Saturday, November 18, 2017

South Dakota Senator John Thune's Bait-And-Switch On Tax Cuts

     Talk about your deceptive marketing practices.  South Dakota Senator John Thune in last Friday's Rapid City Journal repeated the dubious claim that the tax cuts being considered in the
Turning an opportunity
into a problem
U.S. Senate "will directly benefit middle income South Dakota families."  In support of his argument, Thune uses a Tax Foundation analysis that says the tax plan will result in a "$2,528 boost in after tax income for middle-income families" and "2,700 more new full time jobs for South Dakota workers."     
     With all due respect to the Senator, I'm skeptical about exclusively using data gathered by the Tax Foundation.  The Tax Foundation's base of support comes from well-known conservative groups like The Charles Koch Institute, the foundation's second largest donor between 2012 and 2015 at nearly $500 thousand.  Along with other conservative institutions, the Koch interests make up 9 out of the 10 largest donors to the Tax Foundation.  That by itself, of course, does not invalidate the Foundation's work and conclusions, but I believe that Thune could have gone to a source that is not so reliably conservative before trying to convince us South Dakotans that the plan he's touting is unwaveringly good for us.  At the very least our senator could have called attention and responded to analyses that reach opposite conclusions.  
     For one thing, Thune could have consulted Congress's in-house studies.  In a report on the Senate tax bill released last week by the non-partisan congressional Joint Committee on Taxation, the full story has a less rosy cast to it than Thune's characterization.  According to the congressional analysts, by 2019  Americans at every level do indeed get a tax reduction.  But by 2027, anyone making less than $75 thousand a year would get a tax increase, while those earning more will continue get their taxes cut.  
     As to the Senator's promise that the bill will create "2700 new full time jobs for South Dakota workers," I'd like to know what the heck he's talking about.  We have more jobs than workers as it is. As an employer in this state who is in full contact with the situation every day, I know that we have a serious labor shortage in South Dakota. Our dairy industry is seeking workers from Puerto Rico, and our persistent problem with a shortage of construction workers is an ongoing challenge. And don't even tell me about the situation on my home turf, the tourism industry.  Tax cut or no tax cut, how does South Dakota create jobs when we can't fill the ones we have?  More to the specific point, though, Thune's contention about job growth is pie-in-the-sky.  Job growth was weak after George W. Bush's national tax cuts. Same goes for Kansas Governor Sam Brownback's in his state during the past few years.  I have yet to see a connection between business tax cuts and job creation, at least during economic expansions like the one we're in now. I challenge Thune and his supporters to find some evidence backing up that claim. 
     Short of that, I'm calling bait-and-switch on Thune and the tax cut he's touting.   

Addendum (posted 11/18/17 @2029):  Here's a Ted Talk that covers the "tax cut=jobs creation" myth.

Monday, November 13, 2017

There Are Myths, There Are Legends, There Are Tax Cuts

   The persistent mythology that tax cuts stimulate economic growth keeps making its way into South Dakota's Republican pitch for the reform plan making its way through Congress.  Last week our Congresswoman Kristi Noem used a hypothetical pizza business owned by "Beth" as
Yeah, Right.
The National Debt Doubled Under Bush
an example of how her savings of $3 thousand dollars a year under the new proposal could "free up money to install a new oven or give her employees a little raise."  This is actually pretty laughable, considering the average cost of the 5 pizza ovens featured on Google is $12 thousand.  Take out the two counter-top models and the average jumps to $18 thousand.  It would take 4 to 6 years for Beth's tax savings to pay for even an average oven. Some "free up."   As to that "little raise," Noem is right about one thing. In this day and age, $3 thousand spread out over a staff of people needed to operate "Beth's Pizza Parlor" is "little" indeed.  And from "Beth's" perspective, that salary increase would result in higher federal and state employment taxes, to the tune of several hundred dollars a year. 

