Saturday, February 28, 2015

The Politics of the Minnesota Budget Surplus (Or why it is bad news for Minnesota)

Perhaps the worst thing that could have happened to Governor Dayton’s political agenda was for the
    The first point to consider is that there is not really a $1.9 billion dollar surplus.  It is much lower than that.  The last fiscal forecast from November 2014 which projected about a billion dollar surplus did not exist.  It did not because factoring current spending obligation in, inflation largely erased it.  By that, assuming a normal rate of inflation the $1 billion surplus would have been eaten up by current spending commitments. In their more candidate moments, both DFLers such as Ron Latz and Republican Kurt Daudt admitted that, but nonetheless everyone at the Capitol chose to ignore this.    The only way there is a surplus of $1 billion for the coming biennium is if there is agreement to cut $1 billion from the current spending.
    Let’s then cut $1 billion from the current $1.9 billion projection and we are left with $900 million.  This is sort of a surplus.  Why sort of?  Look at the fiscal forecast.  The surplus is largely a product of forces beyond Minnesota’s control.  A growing US economy, decreasing fuel prices, and a rising dollar.  These are macro and unexpected structural forces that can rapidly change.  Fuel prices rapidly went down and they could rapidly accelerate again, triggering economic events that affect the fourth reason for the revised budget forecast, higher individual income and sales taxes.  Minnesota’s economy is doing better, perhaps for some reasons attributed to state economic policy, including increasing income taxes on the wealthy a couple of years ago, but also for reasons having nothing to do with state policy.
    The remaining $900 million is a surplus so long as current economic conditions continue and so long as current tax rates do not change.  If one cuts taxes then this will pressure the surplus projection downward, and if the economy does not continue to grow along the way projected then too it will go down. Moreover, while the fiscal forecast projections into the biennium beyond the next one too offer a structural surplus, it too is based on assumptions about taxes and economic conditions that may or may not continue.
    But the fiscal forecast also misses something important–depreciation on state assets and deferred maintenance.  What is not calculated here are deterioration of state assets such as roads, bridges, water and sewer systems, and parks.  They all need maintenance.  Lost of value to them due to wear, tear, and deterioration have not been considered.  Yes they should be considered part of a capital budget and not an operating budget, but the state operating budget does not do a good job of factoring in necessary or delayed maintenance.  Factor them in and there is really no surplus.
    In many ways, Dayton is correct.  We still need a long term solution to generate the revenues to repair state infrastructure.  Proposals to use the state’s short term $1.9 surplus are both inadequate and short term.  That amount of money just does not cut it to address the current infrastructure needs of the state, let alone also allow for tax cuts, more K-12 spending, and all the other ideas on the wish list by many.
    So here is where the bad news for Dayton kicks in. He wants a structural solution to infrastructure along with other new commitments on spending.  All are worthy.  Yet news of a surplus has all but ended any hope of tax increases and a structural solution.  At least this is what Speaker Daudt has said.  It was already near impossible for the governor and the DFL to get tax increase before, now it will be impossible.  At the same time there will be pressures to cut taxes, which now doubt there will be  bi-partisan support for.  What we have here is a recipe for budget foolery and gimmickry that reminds me of the last time we had a huge surplus–1999.  Back then Ventura was governor, the DFL controlled the Senate and the GOP the House.  The economy was humming along and the surplus was near $5 billion.  Taxes were massively cut and money given back to all.  Then the economy tanked and it has taken until now–16 years–to recover.
    Now is not the time to talk of permanent tax cuts or rebates.  Nor is it the time to think of a  brief budget surplus as a long term solution to delayed maintenance and infrastructure costs.    Nor are one time cash infusions going to change state graduation rates or educational disparities or the rising costs of higher education.  Yet this “short-term-less-than-meets-the-eye” surplus will obscure  all of this, thereby making it more difficult for Dayton to achieve either his short or long term objectives.
recent fiscal forecast to now project a nearly $1.9 billion surplus for the coming biennium.  While money in the bank is not normally thought of as bad news, in this case it is, and it portends a possibility that his political agenda and timely agreement on a state budget could be derailed.

