Monday, January 16, 2017

"Net Neutrality," The Election, John Thune . . . And Your Internet Service.

     "Net neutrality" is the principle that internet service providers should give equal access to all content and applications without blocking or favoring specific products and websites.  The
Senator Thune
Hopping Mad At The FCC
rule is enforced by the Federal Communications Commission, but I believe it is now jeopardized, generally, by the election of Donald Trump, and specifically, by the fact that our U.S. Senator John Thune has been a vigorous opponent of the concept for years.  When the FCC voted 3-2 in 2015 to regulate the internet--a ruling upheld last year by a federal court--Thune was
incensed, calling it "partisan . . . a power grab . . . and federal overreach."  
     Thune's reaction reflected the general attitude among ISPs, who would probably love to develop their services into multi-tiered offerings of speed and quality, giving customers levels of service that vary with prices.  A.T.& T. and Verizon last month were tangling in an issue over the subject with the FCC and will likely be most supportive of taking net neutrality out of the communications lexicon as soon as the Trump administration starts staffing it with friendly commissioners. Of some note, A.T.&T. and Verizon are two of the top 5 contributors to Thune's campaign committee and leadership PAC during the period 2011-2016.
     South Dakotans who are used to unlimited internet accessibility to all sites and apps with the same speed applied to each of them should be aware of this likely change.  The incoming Republican majority at the FCC can immediately hit the "undo" button and reverse course on net neutrality simply by refusing to enforce the rule.  As it stands now, ISPs are banned from blocking or slowing legal internet sites and apps or generally using their connectivity to favor some sites over others.  The problem for consumers will come when the service providers begin showing some form of favoritism toward content that they might happen to own.  Speedier access to premium sites is a possibility.  
     You can make a case that a more lucrative operational setting will drive greater research and development among telecom companies, but the numbers don't back that up. Using the industry's own data from U.S. Telecom, broadband investment is about 50% higher than it was in the
Keepin' It Real
Keepin' It Free
mid-90s.  My guess is that once consumers get wind of what's going on with this, a backlash will emerge.  Dependence on internet access is about as common as dependence on earlier forms of communication as they were being developed. I doubt that passage of the Federal Communications Act in 1934 granting oversight similar to net neutrality hindered telecom R & D during the ensuing decades. I doubt that leaving the status quo intact will do so in the future  

Saturday, January 7, 2017

Repeal Obamacare? We South Dakotans Need To Look Before Leaping.

     The ongoing harangues against the Affordable Care Act (Obamacare) among our U.S. reps has been de rigeur among congressional Republicans since the act's inception in 2010.  But now that those dogs have caught that particular car, they seem a bit befuddled.  Vowing to repeal
Noem, Rounds, Thune
Obamacare? Grrrrr . . .
Obamacare, which Senator Rounds called a "sinking ship" last week, our federal reps, including Senator Thune and Congresswoman Noem, seem utterly clueless about how to proceed.  For one thing, Rounds has already referred to a "gradual transition" toward a replacement, which means he's bereft of ideas on what to do next.  Meantime, Congresswoman Noem says she wants to "retain safeguards for pre-existing conditions and allowing kids to stay on their parents' plans."  Telling the Rapid City Journal last month that "we need to give people more choices, not more mandates," Noem doesn't understand the linkage between ACA's individual mandates and insuring for pre-existing conditions.  We can't "choose" our way around that reality. Senator Thune hasn't said much on the subject of replacement, though he's voted to end Obamacare numerous times over the years, no substitute in sight.

     I think all three of them are just doing their partisan best to convince South Dakotans that repealing Obamacare will be good for us, details to be provided later.  What they haven't done is make a case for replacing a status quo that in the aggregate seems to have been pretty good for this state when it comes to health insurance.  We've seen significant declines in the uninsured rate, per data from the U.S. Census Bureau.  Findings from the Department of Health and Human Services show that 6,000 young adults now get coverage through their parents, and in a well-documented fact sheet put out by Families USA, 74,000 South Dakotans could lose their health coverage altogether if
We Better Look
Before We Leap
Obamacare is repealed outright, most of them among the 346,000 of us who have pre-existing conditions like asthma, diabetes or cancer. Meantime, if 2016 premiums in South Dakota grew at the same pace as the national rate, families on average are spending $1,400/year less on health insurance than they would have if pre-

ACA rate increases were still in force.
     There doesn't seem to be much doubt that ACA has had some significant statewide benefits for South Dakotans, a fact that suddenly seems to be dawning on our Republican U.S. reps and their partisan colleagues in Congress.  It's looking more and more like a slower-motion process will turn the chest-thumping and reckless rhetoric about immediately repealing Obamacare into the deliberative process that it needs to be. I admire that Pubs want to keep the best of ACA but am dubious about how they can do that by repudiating a system that most Americans (75%) either want left intact or abandoned only if a suitable replacement is found.  