      Like many of the enterprises owned by my peers in the business community, mine would probably gain a "little" something from Noem's plan, but I doubt that the cumulative effect would amount to much.  We South Dakotans know from personal experience that there isn't any correlation between lower income taxes and economic stimulation.  The fact that we don't even have a state income tax hasn't done much to spur economic growth in our state.  We've certainly had an awful track record since 2011, the first year of Governor Dennis Daugaard's term.  Since then our cumulative per capita GDP growth through 2016 has been .2% (yep, the decimal is in front of the "2").  That compares to a 6% total, nationally.   In other words, U.S. growth during that period has been 30 times greater than South Dakota's.  Tell me again how low or no income taxes stimulate economic growth.  
     If this anemic performance were a regional phenomenon, that would be one thing.  But it's not.  With the exception of energy market-hammered Wyoming, all of South Dakota's surrounding states have done significantly better than we have, and 5 of the 7 have state income taxes.  Our state's "no income tax" appeal has been an illusion.  Meantime, leapfrog Nebraska and check out Kansas.  The results of Kansas' tax-cutting regimen based on the notion that lower taxes stimulate economic growth have been a complete bust.  When Governor Sam Brownback took over in 2011 he vowed to turn Kansas into a fiscal conservative paradise by slashing state income taxes.  The result actually turned out to be "paradise lost," with economic growth coming in at a fraction of the national rate and a budget shortfall this year of nearly $1 billion.  
     The national track record on tax cuts is just as bad.  George W. Bush's cuts were followed by the worst recession since the 1930s and a doubling of the national debt.  Reagan's led to a tripling of the national debt.  I'll take a tax cut anytime, but spare me the baloney about how it will stimulate the economy.  

Friday, November 3, 2017

Take Action Against Mass Murderers? Depends On Who's Doing The Killing

     South Dakota Senator John Thune's infamously impotent advice to Americans caught in the crosshairs of a mass murderer immediately after the recent massacre in Las Vegas is a 
Helpless Today, Determined Tomorrow
revealing glimpse of enfeebled leadership. 
His cluelessness was disastrously highlighted by last Sunday's massacre in Texas.  Thune's eunuch-like behavior is also a dismayingly sharp contrast to his reaction to the ISIS terrorist who went on a rampage in New York City last week.  Apparently, Thune's commitment to Congressional pro-activity aimed at heading off wholesale bloodshed depends on who is doing the killing.  

     After the carnage in Vegas, Thune talked to NBC's Hallie Jackson.  Telling her that "we'll look at the facts when we get them all in here," Thune went on to say "it's an open society.  And when somebody does what he wants to do--it's going to be hard to prevent anything.  I think people are going to have to take steps in their own lives to take precautions . . . As somebody said--get small."  In other words, we're virtually helpless to stop mass shooters, so people need to get small--as if that advice would have done any good to the targets in Vegas and Sutherland, Texas, who were shot randomly and en masse. As to waiting for the facts to get in, it's been a month since the freakout in Vegas and the bump stocks that turned the shooter's semi-automatic into a virtual machine gun are now back on saleAny steps at regulating or banning them by Congress have gone nowhere, with the National Rifle Association calling bills to ban them "intentionally overreaching."
     Having fired countless bursts of automatic fire from my M-16 when I was a Marine in Vietnam, I'd call Congressional apathy toward banning these devices intentionally indifferent and appallingly apathetic.  I know during his tenure in Congress that our Senator Thune received $181 thousand from gun lobbyists through the 2016 election cycle, but I think he can keep the gun lobby happy and do something to regulate bump stocks at the same time.  
     Meanwhile on another front in the war against mass murderers, terrorism, Thune abandoned his fatalistic "hard to prevent" rhetoric and called for immediate congressional action.  Just a day after that ISIS-inspired truck massacre in New York City last week, Thune said of terrorists, "They're always coming up with new ways to be lethal.  And we've got to do everything we can to stop them."   We're all with you on that, Senator, but I wonder why your boldness and determination applies to one scenario but not another.  
     Scientific American magazine looked at this a month ago. It calculated that since 1970 fewer than 100 Americans a year (and that average includes the 3,000 killed on 9/11) are killed by terrorists.  11,000 Americans are murdered by perps using firearms (another 20,000 die by self-inflicted gunfire) every year.  Like anybody with a lick of sense and some serious experience with firearms, I know that gun control has its limits.  I also know that the war on terrorists, both domestic and foreign, has its limits.  But to shrug one off with a response as feeble as "it's going to be hard to prevent anything" while at the same time vowing "to do everything we can" to keep the other in check is a disheartening contrast of commitments.  Why isn't Thune troubled by this?

