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.

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?