Tuesday, December 26, 2017

Will Kissing Up To Trump Work For Shantel Krebs?

           South  Dakota Secretary of State Shantel Krebs, looking to win the Republican nod for a place on the ballot, hasn't made much news yet, but as of last August her campaign had
Her Own Woman
Or Just Another Trump-bot?
compiled $230 thousand,  probably a good start toward matching the current seatholder Kristi Noem's first campaign war chest of $1.1 million in 2010.
  Her campaign is still fairly light on specifics but some general impressions make it pretty clear just who Shantel is and the voters she wants to win over.  She made a broad proclamation to the Rapid City Journal last September, 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 slogan 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 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.  
     No doubt Krebs has her eyes on the huge margin of victory that Donald Trump got in the 2016 vote in South Dakota and plans to ride some vestigial coattails associated with it.  But given Trump and his administration's general antipathy toward free trade, corn-based ethanol and wind power, my guess is that Krebs will be quick to reconsider the notion that she'd be a surrogate for the White House.  I mean, given what we know about Trump at this stage of his administration, who on earth would go on record as being one of his toadies?  Aberdeen, SD, just lost a 400-job windpower-connected factory because of  Trump's pro-fossil fuel policies. Is Krebs all in with that?  Her website provides a nice bio and the usual platitudes along the lines of making Washington "responsive" to the needs of our state, but doesn't touch on many specifics.  One exception: her hostility toward the Supplemental Nutrition Assistance Program, aka Food Stamps.  Oddly for someone claiming to be a voice for agriculture, she opposes the American Farm Bureau's unqualified support for the program, which someone with her farming background should know has been a boon for the ag industry.  
     Sellable as it will be to many Republicans in South Dakota, Krebs' "I'm all in with Trump" campaign is a risky venture.   Next time up I'll think about whether Dusty Johnson will provide a viable Republican alternative.

Friday, December 15, 2017

Deficits? What Are Those?

      The tax bill working its way into completion in Congress with the unqualified support of South Dakota's congressional delegation continues to look like a venture in legislative
Noem, Rounds, Thune
Deficits?  What Are Those?
surrealism. 
First off I keep wondering if this silly notion of filing our tax returns on a postcard has ever made any sense.   Who in their right minds would send personal information--especially Social Security numbers--into the mails on a post card?  Not only does the nonpartisan Tax Policy Center think the idea is ludicrous, the center notes that the equivalent of a one-page postcard already exists.  It's called  Form 1040EZ.  TPC thinks the number of taxpayers who will be able to simplify their returns into a single-page format created by the tax bill will grow to 29 million, a 12% slice of the 240 million returns that are filed each year.  How many of those are likely to use a tax-preparation service is impossible to determine, but Turbotax and Jackson-Hewitt, among other such services, court short-form filers, so they must be a market of some consequence.  Indeed, the IRS estimates that 90% of Americans use tax-prep services, many of them short-formers.  I doubt that number will change much under the new code, simplification or no simplification.  Meantime, 210 million filers will still have to do it the hard way.  Thanks for not much, tax reformers.
     more unnerving embrace of surrealism is the casual manner in which deficit hawks have waved off the specter of increasing federal debt built into this bill.  South Dakota Senators John Thune and Mike Rounds have both called existing deficits "unsustainable," but enthusiastically embrace this bill just the same.  Congress' Joint Committee On Taxation says that the $1.4 trillion in revenues lost by the tax cuts will only be partially offset by $458 billion in revenues gained by its boost to the economy.  That leaves a $1 trillion dollar hole in the federal balance sheet in 10 years.  Thune, Rounds and their equally indifferent counterpart in the House of Representatives, SD Congresswoman Kristi Noem, have built their careers on complaints about federal deficits, yet here they are, cheering on the addition of another trillion bucks to our federal ocean of red ink.  Their collective admiration for the notion that tax cuts will stimulate enough economic growth to pay for the deficit has been pooh-poohed by history so many times that you wonder if our elected reps go catatonic when confronted by this type of analysis.  Moody's Analytics says the economic stimulus argument is baloney, as does the track record of tax-cutting itself.  Reagan, George W. Bush, Kansas Governor Sam Brownback--all have tried this gambit and failed. Sharp increases in debt followed their much-ballyhooed tax cuts.
     Adding to this Salvador Dali-esque dreamscape is the sudden appearance of the flaws in Congresswoman Noem's tale of tax-devastation to her family in 1994 when her father died.  An examination of it last week in USA Today headlines that Noem's "family saga doesn't add up." The piece concludes that the story "does not line up with some very basic tenets of the tax code." The bit about not "adding up" seems appropo.  Not much in this tax bill adds up.
   