Saturday, February 21, 2015

How the Minnesota DFL Lost Their Narrative

    One can already see the Minnesota Republican political narrative for 2016 and it is not pretty for the Democrats.  Simply put the narrative is that the DFL is out of touch with middle class Minnesota, they are the party of gridlock, and GOP will defend the middle class and stop the bickering.  How did all this happen?
    The strength of the DFL narrative in 2010 and even though most of the 2013-14 session was its defense of the middle and working class.  They had a great narrative: an increased minimum wage, tax increases on the wealthy and cuts for the middle class, more money for K-12, and the Women’s Economic Security Act.  This is a terrific “We are on your side message.”  But somewhere along the way to the 2014 elections the Minnesota DFL lost their message and the battle for images and symbols.  Spending on a new state senate office building did not help and the messaging on taxes and spending fell flat, costing the DFL the House in 2014.
     Now the DFL are in trouble.  Dayton’s push for commissioners’ pay raises was simply politically dumb.  After years where most Americans if not Minnesotans have not seen pay increases, arguing for commissioners’ raises when they already make two to three times the median family income in Minnesota was not smart.  Nor were defenses of it by some DFL commentators that these individuals deserved raises or else government would not be able to recruit or hold talented administrators.  It sounded private sector business CEOs who whine they do not make enough.
    But then it got worse.  The Dayton-Bakk fight did not look good.  It painted a party as dysfunctional, undermining another narrative that the DFL had for the last two years–they delivered on their promises.  And then the deal to address the raises was brokered by Kurt Daubt–the GOP Speaker of the House.  His intervention sets up a narrative that the DFL cannot govern alone and that what is needed is unified Republican control of the legislature.  Moreover the deal he did broker did not take the pay raises off the table–it merely postponed them until later this year–even closer to the 2016 elections.
    And then this past week the State Auditor sharply criticized the mismanagement of MNSure.  Yes it has insured many more Minnesotans yet its managed was flawed and it needs to be fixed.
    Finally, while no one doubts we need to spend billions more on infrastructure and that the Republican proposal to spend the non-existent surplus on roads and bridges is an insufficient smoke and mirrors idea, the DFL have not messaged their proposed tax increases well.
    So think about 2016 and the issues Republicans will use.
    The Senate office building will be nearly done, standing as a monument to government excess; pay raises for commissioners while the middle class struggle; tax increases for infrastructure; health care mismanagement; and possibly a feuding DFL that cannot work together.  Together they paint a picture of Democrats as out of touch with middle class Minnesotans and as a party that potentially cannot get anything done (aided by Republicans who now have an incentive to drive the state into a budget impasse or shut down again and then blame it on the DFL).  This is a 2016 Minnesota replay of what the national Republicans did in 2014 when the ran against Obama and the Senate Democrats.
    What is perplexing is how the DFL lost control of its narrative again.  In the larger scheme of things they are probably do way more to help middle class Minnesota than the Republicans are, but they are simply terrible at messaging and one wonders if they can improve their ability to communicate and understand how these issues play beyond their metro base.

Tuesday, February 10, 2015

Burwell v Mata: Or the Fate of Obamacare and Same-sex Marriage

Let us speculate on the fate of two cases,   King v. Burwell (Affordable Care Act subsidies to health care exchanges run by the federal government) v Mata v Holder (same-sex marriage).

Given Justice Thomas’ dissent in the Alabama same-sex marriage stay some are speculating that Justice Roberts will vote to make it 6-3 in holding that the Constitution protects a right to same-sex marriage.  Assuming that is correct, there may be a several possible reasons for his vote.

Obviously one answer is that he thinks this is the correct constitutional answer.  Second, the Chief Justice is engaged in some smart politics and strategic decision making.  Should he vote to rule that same-sex marriage is protected under the Constitution he is in the position to write or assign the majority opinion.  He of course could assign the opinion to Kennedy (assuming which I do that he is the fifth vote) or he retains the right to pen the opinion himself, thereby giving him more leverage over what the Court opinion is or simply to ensure that the decision is at least 6-3, thereby strengthening its legitimacy.