Monday, October 30, 2017

South Dakota Keeps Betting On Commodities . . . And Keeps Coming Up Short

     South Dakota continues to hinge its economic well-being on the vagaries of the commodity markets.  In a piece published last week in the Pierre Capitol-Journal, Bob Mercer reports that
Time For A Revised Edition
South Dakota Is Going Backwards
South Dakota's adjusted sales tax revenues for the fiscal year that ended last June 30 were nearly 2% lower than those of the preceding year, which is really 4% accounting for inflation.  State economist Jim Terwilleger, addressing South Dakota's Council of Economic Advisors, says in the piece that the shortfall is tied  "directly to weakness in the agricultural economy."  

     Terwilliger went on to call FY '17 a "trough" in ag spending in South Dakota.  He added that it was the third consecutive year of "slumping crop prices."  There's no question that crop and livestock prices have been in a prolonged slump, but I do wonder how Terwilliger concludes that we're in a "trough," which in econo-speak means a low turning point, suggesting that prices will soon be trending up.  After reviewing price charts for corn and feeder cattle to be delivered a year from now, I see nothing particularly cyclical showing up in the futures markets  that would make prices now look like they're in a trough and about to swing higher.  It'll take a major natural or political cataclysm to make that happen.  Otherwise, sentiment across the board is saying that 2018 is likely to be the same-oh, same-oh.  
     And that's where South Dakota's collective finger-crossing in hopes of strong commodity prices continues to come across as a poor alternative to more conventional forecasting and state financing methods.  Noting that our state's 2018 budget is built on an assumption of 4% growth, Terwilleger says that "I don't know if we're going to get there."  Nobody knows, but there's good reason to be pessimistic. More to the point, there's good reason to be fed up--South Dakota continues to be commodity-price dependent because so much of our state's revenues are gathered up by sales taxes, which account for about 83% of the funds that Pierre collects every year, more than twice the amount collected nationally.  Facing facts that consumption taxes in our state are directly dependent on crop prices, Terwilleger notes that sales tax revenues from the sale of agricultural equipment were down $10 million in 2016, to levels that were about the same as they were 20 years ago.  More broadly, lower crop prices, to the tune of about $3 billion annually from 2011 to 2016 reduce the flow of spendable, sales taxable, cash.
     Betting on strong commodity prices year after year is a dumb and irresponsible way for South Dakota to do its budgetary planning.  We need to reform taxes in a manner that will wean us away from agricultural market dependence, and that includes reviewing sales tax exemptions (about $1.1 billion--with a "b"--in 2015) and putting some progressive corporate and individual income taxes into consideration.  As it is, we've been going nowhere fast of late.  During the 5 years that ended in 2016, South Dakota's per capita GDP growth was a feeble .2% compared to a national number that exceeded 6%.  We're stuck in reverse.  It's time to shake up the status quo.  

Monday, October 23, 2017

Sustaining The Unsustainable

       As if the disastrous shredding of the Republican promise to repeal and replace Obamacare weren't an embarrassing enough exposure of the GOP's inability to bring its rhetoric into line with reality, we now have the spectacle of a tax cut promised by President
Rounds And Thune
Not A Bit Worried About Federal Debt
Trump that is likely to jack up the very deficits that South Dakota's U.S. senators have been vowing to contain for years. 
  Our senior Senator John Thune preaches in his website that "for too long responsible budgeting has not been practiced in Washington" and that "our country is on an unsustainable fiscal path."  Not to be out-evangelized, junior Senator Mike Rounds said in his website last August that "with our debt spiraling out of control . . . it's clear that federal spending at current levels is unsustainable."