Wednesday, January 4, 2017

Noem Likes The Congressional Ethics Commission. Will She Push For One In South Dakota's Legislature?

   Kristi Noem made a statement in Congress yesterday that merits some follow-up as she pursues her announced run for South Dakota governor in '18. Republican Noem is SD's sole rep
Make Mine Ethics!
in the U.S. House of Representatives, having been there since her election in 2010.  Despite a nondescript tenure, characterized mostly by going along with the political winds wafted by national Republican leadership, she's probably positioning herself as somebody with a track record that she can run on when the '18 campaign for governor gets underway a year from now. 

     I think she made a pretty decent start in Washington yesterday at the opening of this Congressional term by voting against an obnoxiously transparent effort by the majority of her Republican peers in the House of Representatives to gut the Office of Congressional Ethics.  119 House Republicans proposed to put the office under House control, essentially destroying its independence, a move that was so blatantly self-serving that even President-elect Trump used his bully Twitter account to scold Pubs and remind them that they had more important legislation to consider.  Having smacked the collective tone-deafness out of the GOP reps who promoted this thing, Trump got them to abandon the effort, post-haste.  Coming out of the fiasco in squeaky-clean fashion, Noem was one of 73 Republicans who voted against the move, for reasons that can coalesce into one conclusion:  She's okay with the idea of an independent ethics commission overseeing an elected legislative body.
     If I'm wrong and there was some other political or personal motive, I'm eminently correctable--and I invite explanation of Noem's vote by her office here in the blog's comment section.  Until then I take the existential position that Noem supports independent ethical oversight in Congress, not a particularly bold conclusion and one that dovetails with the idea of an ethics commission for South Dakota government.
     Such a body was actually created by the passage of Initiated Measure 22 in South Dakota last November.  The entrenched Republican leadership in Pierre, however, had a different view, beginning with Governor Dennis Daugaard conescendingly scolding his state's voters by telling
Inquiring South Dakotans
Want To Know
them they were "misled" into voting for the initiative. As expected, the measure was taken to court, where it was struck down as unconstitutional. That outcome notwithstanding, I have no doubt that the section of IM 22 establishing a D.C.-style independent ethics commission for South Dakota's legislature--indeed, all branches--would pass constitutional muster.  

     And now that Kristi Noem has staked out her position in favor of such a body in the U.S. Congress, I expect her to make the creation of such a commission a key part of her proposals during the coming gubernatorial campaign.  After all, her prospective constituents have already voted for one--and if it's good enough for South Dakotans and it's good enough for the U.S. Congress, why wouldn't it be good enough for South Dakota government?  What say you, Representative Noem?

Addendum added at 1503 1/4/17:  A reader just provided me with an interview regarding IM 22 with Kristi Noem last month in which she claimed that voters didn't get the "full story" on the measure.  She didn't specifiy the ethics commission aspect, so I'm hoping we'll get some clarification on the "full story" regarding her feelings about it.  Here's the url  

Thursday, December 29, 2016

South Dakota's Unfair Tax System Extends To Our Farmers And Ranchers

     Meade County Commissioner Galen Niederwerder penned a most provocative and insightful look into South Dakota's nagging problem with fairness in agricultural property taxation.  Writing for
Snowed Under By Taxes
In South Dakota
himself (not the Commission) Niederwerder's piece appears in my blog just below this post as a welcome addendum to my Nov. 30 Rapid City Journal column in which I called for tax reform by substituting income taxes for many of the regressive sales taxes imposed on South Dakotans.
     In that piece I had to ignore property taxes on agricultural land for space reasons and am glad that Commissioner Niederwerder followed through on this essential element in the conversation about tax reform.  He calls property taxes "the most regressive form of taxation" and adds, "ag property does produce income; however the taxes due are not based on the actual income produced, but rather a Department of Revenue bureaucrat's theory of what it should be able to produce."
    This seems an amazing and intolerable situation. The taxable amount is driven by income, which I can see, but not on actual income.  It's based on theoretical income.  There's an intrinsic craziness to this set-up--sort of like my accountant informing me that my tax obligation this year is not based on what I actually made but should have been able to make.  Subjected as they are to that kind of nuttiness, it's little wonder that Niederwerder and his many ag-oriented constituents in Meade County are crying "foul" and calling for some reform.  I know enough about the grain and livestock markets via my many years as a commodities trader, broker and producer to understand that producers have gotten clobbered during the past couple of years.
    Actually, the 76% drop in ag income in South Dakota during 2015 is more like a bloodbath than
Wheat Prices Wither
Taxes Don't
a mere clobbering.  Given the static nature of their property taxes, farmers and ranchers in this state are being unfairly squeezed by a tax system that is too rigid to accommodate their uniquely volatile markets.  As Niederwerder notes, "taxing the revenue stream is vastly preferable, whether it's on the incoming side when it's earned, or the outgoing side when it's spent."  He adds that he would support my suggestion for an income tax as a substitute for sales taxes if the proposal also called for elimination of property taxes or a designation that property taxes be used solely to fund local government services.  As with me, Niederwerder wants income taxes as a substitute for, not an addition to, existing taxes.  And also with me, this savvy county commissioner wants the word "fairness" applied more judiciously to South Dakota's tax system, which is profoundly indifferent to the equitable distribution of its burdern.

