West Virginia’s New Voter ID Law and the Myth of Voter Fraud

/in , /by

Effective on January 1, 2018, West Virginia law now requires a prospective voter to present a valid identifying document to a poll clerk. The clerk will then verify that the name on the document conforms to the individual’s voter registration record. If the identifying document has a photograph, the poll clerk will determine that the photograph is “truly an image of the person presenting the document.” This new law is similar to voter ID laws passed by state legislatures around the country at the urging of Republicans. But voter impersonation fraud – the only possible fraud affected by the new law — is virtually non-existent in the United States and no cases have been identified in West Virginia.

I believe that West Virginia’s new voter ID law will have the consequences – perhaps intended – of complicating the voting process, intimidating some potential voters, and reducing the numbers of voters from the poor and less-educated ranks of our state. It will slow the voting process and create lines where there haven’t been lines, thereby frustrating and deterring voters. If these predictions are correct, the new law will undermine voter confidence and participation. But there are benign aspects of the law that should be acknowledged.

There are eighteen categories of documents that may be used to establish identity, not all of which are photo IDs. Most people will have at least one of them. If not, a voter can be accompanied to the polls by someone who can vouch for her identity. If none of this works the voter will be required to execute an affidavit stating his identity and that he is the person listed in the precinct voter records. He will then will be permitted to vote a provisional ballot. The question of his identity will be resolved by election officials later. The provisional voter will not be required to take any further action to have his vote counted. In theory, anyway, no one will be turned away from the polls.

West Virginia’s new law is less restrictive than the laws passed in many states. Seventeen states require a photo ID, which African-Americans and Hispanics are statistically less likely to have. In ten states voters who do not have the required ID may vote a provisional ballot but must take some action after election day, such as returning to the polls with a qualifying ID, for the provisional ballot to be counted. These strict requirements have been challenged in court, with some notable successes so far.

West Virginia’s new voter ID law was passed in 2016. To the surprise of many, an amendment proposing automatic voter registration when an individual interacts in some way with the Division of Motor Vehicles also passed. At that time only two other states – Oregon and California – had automatic voter registration. Automatic voter registration is already showing clear benefits in Oregon. Within two months of implementation more than 15,500 Oregonians were registered — a four-fold increase. Thirty percent of the new registration records transferred from the Oregon DMV to election officials reflected eligible but previously unregistered citizens.

Saira BlairWhen the Republican legislators who sponsored the voter ID law realized that it might actually increase voter registration, they began to backpedal. During the 2017 legislature, Del. Saira Blair (R-Berkeley) proposed an unsuccessful amendment to the original bill that would have permitted voting only upon showing a photo ID. Blair, who is 21 years of age, couldn’t cite a single case of voter fraud but sponsored the amendment because she had heard anecdotes. She said “without photo identification, it’s hard to stop fraud, and it’s also nearly impossible to prove it took place.” As Supreme Court Justice David Souter quipped, this is like arguing that “the man who isn’t there is hard to spot.” Really, isn’t there anyone more mature than Blair – Republican or Democrat – who is willing to run for this seat?

It is no wonder that Del. Blair could cite no cases of voter impersonation fraud in West Virginia, because there just aren’t any. A comprehensive study of allegations of impersonation fraud (not just prosecutions) was begun in 2008 by Justin Levitt, a professor at Loyola Law School in Los Angeles.  As of 2014 he had logged only 31 incidents nationwide out of over one billion ballots cast.  None of these were in West Virginia. And keep in mind that impersonation fraud is the only kind of fraud the new West Virginia voter ID law is designed to prevent.

Impersonation fraud is exceedingly rare for several reasons. First, it is risky to the fraudulent voter. He must announce himself in front of poll workers, who may know who he actually is or the person he claims to be.  Second, the penalty for fraudulent impersonation of a voter is severe – it is a felony. Third, a fraudulent impersonation affects only one vote. The risks and rewards just do not encourage impersonation fraud.