Friday, December 8, 2017

South Dakota Governor Daugaard Calls Me Out In Today's Rapid City Journal. He's Mistaken. There's GDP, And Then There's GDP Per Capita.

     Daugaard doesn't address the difference between GDP and GDP per capita in a piece directed at  me in this morning's Rapid City Journal.  In his op-ed column Daugaard claims that I erred in comparing U.S. GDP
Governor Daugaard
Not Seeing Eye To Eye With Me
with South Dakota's GDP in my own RCJ op-ed piece last week.  He's mistaken.  I compared per capita  GDPs, which are a vastly different and far more informative depiction of economic growth.  It takes into account population changes.  For example if GDP growth is 2%, but population growth is 3%, per capita GDP has actually declined because economic growth hasn't kept pace with the growth of the population. Here's a concise definition of why the difference is important:  
"GDP per capita is a measure that results from GDP divided by the size of the nation’s overall population. So in essence, it is theoretically the amount of money that each individual gets in that particular country. The GDP per capita provides a much better determination of living standards as compared to GDP alone."  In other words, the macro (GDP) number is one thing, its per capita counterpart is another.
     It's wonkish, I know, but Daugaard's correct cite of GDP growth has nothing to do with my comparison of GDP per capita growth.  Using the Commerce Department's Bureau of Economic Analysis data, Daugaard would clearly see that U.S. GDP per capita growth has vastly outperformed South Dakota's, with the U.S. figure coming in at about +6%, and South Dakota's declining a bit.  I stand by my characterization of South Dakota's performance as "pathetic" and my belief that holding the state's governing class to an objective standard when it comes to issuing pay raises seems reasonable and consistent with many private sector benchmarks for performance.  The Governor himself even applies the principle.  In his FY 2018 budget message, Daugaard delayed until next year a state employee pay-for-performance component available to some of them "due to lack of available funding" and no pay increase outside the "market adjustment" for all other classified state employees.  A no-growth economy resulting in a drop of government revenues means nobody gets a real raise, which is basically the point I made in the first place.  
     Also, Governor Daugaard in the course of his piece noted that I often refer to myself as a Republican, but that my "op-eds and blog demonstrate [my] liberal bent on most issues." Coming from a lawyer presumably trained in the rudimentary principles of logic, Daugaard's ad hominem distraction is a surprise, though I suppose in this politically tribalistic culture of ours, fallacious reasoning  and its subsequent diversions can come to be expected.  In any event, I'm no longer a Republican, having changed my registration to Independent several months ago. What hasn't changed is that on a per capita basis, South Dakota's economy has fallen significantly behind that of the United States and five of six of our surrounding neighbors.  
     That said, I do appreciate that Governor Daugaard has given my work his time and attention, especially in a forum like The Rapid City Journal.  Our differences are obvious and profound, but in the long run everybody's awareness and understanding are elevated by public conversations like this. I wish the Governor well as he comes into the concluding year of his administration.  