Another scenario: He is leaning toward striking down the federal subsidies under the ACA.  This is not an impossible scenario and given rumors that he switched his vote in 2012 regarding the constitutionality of the mandate, it is possible that now he write a 5-4 opinion striking down the subsidies on statutory interpretation grounds.  Thus, voting to support same-sex marriage under the Constitution gives him some political capital or deflects away from his decision in Mata invalidating the federal subsidies.

Thursday, February 5, 2015

The Case for Mandatory Vaccinations

 Vaccinations provide public goods and address  free rider problems.  This is an ethical case for mandatory vaccinations. 
Please note:  Today's blog appears in the February 5, 2015 Minnpost as "The Case for Mandatory Vaccinations."

Friday, January 30, 2015

The Ethical Code of Dick Cheney

Please note:  This essay originally appeared in Politics in Minnesota.  Please consider subscribing to  that publication.

Has Dick Cheney ever expressed a moral qualm about anything he ever did? 
    If his comments about the Senate torture report released late last year are any indication, the simple answer is no.  Cheney’s life, both public and private, reveal a pattern of selfishness, devoid of any sense that he has ethically reflected on any of his actions or found any regret in his behavior.  He stands as the paradigm of a public official nearly devoid of a sense of personal integrity, demonstrating a sense of self-rationalization that stands as a negative example of what ethics in public office represents.
    There is a consensus among those who teach and write on government ethics that it includes a sense of personal integrity, reflection, consistency, respect for rule of law, attention to the reality and appearance of conflicts of interest, a shunning of self-dealing, respect for truth telling, and promoting the public good.  Applying these ethical benchmarks to Cheney, how does he measure up?
    Dick Cheney’s public career is long.  He served as a member of Congress, a presidential chief-of-staff, secretary of defense, and vice-president, in addition to being the CEO of Halliburton.  He has been described as one of the most powerful vice-presidents in history.  Yet almost from the start of his adult life Cheney had evidenced a selfish approach to the world, evincing no ethical maturation over time.  He is well-known for having dodged the draft and the Vietnam War with five deferments, proclaiming in a Washington Post interview that he “had other priorities in the 60's than military service."  This is the same person who as secretary of defense sent troops to Iraq in Operation Desert Storm and later to Afghanistan and Iraq again as part of the War on Terrorism.  Military service is a noble calling for Cheney; when it is others besides him who put their life on the line.  If the mark of integrity is consistency between what one says and does, hypocrisy is the badge of unethical behavior.  As philosopher Immanuel Kant once argued, a defining trait of unethical behavior is making yourself an exception to a rule you expect everyone else to follow.  This is what Cheney has done.
    Selflessly serving his country has never been an ethical priority for Cheney.  As CEO of Halliburton he did business with the US government that often amounted to gouging the taxpayer, with recurrent allegations that his company engaged in bribes to secure business.  When he gave up that post to become vice-president the New York Times reported that he may have lied about severing his ties with his former company.  It might well be that as VP he personally profited from decisions he made when Halliburton received government contracts.  Even if he did not, the appearance of conflict of interest was something  that he ignored.  Further proof of how he was inured to the appearance or reality of conflicts of interest was his hunting trip with Supreme Court Justice Scalia and how such activity might compromise the integrity of an impartial judicial system, especially at a time when the judiciary was adjudicating many Bush administration policies.
    When it comes to his conduct in government some might argue that Cheney is the consummate Machiavellian, echoing an “ends justifies the means” ethic. His comments about torture after the recent release of the Senate report that  “I would do it again in a minute” or that as he said on Meet the Press that “I’m more concerned with bad guys who got out and released than I am with a few that, in fact, were innocent” clearly demonstrate an ends justifies the means mentality.  But labeling Cheney a Machiavellian acting for a noble cause gives him too much moral credit.  First, his attitude in these statements expresses contempt for rule of law and human rights, something we expect of someone in a leadership position in a constitutional democracy.  Second, his statements reflect less an appeal to some public or greater good than they speak of post hoc rationalization of illegal behavior.
    Cheney is not really Machiavellian–he is simply partisan and self-interested.  In 2004 after Bush won re-election the vice-president spoke of tax cuts and spending priorities favoring his supporters by stating “We won the midterms (congressional elections). This is our due.”   Cheney is less interested in appeals to the greater good than his own personal interests or that of his friends. Don’t forget, Cheney too has expressed disdain for the importance of personal ethics in guiding government policy. Time once reported him saying about energy policy that: “Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy.”
    Respect for legality, patriotism, and honesty are generally hallmarks of ethical behavior. Yet Cheney’s chief of staff Scooter Libby was convicted of four counts of lying and obstruction of justice, and he and the vice-president are  tied to the outing of CIA agent Valerie Plame in retaliation for her husband and diplomat Joseph Wilson writing a New York Times op-ed sharply critical of the Bush Administration’s false claims of Iraq’s efforts to obtain nuclear materials.  It was such claims about Hussein possessing weapons of mass destruction that served as the pretext for the 2003 invasion.  Cheney continues to lie when it comes to Saddam Hussein, asserting in a 2014 Meet the Press interview that he "had a 10-year relationship with al-Qaida" even though all the evidence clearly refutes such a claim.
    Finally, some want to give Cheney credit for supporting same-sex marriage.  Yet such support may be less altruistic and principled than thought–perhaps based more on the fact that his daughter is a lesbian.  Therefore his views be less about ethics and more about personal or family self-interest.
    What do we learn about Dick Cheney’s ethics?  While his entire life has not been reviewed one can still learn a lot about his character based on choices he made in critical situations It is clear that by most standards regarding what would define someone as ethical, Cheney falls far short.  He is blind to conflicts of interest, real or apparent, is willing to lie for personal gain, and he is willing to make himself an exception to standards of conduct that most of us would expect others to follow.