Tuesday, December 27, 2016

Property Taxes Need Overhauling As Part Of SD's Tax Reforms. Guest Post By Meade County Commissioner Galen Niederwerder

Mr. Niederwerder
Meade County (SD) Commissioner
  Two items recently published in the Rapid City Journal were read with special interest out here in farm/ranch country.
    John Tsitrian’s November 30th column and the paper’s December 6th editorial both discussed the sales tax shortfall currently befuddling Gov. Daugaard’s office. Both attributed the drop in state revenue to the severe decline in farm/ranch income this year, with the editorial noting farm/ranch income is down 76%. That’s right - 76%! Disappointingly, both pieces reflected only on the effect the decline is having on state revenue; neither mentioned the impact it is having on individual farm families and local economies.
   To his credit, Mr. Tsitrian did outline a possible solution to the problem - implementing a state income tax. Although it wasn’t clear, he seemed to suggest that it be an additional tax - not a replacement. But just adding a new tax wouldn’t necessarily fix the problem. At the very least, the governor and legislators could sure do a better job of budgeting; when their spending budget was set last year, their sales tax revenue projections were way optimistic. Not only so, it’s ironic - and troubling - that the state has a revenue shortfall less than a year after Daugaard engineered the two largest tax increases in state history.
   I agree with Mr. Tsitrian that we need tax reform. But not for sales tax supplementation - it’s necessary for property tax relief. Even as farm income has plummeted - not just this year, but over the past several years - Ag property taxes continue to skyrocket. That’s because the governor and legislature have determined that Ag property taxes are “too low” compared to Owner-Occupied and Commercial properties. And owners of those properties are also over-burdened - if you disagree, I invite you to attend the Assessment Appeal hearings before your county Board of Equalization next April.
  It’s truly the most regressive form of taxation. Ag property does produce income; however, the taxes due are not based on the actual income produced, but rather a Department Of Revenue bureaucrat’s theory of what it should be able to produce. Commercial properties are taxed the same amount, even if they’re vacant. And a homeowner is penalized for owning a mere object that has no innate ability to produce the dollars required by the state to pay the tax due on it. Fact: Property taxes are not based on one’s ability to pay, they’re based on a government official’s opinion of value. Taxing real property is as senseless as the Personal Property Tax that was outlawed 40 years ago. The system needs to be overhauled. 
  Taxing the revenue stream is vastly preferable, whether it’s on the incoming side when it’s earned, or the outgoing side when it’s spent. An income tax only taxes one on what is actually earned; make a little - pay a little, make more - pay more. And a person pays sales tax only if he feels he can afford the object he’s buying; if he can afford that, he can probably afford the tax. The current situation with farmers and ranchers bears this out with laser-point accuracy; sales taxes are down because they’re just not buying much right now. Although people don’t have to pay taxes on something they can’t afford to buy (obviously), they get no such grace when it comes to paying their property tax. Taxing the revenue stream gives people at least some control over their taxes; with property taxes, the state has all the control.
  So I support Mr. Tsitrian’s suggestion of an income tax, or an increase in the sales tax, or a combination - but ONLY IF achieved by a Constitutional Amendment that also either eliminates the property tax, or designates it for local governments exclusively, such as counties, townships, fire and road districts, etc. Otherwise, it’ll just be piling on. Can you imagine giving the state an additional source of revenue without constitutionally changing the property tax? It would be like handing gasoline to an arsonist.
 Yes, government and schools require revenue. And there is no truly “fair” tax. There is no such thing as the “best” way to tax, or even a “good” way to tax. Even so, the state should adopt a less worse form of taxing the people it governs. But please, Gov. Daugaard, don’t appoint a Blue Ribbon Task Force to study the issue. That’ll only result in another historic tax increase.

  Galen Niederwerder operates a small ranch and insurance agency with his wife, Donna, north of New Underwood. He is a member of the Meade County Commission; the opinions expressed here do not necessarily reflect the opinion of Meade County, or the other commissioners.  