Tuesday, December 5, 2017

Iowa Native And Great Friend Diane Grant Reacts To Iowa Senator Chuck Grassley's Patronizing And Disdainful Remarks About Ending The Estate Tax

     Here's what Grassley said:  "I think not having the estate tax recognizes the people that are investing, as opposed to those that are just spending every darn penny they have, whether it's on booze or women or movies,"


     Here's Diane's reply:  Despite the fact that Iowa is often characterized as backwards and full of country bumpkins, and that I haven't lived there for more than 40 years, I have always been proud that I am a native Iowan. The state consistently ranks in the top ten for education, it has a healthy two-party system where one's vote counts for something, and the general quality of life is high. But Mr. Grassley, you have diminished my pride. I have refrained from commenting on recent political actions, but this time I could not stay silent.
My father considered you his friend. He campaigned for you. He entertained you in his home a few times. He had the highest regard for you, and since I respected my father's opinion, I also held you in high esteem, even though I did not concur with you on many issues. My father passed away almost a year ago, and I can't help but wonder how he would view you now.
Mr. Grassley, would you please define for me just exactly who those people are "just spending every darn penny they have, whether it's on booze or women or movies?" Many of us would like to know. Please explain to me how you can justify your vote for a tax bill that truly only benefits the top 1%, that essentially raises taxes for the lower and middle classes, that takes away medical coverage for 13 million people, and increases the deficit by more than 1.4 trillion dollars. Who are you really serving? In my view, it is not your constituents; it's not the majority of the American populace. Is it the narcissist who currently occupies the Oval Office?
You are not alone - I am just as disgusted and disappointed in the South Dakota senators who also put party ties, class and nepotism ahead of conscience and what they know is morally right. I am utterly discouraged by the current divisive partisan politics. However, I am a believer in karma - what goes around, comes around. Eventually - and I hope sooner than later - a reckoning will come.
- Diane Rasdal Grant

Monday, December 4, 2017

South Dakota's Budgeteers Are In A Self-Induced Hypnotic Trance.

     Self-hypnosis seems to be the governing style that defines how South Dakota keeps ignoring some fundamental causes of the state's persistent shortfalls in tax collection.  Governor
Daugaard
Costs Are Up, Revenues Are Down
Daugaard last month announced that we're headed for another lean
 budget year because of lower than expected receipts from sales and contractor excise taxes.  As if hypnotically transfixed into denial of the obvious, Daugaard blames a trend toward more spending on medical expenses, which are exempt from sales taxes, noting that healthcare takes 20% of consumer spending, up from 15% in 1997.
     This is a new excuse and it doesn't wash.  There's no reason to doubt its conclusions about the growth of healthcare spending, but why it was suddenly discovered and declared to be the whipping boy for our state's anemic showing on tax receipts is open to question.  For one thing, the growth of healthcare as a portion of South Dakota's economy matches closely  with the national trend, so there's good reason to wonder why it seems to come as a surprise to our state's leadership.  The trend has been clear and well-known for decades.  Daugaard's revelation of it merits a big "duh." 
     The national economy, which has performed vastly better than South Dakota's, has successfully absorbed the shift in consumer spending toward healthcare.  Why hasn't South Dakota's?  It's a compelling question, and Daugaard needs to address it.  The fact is, South Dakota's economy hasn't come close to matching the overall growth of the U.S. economy, which on a per capita basis has grown 30 times more than South Dakota's.  Ours actually has a declined a bit during the period since Daugaard's first year in office, 2011.  It's little wonder that the increased spending on healthcare has had such a major impact on our state's revenues while the more robustly growing national economy hasn't been hampered by it.  
     A rising share of healthcare spending and it's effect on South Dakota state revenues only exposes the inefficiency and inadequacy of our state's tax system.  82% of SD's revenues are generated by sales and gross receipts taxes, which are disproportionately paid by lower income earners, leading USA Today to rank us the 4th worst state in the country when it comes to regressive taxation.  Turns out that healthcare spending hits lower income folks disproportionately harder also, so if Daugaard is contemplating slapping a sales tax on healthcare goods and services, South Dakota's lower-earning households will be more burdened than their higher-income neighbors.  The contempt for our poor and lower-income-bracket citizens that is built into South Dakota's tax system would only have its meanness intensified by taxing healthcare services.
     Meantime, as long as we're looking at sales tax-exempt goods and services, a scan of how much those tax exemptions cost South Dakota is long overdue.  The SD Department of Revenue in 2015 calculated that all exemptions, if taxed, would yield $1.1 billion to the state.  Our agriculture sector receives about 15% of those breaks while healthcare gets about 12%. The rest of the list is long and studded with special interest categories.  Unfair as the system is, there's a way to spread out some of the burden by putting those interests on to the sales tax rolls.  It probably amounts to a short term fix, but it might be a way to get South Dakota on the road to real tax reform.  
   