     So just how did Thune and Rounds mount their crusades against unsustainability?   They ignored them and voted last week to approve a budget of about $4.1 trillion in spending with revenues anticipated at $3.65 trillion, leaving a deficit of $440 billion through October, 2018.  What's more, in the byzantine process of Senate deliberations, this budget sets the stage for deficits totalling $1.5 trillion over the next 10 years.  So much for unsustainability.
     Naturally, there's a Republican explanation for this gush of red ink our Senators support.  According to the partisan line, this budget sustains the "unsustainable" in order to smooth the way for the tax reforms that President Trump has been pushing since inauguration day.  The GOP line is that Trump's tax cuts will not be budget busters at all.  Powerful economic growth will generate tax revenues that themselves are strong enough to cut into the federal debt and bring it more in line with historic levels. Based on the experiences of the last half-century, this is bunk.  I have yet to see any data that support that argument.  George W. Bush's tax cuts were followed by the 4th largest national debt increase incurred during a president's tenureReagan's often-ballyhooed tax cuts were followed by a tripling of the national debt during his years in office.    
      Bringing that theory down to a more relateable level, the recent Kansas tax-cutting experiment instigated by Governor Sam Brownback has been a disaster, leading to a $900 million deficit. The Washington Times last summer called Brownback's effort a "failed tax experiment" that should be heeded by Republicans at the national level.  We South Dakotans can take note of the fact that we don't even have an income tax, which according to Republican dogma should make our state a wonderland of investment and economic growth  As we've seen, of course, that's a pipe dream.  In the 5 year period that ended in 2016, South Dakota's per capita GDP growth was a fraction of 1%, compared to a national growth rate of more than 6%.  Last June the financial data service Wallethub ranked South Dakota's income taxless economy an underwhelming #32 in the country.  Much as tax relief would be nice for me and my peers in South Dakota's business community, on the basis of facts and history, I'd like to know how Senators Rounds and Thune can keep pushing the line that tax cuts will make up for the federal deficits they support    

Tuesday, October 17, 2017

South Dakota's Motto "Under God The People Rule" Is About To Get Tested . . . Again

     Talk about the power of a popular backlash.  Tommorow's gathering in Pierre is a serious statement about the will of a lot of people in South Dakota, more than 50 thousand of whom (me
They Will.
included) signed a petition intended to bring our state's government into compliance with the state motto "Under God The People Rule."  The petition will put the "Voter Protection and Anti-Corruption Amendment" to the South Dakota Constitution on next November's ballot, where I believe it has a great chance of passage.  

    This initiative is a direct response to the way our state's legislative and executive branches dismantled Initiated Measure 22 during last Winter's session.  IM-22 was a complicated amalgam of draconian restrictions on government and electoral processes that included a provision for taxpayer funding using a system dubbed "democracy credits" for candidates seeking office.  Though I was generally supportive of its goals for oversight and transparency, the taxpayer-financing  of elections turned me off and I opposed the measure, which nonetheless passed with a 52-48 majority.  
      The political backlash in Pierre was swift and decisive.  Within weeks of IM-22's passage, Governor Daugaard disdained the new law, calling it "irresponsible" and a "bad law."  He also condescendingly scolded voters by claiming they were "misled" and "deceived."  As expected, the law itself was immediately challenged on Constitutional grounds and began moving through the courts, where it was headed for judgement by the state's Supreme Court.  In the meantime, state legislators and the Governor crafted a series of replacement acts while repealing IM-22 altogether via House Bill 1069. Neither the state's courts nor a majority of South Dakota voters were considered to be a relevant part of the process.
    The subsequent pushback by voters is one that I supported right away.  Like plenty of South Dakotans I was dismayed by the cavalier and presumptuous manner in which our elected officials blew off  the will of the people and destroyed the measure before it was given its due process in court. "Under God The People Rule" was rendered a mockery and the resulting outrage should come as no surprise to our political class, as SD's legislative and executive branches now have to contend with a powerful, new replacement for IM-22.
    This "updated" version wisely dropped the deal-killing "democracy credits" plan for taxpayer financing that turned off a lot of potential supporters.  Also, unlike its predecessor this amendment is much simpler and focused on fewer concepts, possibly the most important of which is that it stops elected officials from overturning any voter-approved laws without going back to the voters themselves for permission.  I also like that the proposal creates an independent citizen's ethics commission, not the state agency (I mean, the state monitoring itself?  Come on.) that the legislature set up when it revoked IM-22. It also flat-out bans gifts (including food, beverages and alcohol) from lobbyists to elected officials.  A provision banning "foreign" money from our elections could stand some explanation, but coming discussions and debates will clarify it.  You can go to to read the full amendment.  Nobody, most notably our elected officials, will be "misled" or "deceived." Some might even be enlightened.