West Virginia’s former system of voter identification required the voter to announce his name in front of poll workers, sign a register and have poll workers compare that signature to the one in voter registration records. This system worked exceedingly well to deter impersonation fraud before the enactment of the new voter ID law. One wonders about the true motivation for adopting this legislation – it certainly wasn’t based on a problem that needed to be fixed.

In her excellent 2010 book The Myth of Voter Fraud, Lorraine Minnite concludes that

The best facts we can gather to assess the magnitude of the alleged problem of voter fraud show that, although millions of people cast ballots every year, almost no one knowingly and willfully casts an illegal vote in the United States today.

Instead, voter fraud is a politically constructed myth. It is used to support measures that suppress the opposition party’s votes because this is more effective and less expensive than mobilizing new voters who may end up destabilizing a party’s own coalition.

Voting is a constitutional right. So it is unconstitutional to condition the exercise of that right on the payment of a poll tax. However, current Supreme Court law does not extend this principle to universally applicable voter ID requirements, such as requiring a photo ID, even where they burden the right to vote for some groups like the elderly, the homeless and the disabled. Nevertheless the legislative motivation for adopting such requirements can render them unconstitutional. North Carolina’s strict voter ID law was struck down by the Fourth Circuit Court of Appeals (also with jurisdiction over West Virginia) because it was surgically designed to reduce African-American voting. There is no similar legal challenge to West Virginia’s new law.

My advice to West Virginia voters: get your IDs ready, be prepared to stand in line, and be sure to thank the Republicans for their handiwork in 2018.

The Rich Benefit Bigly From Trump’s Tax Reform

/in , , , , , , , /by

The Tax Cuts and Jobs Act (TCJA) has added mightily to the already serious income and wealth inequality in America. Yet our state’s Republican representatives in Congress seem oblivious that most people in this state are poor relative to the rest of the country. They have boasted about what amounts to the crumbs on the table that middle and lower income West Virginians gain from this Act. For example, Rep. Alex Mooney, who represents much of the Panhandle in Congress, announced that he voted for “tax cuts for all West Virginians.” Always obsequious when it comes to the White House, Mooney said “President Donald Trump has been a true leader on delivering tax relief for all Americans and I am looking forward to continuing to work with him to create more jobs and to keep our economy growing.” There is no other way to put it — this emphasis on the illusory benefits enjoyed by the broad middle of our society is just willfully deceptive. The true winners under the TCJA are the rich, who will benefit at the expense of the rest of us.

Even the frequently touted tax reductions for lower and middle income taxpayers are not intended to be permanent. These will decline over the next eight years and ultimately expire. Sen. Shelley Moore Capito argued in the December 27, 2017, Spirit of Jefferson that the new law doubles the standard deduction to $24,000 for couples. But she failed to mention that this increase also expires in 2025. Furthermore, she didn’t even try to defend some of the law’s permanent features, which benefit the wealthy. These are the $1.5 trillion tax cuts for corporations, which will do nothing but increase the value of corporate stock in the hands of the wealthy, and the repeal of the Affordable Care Act’s individual mandate. The repeal of the mandate will generate $53 billion in annual savings by 2027, paying for about one-third (about 4.7 percentage points) of the bill’s 14-percentage-point permanent cut in the corporate rate. But it will leave millions more uninsured and raise premium rates for many others.

Here are three additional key ways in which the TCJA benefits the rich at the expense of the rest of us:

Distributing Tax Cuts Disproportionately to the Rich. The Tax Policy Center, a joint effort by the Brookings Institution and the Urban Institute, put it this way: “In general, higher income households receive larger average tax cuts as a percentage of after-tax income, with the largest cuts as a share of income going to taxpayers in the 95th to 99th percentiles of the income distribution.” This result will clearly play out in West Virginia.