   
     
     

Monday, November 27, 2017

South Dakota Legislators Need A Pay Raise, But It Shouldn't Be Automatic

     Though it shouldn't necessarily be automatic, South Dakota legislators need a pay raise.  As it is now, the salary that state reps and senators get is $6,000 a year plus $142 per diem for each
For This Kind Of Money?
I Don't Think So
legislative day and some compensation for work done away from the legislature. Sessions last from around January 10 through late March, each containing either 35 or 40 (depending on even or odd numbered years) legislative days. The salary has been fixed for 20 years while the per diem is adjusted by the legislature itself.   

     This kind of money is actually awful for the time and effort our elected officials put into their work.  Calculated on a daily or hourly basis, it's roughly entry-level compensation by private sector standards. Though the number of "work" days when the legislature is actually in session seems limited, the fact is that legislators (at least every one I've ever known) are tied up in the process for virtually the entire 70 or so days that it takes to get an annual session completed.  Then there's the year-around commitment to their positions that require attention to matters of state government, including a lot of constituent contacts that go with the job.
     Our state's legislative compensation has fallen so far behind inflation that it's probably keeping a lot of good people from running for office.  They simply can't afford to.  With good reason, the Legislature's Executive Board two weeks ago advanced a plan to increase pay via a constitutional amendment that will be up for debate in the coming session.  The plan would immediately raise the salary to $10,200/year, using a formula based on the growth of South Dakota's median household income.  Historically, that matches up with an average inflation rate of 2.75% during the past 20 years, so it's reasonable enough.  
     But as the need and request for a raise are overdue and merited, the automatic aspect of it from this point forward can be called into question. Given the nature of the job, I'd be more inclined to use an incentive-based system than one tied to household incomes or inflation By using changes in our state's Gross Domestic Product as the measure by which legislative incomes are set, our elected officials would have a performance-based standard for setting their wages. On that basis, long term growth justifies an immediate increase. The last six years, however, have been slow-growing, averaging less than 1% a year since 2011, Governor Daugaard's first year in office.   During that period, U.S. per capita GDP has gone up at 30 times the rate of South Dakota's.  This is pathetic.                                                                                                                                                             The feebleness of our state's agriculturally-based economy only highlights the failure of our elected leadership to find avenues of economic growth that would offset the poor grain and livestock prices of recent years.  Legislators should be held accountable for that failure by seeing their salary growth remain as listless as South Dakota's economy.  Tying compensation to performance would certainly be consistent with the business-like model for running our government that many extol, including Governor Daugaard himselfLet's adjust for the past 20 years, but remember that pay raises are earned, not automatically granted.   

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.  https://www.youtube.com/watch?v=CKCvf8E7V1g
     
    

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 
Thune
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 represent.us 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
Krebs
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
Johnson
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.  