Saturday, January 17, 2015

From Selma to Stonewall: Same-Sex Marriage and the Legacy of Martin Luther King, Jr.

            By now it seems inevitable if not entirely predictable that by July this year same-sex marriage will be the law of the land in the United States.  Many will applaud that it is now legal across America and that the battle for equality is over.  Yet for all who draw the parallel between the battle for GLBT rights and civil rights, one can only hope that it does not end the same way, a war half won and facing serious backlash to this day in the South and across white America.
            On Friday the Supreme Court announced that it will review a Sixth Circuit Court of Appeals decision which had upheld a ban a same-sex marriage.  It accepted the case because other circuits had ruled contrary, creating a split in the law that the Supreme Court has to resolve.  This is the political science-law professor answer to why the case will be heard. The US is also a country divided, with 36 states and 70% of the population living in a world where same-sex marriage is legal, and where there is no definitive answer to whether the Constitution protects the right of same-sex couples to marry.  Federalism may be great for many things, but some constitutional questions demand definitive answers.
            While the Supreme Court has avoided it so far, the question before it will be whether the Constitution protects the right of same-sex couples to marry.  Justice Kennedy will write a 5-4 opinion saying that it does (unless Chief Justice Roberts joins in to make it 6-3 so he can control the scope of the majority opinion), capping a career where he has written all the major opinions (Romer, Lawrence, and Windsor) affirming GLBT rights.  Four years ago at a Supreme Court continuing legal education class I did at Reuters I predicted that Kennedy would write a June 5-4 opinion declaring that the Constitution protects same-sex marriage, and then he would announce his retirement.  I still think that will occur this year.  It is unlikely, contrary to what some social conservatives hope, that the Court will declare same-sex marriage contrary to the Constitution or that it will author any opinion invalidating same-sex marriages in any place in the United States.  Nor is it likely that the Court will simply say that the Constitution is silent on the issue and leave it to the states to decide.
            So then what?  Is the battle over?  For Republicans the decision would be great. As with immigration, letting someone else resolve a divisive issue upon which you are on the losing side of history and which costs you votes and future party vitality would be a blessing.  Making same-sex marriage legal across the country takes the issue off the electoral agenda.  But  that is not the end of the story. 
            The movie Selma is a powerful reminder of how far and not this country has come regarding civil rights for African-Americans.  The reason that movie is so powerful is not simply because of its reenacted and reminder of the violence that occurred at the Edmund Pettus Bridge and elsewhere in South and across the country during the 50s and 60s as King and others fought for equality.  It is also a powerful reminder, especially in light of Michael Brown and Eric Garner, that the struggle and the violence persists. A half a century after Selma racial discrimination persists.  It exists in school outcomes and incarcerations.  It exists in racial profiling,  income and wealth disparities, and in general attitudes about race, especially and still in the South.
            Many have drawn parallels between the civil rights movement for racial equality and the battle for GLBT rights.  Blacks had Selma, gays and lesbians Stonewall in New York.  Many draw parallels in the legal strategies between Thurgood Marshall, NAACP, and the Lamda and Human Rights campaigns.  Loving v. Virginia (where the Supreme Court struck down laws banning racially mixed marriages) is the direct precedent invalidating bans on same-sex marriage. There are similarities, but let us hope there are differences.  Fifty years later racism remains entrenched in America, especially in the South.  It is no coincidence that the core of the states today that oppose same-sex marriage are the same that fought Black civil rights the hardest, and where discrimination is still ugly.  These are also the states where reproductive rights are still  most fiercely opposed 40 years after Roe v. Wade, and where workers rights are weakest.
            The point is that passage of a law or the issuance of a Supreme Court decision does not end the battle.  Despite Selma, the 1964 Civil Rights Act, and the 1965 Voting Rights Act, much work needs to be done to bring racial equality to America.  The same will be true come later this year when Justice Kennedy writes his 5-4 opinion.  This is what we need to remember as we celebrate Martin Luther King’s birthday.