Tax Benefits

Doubling the Estate Tax Exemption. The TCJA doubles the exemption from tax on estates valued from $11 million per couple to $22 million per couple. Doubling the exemption reduces the share of estates facing tax from 0.2 percent to 0.07 percent, leaving only 1,800 taxable estates nationwide. It is hard to understand why this tax change was so important — unless satisfying rich donors is considered. The estate tax rate is only 17%, far less than on ordinary income for this group of taxpayers. Still the tax exemption will be worth on average $4.4 million to those upper-end estates who will now be exempt. To put this in perspective, $4.4 million is about what it would cost to give 1,100 Pell grants to low income students.

Creating a Tax Break for “Pass-Through” Income. Although the corporate tax rate is reduced by 14 points, this benefit mainly applies to large corporations.  Many small corporations and limited liability entities account for business income by passing it through to the individual owner. Trust me on this, most of these business owners are not among the struggling taxpayers in this country. The corporate tax rate doesn’t apply to passed-through business income. Instead, the individual tax rate for that taxpayer would apply. It was not enough that the individual tax rates will be reduced, the TCJA also creates a special new tax benefit for pass-through business income. The final TCJA allows small business owners to deduct 20% of their passed-through business income.

I get it that current Republican ideology is interested in directing policy benefits to those in society they call the “makers,” while being far less concerned about everyone else whom they label the “takers.” The TCJA is a perfect example of how this works, even though Republican politicians continue to argue falsely that the beneficiaries of this law are the middle class. To some extent, the horse is out of the barn — this bad tax law passed warts and all. But we cannot let this go. At every opportunity in the run-up to the 2018 mid-term elections and then on to 2020, we need to keep this issue at the front of the debate.

Government by the Rich, for the Rich

/in , , , , , , , , /by

The much maligned Tax Cuts and Jobs Act (TCJA) is regarded by most Americans as a naked effort by the Republican Party to reward its key donors, among them the wealthiest of Americans. Public polling has consistently been negative for this “reform” legislation. The law’s modest temporary tax relief for the middle class is just window dressing. The public has simply disregarded this window dressing and correctly assessed the stink from what has been served up to them.

The TCJA is an enormously complex law, with poorly understood provisions the effect of which won’t be known until well after the law takes effect. Since the tax code has a profound effect on the behavior of individuals and businesses, and hasn’t been revised since 1986, a major revision should be thoroughly debated in the light of day. But to do that would have permitted the TCJA’s ugly flaws to be exposed and for opposition to solidify. So in adopting the TCJA Republicans jettisoned any pretense of democracy.

There were no public hearings. Some of the law’s provisions were added at the very last minute. The Congressional Budget Office had no time to evaluate the Republicans’ flimsy claim that increased business activity spurred by the tax cuts would raise substantial new tax revenues. The Bill was available for review roughly three days before the final Senate vote. The Democrats, who were not opposed to revisions to the corporate tax structure and might have made reasonable suggestions, were shut out of the process. This is how the Republicans govern.

One wonders why a massive tax cut was so important for Republicans in the first place, particularly in the face of negative public polling. The Trump Administration is riding the wave of economic recovery that began well before Trump took office. National unemployment is hovering around 4%, generally regarded as full employment. Corporations are already sitting on $2.3 trillion in cash reserves. They do not need massive tax cuts to free up cash for investment. The answer is that big donors are furious about not receiving the big tax cuts that were promised when the Republicans repealed Obamacare, which they failed to do.

Nobel-prize winning economist Paul Krugman has argued in the New York Times:

A large part of the answer [for why a huge tax cut was so important] is that many Republicans now see themselves and/or their party in such dire straits that they’re no longer even trying to improve their future electoral position; instead, it’s all about grabbing as much for their big donors while they still can. Freedom’s just another word for nothing left to lose; in the GOP’s case, that means the freedom to be the party of, by, and for oligarchs they always wanted to be.

Krugman can be intemperate at times, but he seems to be on to something. At all the key forks in the policy road, the Republicans have rewarded themselves and their rich friends. The TCJA represents a huge redistribution of wealth from the poor and middle class to those in the upper income brackets who hardly need it.

