulation to House Republicans, saw it as the low-water mark of his presidency.

Yet the deal also created the bipartisan supercommittee, which was charged with finding at least $1.2 trillion (over 10 years) in additional cuts by Nov. 23. The supercommittee has a strong incentive to succeed, since its failure will trigger an automatic, equivalent cut in domestic and defense spending.

Now, as the supercommittee spars over dueling Democratic and Republican plans for meeting the target, Republicans are on the hot seat.

Democrats this week reportedly proposed a $3 trillion package over the next decade, including $1.2 trillion in revenue increases. Republicans came back with a smaller counteroffer of $2.2 trillion. The reason, of course, is that the GOP’s anti-tax fanaticism prevents it from matching the Democrats’ debt-reduction plan without proposing truly punishing cuts in federal spending.

The Republicans claim their package includes revenues ($640 billion worth) but much of it seems to come not from actual changes in the tax code, but from increased fees and co-pays in Medicare. The rest is supply side fairy dust—around $200 billion from the higher growth supposed to be generated by future tax reform.

The upshot is that Democrats now look like they are more serious about getting the nation’s debt under control, and in a way that spreads the pain of fiscal retrenchment more equitably. Republicans look like their top priority isn’t restoring fiscal discipline, but shielding the wealthy from higher taxes.

If they refuse to deal on taxes, they’ll likely be blamed for the supercommittee’s failure and subsequent trigger of automatic spending cuts. The GOP may not care about slashing domestic spending—even though it includes critical public investments in science and technology, infrastructure and education—but they do care about defense spending, which would take a whopping, half-trillion-dollar hit.

Of course, Republicans could offer a minimum bid of $1.2 trillion in spending cuts to avoid across-the-board cuts, and call it a day. Supercommittee Democrats, however, shouldn’t let them off the hook without substantial concessions on taxes. Democrats don’t want to trigger big domestic and defense spending cuts either, but it’s better to force the issue of GOP intransigence on taxes now than during the debt ceiling debate, when America stood on the brink of default.

Even if the supercommittee does its job and approves a bipartisan debt reduction plan by Thanksgiving, it’s by no means clear that Congress will pass it. Members of Congress hate nothing more than being “shut out of the process,” and many bridle at the idea of delegating power to 12 supercommittee members to craft a massive plan and present it for an up or down vote.

Complaining that he has “no stake” in the outcome, Democratic Rep. Henry Waxman added, “I find it an outrageous process, that 12 people could rewrite the laws of the United States and come up with ideas just setting there and getting into some mood that might influence them at the moment.”

Over on the right, there’s little love for the supercommmittee. Nothing is more predictable than that Tea Party zealots will rise in righteous condemnation of any plan that includes higher tax revenues, thus breaking the party of Lincoln’s solemn covenant with anti-tax gadfly Grover Norquist.

More favorable are congressional moderates, whose main concern is that the supercommittee won’t go far enough. Nearly 100 Members from both parties signed a letter urging the supercommittee to cut $4 trillion over the next decade, the amount most budget experts believe is necessary to stabilize the debt. For pain-averse lawmakers, the logic of “going big” and not having to keep repeating these excruciating political battles over spending and taxes is pretty compelling.

If the supercommittee fails, the economic and political consequences won’t be pretty. Fresh evidence that the nation’s political leaders are incapable of coming to grips with the debt crisis will no doubt cause the markets to nosedive, and could even lead ratings agencies like Standard & Poor to downgrade the nation’s credit again. This could cast a pall over the economy, just as it’s finally showing some signs of life.

Worst of all, it would deepen the public’s already explosive anger at Washington. A mere nine percent of the voters approve of the job Congress is doing, and 89 percent say they don’t trust the government to do the right thing. By going big on debt reduction, Congress could start earning back that trust.

Photo credit: DonkeyHotey

Weinstein on Overhauling the Federal Tax Code

Posted on by The Progressive Policy Institute

PPI Senior Fellow Paul Weinstein and Committee for a Responsible Federal Budget’s Ed Lorenzen argue for overhauling the federal tax code again after 25 years in The Atlantic:

Today marks the 25th anniversary of the Tax Reform Act of 1986, the last major overhaul of the federal tax code. Signed into law by Republican President Ronald Reagan and championed by Democrats such as Bill Bradley and Richard Gephardt, the enactment of the law was a remarkable bipartisan achievement. It dramatically lowered marginal rates with a top rate of 28 percent, removed millions of working poor off the tax rolls, and simplified the tax code by closing a myriad of tax loopholes.

Unfortunately, many of the loopholes that the 1986 reform eliminated have returned, with a few extra ones slipped in for added measure. Since the law’s enactment, more than 15,000 changes have been made resulting in a tax code that is several volumes longer than The Bible and requires 71,684 pages to spell out the rules. Because of this complexity, 80 percent of American households use a tax preparer or tax software to help them prepare and file their taxes.

But complexity is only part of the problem. The other is cost. Year-after-year, elected officials in Washington shovel more tax breaks into the trough (tax breaks now account for $1.1 trillion) causing both deficits and marginal tax rates to be higher than is necessary or optimal for the economy.

Despite the obvious need for tax reform, some in Washington are advocating that congressional Super Committee charged with finding a balanced deficit reduction package not tackle tax reform. They claim it’s too complicated, too hard, or too long-term.

Read the entire article.