Tuesday, October 10, 2017

NAFTA Could Use An Update, Not A Trump-Initiated Wrecking Ball

     President Trump's long-standing beef with the North American Free Trade Agreement (NAFTA) will get aired out this week as the 4th round of scheduled renegotiationsof the
Revise And Modernize
Don't Wreck
landmark trade deal begin today, October 11, in Washington.  We South Dakotans, who've been watching our agriculture-driven economy flounder for the last few years (for data wonks, SD's  2017 statewide taxable sales were down almost 2% from a year ago and our 5-year per capita GDP growth was less than 1% compared to a national increase of more than 6%), should be keeping a wary eye on the talks.  Our ag sector doesn't need to take another hit.

     That NAFTA has been a very good deal for South Dakota is self-evident.  On a national scale, the numbers are eye-popping.  In 1993, when NAFTA came into being, the U.S. exported about $9 billion worth of corn and soybeans to Canada and Mexico.  Thanks to NAFTA, that number jumped to nearly $40 billion.  About 30% of U.S. ag sales go to our North American partners, with the top three products being corn, soybeans and pork.  Even one of Trump's most consistent friends in Congress, our Senator John Thune, has weighed in on the importance of NAFTA to the nation's farm sector, telling KSOO radio last Summer that "open markets, lower tariffs and uniform regulation means more money in the pockets of South Dakota farmers, particularly from livestock."  Thune singled out NAFTA as being particularly "positive for South Dakota."  
   And then there's the rest of the country.  Considering that Trump's well-known hatred of NAFTA is hanging over these negotiations, South Dakotans do indeed have every reason for concern about the future of the deal.  But  what's interesting is that "the worst trade deal ever signed," as Trump often puts it, has important supporters in parts of the country where the President thinks his protectionist agenda would be most helpful.  A piece last Summer in the Detroit Free Press notes that Michigan would be at risk in a drastically revised or entirely ditched NAFTA.  DFP says that "Michigan has more to lose than any other state" if NAFTA's terms are changed according to Trump's wishes.  Credit scoring giant Fitch Ratings says Michigan would be the most affected state in the country because "its economy is the most interconnected" with our NAFTA partners.  
     As it turns out, the uniformity of regulations and the openness of our markets have created those "interconnected" supply and distribution chains that have helped advance both the ag and industrial sectors of all three trading partners.  A 2016 study from President Trump's alma mater The Wharton School of Business notes that NAFTA-driven advances in the U.S. economy have been steady, if modest, and that job re-distribution, not net job loss,  has been the result of the agreement over the past quarter-century.  A study in the Washington Post last August reinforced that conclusion.  
     Trump's politically shrewd tirades against NAFTA played well in the industrial belt around the Great Lakes, where job losses and shuttered factories affected enough voters to give him the wafer-thin electoral victories that took him to the White House.  But the rest of the country, South Dakota (and now Michigan) in particular, stands to lose much as the President continues to focus on that relatively narrow base of support.
     
     
     
     

Tuesday, October 3, 2017

Constitutional Rights Do Not Equal Constitutional Insanity

   There are Constitutional rights and there are Constitutional absurdities, the latter having been played out during the horror show in Las Vegas last weekend.  Adhering to the rights
A Right
Not A License For Craziness
guaranteed by the country's founding documents doesn't mean extending them to a point somewhere far beyond the reaches of common sense.  For example, the 1st Amendment to the Constitution has some limitations on freedom of speech, most famously its inherently sensible denial of the right to yell "fire!" in a crowded theater when no such emergency exists. 
 