Friday, October 13, 2017

A Q For SD Pubs Running For Congress: Your Thoughts, Please?

     It's been many months since Shantel Krebs and Dusty Johnson announced that they'd be running for the Republican nomination for Congress next year.  So far it looks like they've been going through all the standard motions, but apparently neither of them feels the need
Trump Toady or Independent Thinker?
to be burdened with positions on issues that matter to us South Dakotans. As you might expect their respective websites don't reveal much in the way of specifics, so I've been looking elsewhere for their thoughts on policy.                                                                                                                         
Upon googling, it looks like the closest Krebs has come is to make a broad proclamation to the Rapid City Journal last month, telling the paper that when Trump was elected she was "all in," and that her motivating force is that she "wants to help him deliver results."  Her "logo" (doesn't Krebs mean "slogan?"), she explains, is "Get it done."  I admire that she rejects procrastination, but I also wonder what the "it" is that she's determined to "get done."  If "it" references her complete devotion and dedication to Trump and his policies, I wouldn't give Krebs much consideration as a congressional  representative.  "All in" is pretty inclusive, which sounds to me like she's determined to be a rubber stamp for the administration.  If elected would she have the mettle to assert some independence when White House policies may not be the best for South Dakota?  For example, is she "all in" with Trump's hostility toward NAFTA?  He's on the record as calling it the "worst trade deal" ever approved by the United States, yet the benefits to farm states since the treaty's inception a quarter-century ago are self-evidently positive, as our senior Senator John Thune noted in a radio interview recently.  
     My guess is that Krebs will be quick to reject the notion that she'd be a rubber stamp for the White House.  I mean, who on earth would go on record as being a toady?  But by doing so she would be repudiating her "all in" commitment to the President.  Her website provides a nice bio and platitudes along the lines of making Washington "responsive" to the needs of our state, but doesn't touch specifics. So what is it, Ms. Krebs, are you all in with Trump or are you willing to consider issues on their merits and make decisions based on what you think is best for South Dakota?
Dusty Johnson, whom I've met and like, is also running a campaign that's long on self-promotion and short on policy substance.  He says he's running for Congress because he's an "optimist."   That's about as good a reason as any, I suppose, but given his background as a Commissioner on South Dakota's Public Utilities Commission, I'd expect him to say much about national energy policy and how it would affect South Dakota.  For example, last week's repeal of the "Clean Power Plan" by the Trump administration could have significant effects on ethanol production, which depends on South Dakota's largest crop, corn, as its feedstock.  Does Johnson have a position on this?  I did find a comment about healthcare in the Rapid City Journal last July--Johnson thinks more control should go to the states, a not terribly earth-shaking position by a Republican.  He could have given us a clue about how he stands on the measures to achieve that end
Optimist, But What About Policy? 
that have so far failed in the Republican-dominated Congress.  

     That programmatic response on healthcare is probably a signal that Johnson will do as expected by the GOP, but considering his long-standing status as both an appointed and elected official, I'd love to know more.  In particular, given his experience as a state government insider, his opinion of how South Dakota could successfully run a federally funded program after our state's abysmal track record with EB-5 and Gear Up needs some explanation.  
     As with Shantel Krebs, Dusty Johnson is politically pragmatic enough to know that avoiding serious policy commitments is a way to stay out of trouble on the campaign trail.  But given what seem to be equal measures of affability, experience and media appeal, it would be nice if they could find a way to differentiate themselves on the basis of something other than gender.