By far the largest impact of the TCJA will be the reduction of corporate tax rates. These reductions will themselves be responsible for nearly $1.5 trillion in reduced tax revenues. The Republican argument is that corporations will use this new cash to increase business capital investment, hire new workers and raise wages. But there is nothing in the TCJA that requires a business to use the tax cuts in this way. Many businesses have said they will use the money for non-productive uses like increased dividends and share repurchases. These uses only serve to increase the value of the corporation’s stock in the hands of those who own it.

Who benefits when the value of corporate stock goes up? Only 52% of the American public owns any stock whatever, even in retirement accounts, and those owners surely won’t be found in the bottom half in wealth and income. President Trump is fond of bragging about how the stock market is breaking records. Can’t you just hear the Champagne corks popping in all the nation’s homeless shelters?

In my next post, I will detail how the rich will directly benefit from the TCJA at the expense of the rest of us. Certainly, this statute ought to be one of the first things on the agenda of any new Democratic majority in Congress to reverse. In fact, instead of just undoing this bad law, the TCRA may unleash the Democrats to make substantial changes to the tax code to benefit affirmatively those whom the Republicans have, for now, shut out.

West Virginia’s Other Public Health Crisis

/in , /by

Now that President Trump has declared that the opioid epidemic in this country is a national disaster, we may soon see more attention being paid to that health crisis in West Virginia. But there’s another health crisis in West Virginia that’s been festering under the radar: the epidemic of chronic disease and general poor health. According to the most recent report by the West Virginia Health Statistics Center, West Virginians have the second highest obesity rate in the country, the fifth highest rate of inactivity or lack of exercise, and the fifth highest rate of cancer. The state ranks first in the country for heart attacks, second for the prevalence of mental health problems and fourth for diabetes. Panhandle counties, particularly Jefferson, generally fare better than the rest of the state on these measures. Yet from any viewpoint, these statistics are troubling.

But unlike with opioids, recent science has shown there’s a quick, inexpensive, and certain cure for this crisis of poor health: it is our feet. When it comes to the epidemic of chronic illnesses that West Virginians are facing– cardiovascular, cancer, diabetes, orthopedic and even Alzheimer’s and depression– the remedy is to get moving.

Our current medical delivery system is a complicated mess, with most of the focus being on acute care fixes, and little on prevention. Primary care doctors can’t spend much time with individual patients. Insurers and the government reimburse for “procedures,” fixing what’s wrong after you’re sick, not preventing it in the first place. So the classic rule of economics applies. We get more of what we subsidize, and the US healthcare system rewards fixes—pills, coded treatment routines, but not prevention.

So the latest medical news is something that everyone in West Virginia and the rest of the nation should read and heed: simple, inexpensive and relatively easy forms of exercise can both extend lives and improve the quality of our years.

For 15 years, the nationally regarded Cooper Institute in Dallas compiled data from over 55,000 men and women on whether running – slog or speedy – showed health differences. In 2014, the published study showed a remarkable difference, regardless of how fast you moved, or how far. The overall risk of dying for movers went down 30 percent, and heart-related deaths declined 45 percent.

This year the news got even better. In a follow-up to the 2014 study, a new published study reexamined the Cooper data, added results from other recent related studies and reported even more striking benefits. If you regularly move some, regardless of pace or distance, you can add three years to your life. The study found as little as five minutes of daily running led to better life spans. Notably, the overall longevity benefits of 25 to 40 percent were found even after the scientists, in their syntax, controlled for such “confounding factors” as smoking, drinking, hypertension or obesity.