     Why that principle hasn't been applied to the 2nd Amendment seems to me a failure of logic, experience and good judgement.  Having toted and used the most lethal weapons of my generation during my 13-month hitch as a Marine in Vietnam, I'm no stranger to the genre of firearms. Nor am I a stranger to their purposes and value in civilian life. Gun ownership is an embedded part of our lives in this country, a principle that I have no trouble supporting.  I recall a close relative of mine who began carrying a handgun after a woman was raped in the underground parking garage of his upscale condominium. Who can't condone the sense of security that comes with a decision like that?  I also appreciate that a lot of people simply enjoy the sport of shooting, along with the history, the mechanics and the aesthetics of guns and rifles.  And of course there are those who hunt with firearms, a sturdy community of good citizens who also happen to support many of our wildlife conservation programs through their hunting license fees.  They're also damn good for business, as I and my peers in the lodging industry will be quick to affirm.  
     Then along came Las Vegas, which reminds us that a fondness for that guaranteed right to bear arms has occasionally morphed into a bloody and violent freak show.  The Vegas madman Stephen Paddock had an arsenal far above and beyond the needs of any rational gun owner.  News reports say that police found 43 firearms and several thousand rounds of ammunition in searches of his home and the hotel room where he went berserk.  They were all obtained legally and some were apparently modified to make them simulate automatic gunfire.  The crowning absurdity is that all of this was in keeping with laws in the books in Nevada.  
     The framers of the Constitution couldn't possibly have had this in mind when they guaranteed Americans their right to bear arms, but we've gotten to this place and there's no turning back.  Mass killings are impossible to prevent.  Just the same, gun rights can co-exist with gun control that's designed to make things more difficult for determined and deranged people to obtain weapons in the quantities that Paddock possessed.  Constitutional rights are one thing, Constitutionally sanctioned insanity is another.  

Tuesday, September 26, 2017

Can South Dakota Handle The GOP's Healthcare Plan?

     At this point it's a matter of trust.  My native Republican instincts tell me that the latest GOP effort to replace Obamacare (Affordable Care Act, or ACA) is one I could
Probably.
But It'll Resurface.
support.
 Though likely to fail on this try, it’s bound to come up again.  I can certainly understand our Governor Daugaard 
enthusiastically getting behind it.   For one thing, the current bill renders moot South Dakota's stubbornly irrational rejection of Medicaid expansion, an offer under ACA that would provide a couple of billion bucks to our state over the next few years.  Heck, the status quo is such a good deal that then-Governor Mike Pence figured out a way to expand Medicaid into Indiana, making him one of eleven Republican governors who understood the value of insuring a sizable portion of their state populations who make too much to qualify for Medicaid but not enough to afford conventional insurance.  Adding in the economic gains from the rollover of those billions of dollars only reinforces the fiscal sanity of saying yes to expansion built into ACA. 
     Daugaard himself had even come up with a plan to bring it into South Dakota, an effort he abandoned after he apparently was convinced that a Trump administration could easily overturn ACA.  Trump's vision has of course been exposed as a hallucination, but Governor Daugaard is dutifully following up on his responsibilities and political affiliations by giving Republican leadership the attention and lip service it merits.  His Chief of Staff and son-in-law Tony Venhuizen was quick to address the Medicaid expansion funding issue a few days ago, when he told the Mitchell Daily Republic that one of the main reasons Daugaard supports the latest GOP plan is that it brings  "funding parity" between expansion and non-expansion states.  
    This is actually a back-door way of acknowledging what has been obvious for years:  states like South Dakota, stubborn as they've been in their resistance to Medicaid expansion, have really been getting the short-end of the stick when it comes to federal healthcare spending.  But by going along with this concept of federal block granting, South Dakota effectively gains what it has been giving up by disdaining expansion.  Block grant money would amount to a yearly gain of nearly $1 thousand per resident (almost a billion dollars) to South Dakota according to a New York Times analysis.  That would more than make up for the money we've been leaving on the table up to now.
     And, as a business-type who sees the value of money pouring into the state, regardless of whether the source is named Obamacare or Trumpcare, I love the idea.  The only caveat now is the matter of trust that began this missive.  We've seen what's happened to federally-supported and sanctioned programs in this state during the past decade or so, and it hasn't been pretty.  EB-5 and Gear-Up have set pretty poor examples of our current leadership's ability to manage Washington-sanctioned programs.  Before the Daugaard administration gets totally wound up in its enthusiasm for this block grant or the next one that’s likely to be proposed, some assurances that another fiasco won’t materialize are in order.