Friday, December 23, 2016

Would-be Black Hills Uranium Miner's Biggest Stakeholder Was Just Indicted For Fraud In New York

     Azarga Uranium, the mining outfit that has been trying for about a decade now to set up a mine in the southern Black Hills, has financial underpinnings that have always looked shaky to
Azarga's Biggest Shareholder
The Company They Keep?
As South Dakotans consider the ability of this company to follow up on its plans and have the financial wherewithal to make things right if their operations disrupt the local landscape and groundwater, Azarga's finances should be kept under some very close scrutiny.  I have my doubts about the company's ability to even function, so flimsy is its financial superstructure.  I noted here a couple of months ago that its biggest stakeholder, a New York (albeit registered in the Cayman Islands) hedge fund called Platinum Partners, which owns 30%, is an outfit with some history.  At the time one of its associates had just been arrested for wire fraud and the fund itself was liquidating two of its largest positions.  

     Now it comes out that the partners at PP a few days ago were charged with fraud.  The 49-page indictment is consistent with the claim that the fund was effectively a Madoff-style Ponzi scheme.  Guilt has yet to be decided via due process, but if the facts in the indictment are accurate, this is an outfit that was on the ropes and desperate to cover up its hopelessly mangled finances.  It holds a 30% stake in Azarga that might have to be liquidated.  Dumping all that stock on the market would be some tough news to beleaguered Azarga shareholders who've already watched the stock price go from around $40/share ten years ago to 25 cents/share today.  A massive wave of selling is likely to put even more downward pressure on the stock. Azarga's 2015 annual report, issued last March, includes a cautionary statement by its auditors that "material uncertainties" in the company's financial position "cast significant doubt about the company's ability to continue as a going concern." (Italics mine.)
     The combination of the long delays in the permitting process to get the Black Hills (known locally as "Dewey-Burdock" for its location) mine operating and the crushingly low price of uranium, which hasn't recovered from the pounding it took after the Fukushima nuclear reactor disaster in Japan a few years ago, has been devastating to Azarga's fortunes.  Its stock now languishes in the slums of the
Platinum Partner
Alleged Perp
securities world, the penny-stock market. Its hopes for a revived stock price are based on the prayer that uranium markets and friendly regulators will converge into a positive outlook for the company. Meantime, it just keeps bleeding cash, operating at continuous losses, and now has to contend with a major shareholder that's fighting a criminal indictment. The State of South Dakota, generally, and residents of the Black Hills, specifically, need to keep an eye on this company's financial fortunes. Like its auditors, I have my doubts about Azarga and I'd like to see the company come out with some specifics about the soundness of its financial footing before anybody starts drilling holes at Dewey-Burdock.  

Saturday, December 17, 2016

No Need For Cheerleading, Senator Rounds

     Our U.S. Senator Mike Rounds is brimming with enthusiasm about the prospects for our "new president" and "reinvigorated Congress" to get to work next year.  Published last week in
Senator Rounds
Rubber Stamp?  We'll See
the RCJ, his glowing projections  for the newly installed Trump administration's commitment to "moving infrastructure into the fast lane" reflected some politically mandatory enthusiasm for the Republican-controlled federal government and its plans for "investing in infrastructure across America." Actually, I'd guess most Americans are plenty gung-ho about infrastructure investment, though Trump's proposal to make private financing the cornerstone of the plan should raise a few questions.  Rounds himself stood by while one of the largest public-private projects he endorsed during his administration as South Dakota's governor a few years back, the failed beef plant in Aberdeen, blew up into the EB-5 scandal.  That fiasco 
directly cost South Dakota $2-$3 million, probably more when you add in lost local and state taxes that bankrupt investors didn't pay.
     If that venture didn't make Rounds a bit more circumspect about his unabashed enthusiasm for Trump's public-private concept, the rest of us should be paying attention.  An analysis of the Trump plan by the conservative free-market thinkers at the American Action Forum uses words like "fantasy on steroids . . . nonsense . . . there is no infrastructure Genie" to lambaste Trump's supposedly revenue neutral plan for providing investors with tax breaks that will be offset by taxes on wages of new construction workers, along with corporate profits earned by builders and contractors. Meanwhile, the vastly more liberally-oriented Washington Post calls it a "trap . . . a tax cut plan for utility investors . . . that doesn't directly fund infrastructure" and could provide tax breaks for "investors in previously planned projects."
     The American Society of Civil Engineers has identified (in 2013) numerous infrastructure projects that need repairs and upgrades in South Dakota.  The total bill over the next couple of
Troubled Bridge
Over SD Waters
decades is in the hundreds of millions, and given the numerous bridge, road and water projects, among others identified by ASCE, that are crucial to our state's economy, getting a workable infrastructure program going under the Trump administration is high priority stuff for our state's Congressional delegation.  The traditional approach of direct government investment and oversight can be tailored by our elected officials to avoid excessive red tape, which is where the deliberative energy should be focused.  I hope Mike Rounds will show some more independence and analysis on this before going along with whatever the Trump administration hands him as his marching orders.