Saturday, January 3, 2015

The Truth about Right-to-Work Laws

With Republicans in control of so many state governments and legislative chambers across the country one can expect that they will move their agenda.  Among items on their wish list will be right-to-work (RTW) legislation.  The argument will be that RTW laws will cut unemployment and grow the economy.  Ostensibly the argument conversely is that unions increase unemployment and hurt the  economy.
What do we really know about RTW laws?
 There are 24 RTW states and 26 plus the District of Columbia without such laws.  The Bureau of Labor Statistics (BLS) provides data on unionization rates, unemployment, and median family income.  Look at the October 2014 state unemployment rates as computed by the BLS.  Six of the states with the highest unemployment rates were RTW.  Among the ten with the lowest rates, five were RTW.  The average unemployment rate for RTW states was 5.5%, for non-RTW, it was 5.8%.  Since the 2008 recession, the difference in unemployment rates between RTW and non-RTW states has been minimal, revealing no clear pattern that the former has produced more jobs than the latter.
            Another way to examine the issue is by doing a statistical test called correlation analysis. Statistically, if being RTW decreases unemployment the correction is 1. If RTW increases unemployment the relationship is -1, and if the laws have no impact the relationship is 0. Is there any statistical correlation between a state being RTW and unemployment rates?  The correlation is 0.1 using 2014 data or 0.09 using 2012 data.  There is essentially no statistical relationship between states being right-to-work and unemployment rates. 
But now take a look at the differences from another angle.  There is a significant difference in median family incomes in states that are RTW versus those that are not.  Using a three year average of median family income from 2011 to 2013, RTW states have a median family income of $49,276, for non-RTW it is $55,725Ba difference of $6,449 or 13.1% per year.  Testing for the impact of RTW on median family incomes, the correlation relationship is -0.4. This means there is statistical evidence that RTW laws are associated with significantly lower incomes.  RTW appears to depress incomes.
           Now is there any statistical correlation between the percentage of the workforce in a state that is unionized and unemployment rates? Again using BLS data, one finds a correlation of 0.1  The connection is almost non-existent.  However, the percentage of the state’s workforce unionized demonstrates a positive 0.47 correlation with incomes.  Unions appear to increase family income while having no impact on unemployment rates.
Overall RTW laws have no real impact on unemployment and instead states with them have lower median incomes.  Similarly, unionization does not depress employment and instead increases wages.  Presumably more wages for workers means more consumption and a better economy in the state.  Thus, from an economic point of view, RTW laws do not appear to be a good economic deal for a state and in fact one might be able to argue that they bad policy that should be avoided.