But wait, as the late-night infomercials say, there’s more. The health benefits weren’t just for better cardiovascular health, which showed a risk reduction of 45 to 70 percent when compared to non-runners. A similar powerful result was achieved from just walking. In addition, the report noted a 30 to 50 percent cancer death risk reduction, as well as an unquantified protection from death due to neurological conditions, such as Alzheimer’s and Parkinson’s. Just regular walking at a moderate pace lowered memory loss risk by up to 50%, slowed age-related declines in brain function, and improved cognitive task performance.

With all this compelling evidence, the question becomes what could government and employers do to help people get moving? To its credit, West Virginia has begun steps to formulate a plan to do just that. Two health-related initiatives at West Virginia University, along with a non-profit, have set up “ActiveWV 2015.” These groups took the generalized outline from the National Physical Activity Plan (NPAP) and began adapting it to fit the state’s unique challenges. Its most recent report says:

Examples of implementation activities include multiyear programs to provide resources and support to pre-K through 12th grade schools seeking to establish comprehensive school physical activity programs and a public awareness and social marketing campaign to promote physical activity using the people, programs, and places of West Virginia. Other examples include providing resources for primary care physicians interested in writing physical activity prescriptions based on use of local and state parks.

These are good ideas, and hopefully will produce long-term results. But are there other more concrete policy steps that might move things along faster? I think so. One is tempted to think how smoking was substantially reduced by treating it as a public health problem. Strong government efforts were implemented, such as warning notices on tobacco products, and graphic public ads on the adverse results of smoking. Then laws were passed prohibiting smoking in most public places, and slowly the tide turned against smoking. But could this approach be applied to increase physical activity? The problem is different. There is not one single behavior that needs to change. There is no single harmful product on which to affix warnings. More fundamentally, it probably is much easier to persuade people not to do something than to take positive action. Nevertheless, the public health campaign approach should not be ignored.

Here is my modest proposal for three concrete policy changes that would have significant public impact. First, motivate both primary care physicians and their patients to have a dialogue about the benefits of exercise, and to recognize when good exercise habits are being formed. The best way to do this is not some “command and control” regulation, but rather to find the right motivator. Most doctors already do a good job on the dialogue and tracking of blood pressure, cholesterol and insulin resistance. Perhaps some way to compensate doctors for positive changes in patient physical activity can be found, emphasizing prevention rather than cure. And while we are at it, why not find some creative way to reward patients financially for doing what they should do for themselves? Doing so would be far less expensive than the current healthcare approach.

Second, let’s build more public gyms and exercise facilities. Governments already find it a useful expenditure of public money to build and staff facilities for the preschool population as well as senior centers for the aging population. Today only a small proportion of people in the middle age groupings have sufficient resources to afford private health facility memberships. Indoor exercise facilities could be incorporated into, or become, community centers. The dollars spent on these type of facilities will substantially reduce the state’s soaring Medicaid expenditures and other public health costs.

Third, some employers acting in enlightened self-interest get their employees to engage in healthy activities and give them a small reward for doing so, often in the form of a modest reduction in their health insurance premium. Most of the time that reward is too small, so employers might create a scaled-up version of subsidies and rewards for exercise and related good health outcomes, sharing more of the employer’s healthcare expenses that are avoided.

West Virginia now has the medical and scientific evidence on how simple it can be to extend the quality and length of its citizens’ lives, and to reduce the soaring incidence and cost of chronic disease. This state could be an excellent laboratory for dramatic reductions in poor health indicators and set an example for the rest of the country. After all, there is nowhere to go but up.

 

West Virginia’s Budget Disgrace

/in , , , , , /by

The soap opera in Charleston appears to be over. After failing to come together on any meaningful changes for increasing revenues or reforming the tax structure, the Legislature adopted a “bare-bones” budget that cuts more deeply than ever into valuable state programs. This was a default to the lowest common denominator and a failure of statesmanship. It defers many important questions for a later Legislature. One Delegate said that the budget was the result of “complete and utter dysfunction.” The process wasted everyone’s time and money.

While there is blame to go around, this result was the product of opposing positions taken by members of the same political party. Senate Republicans insisted that there would be cuts to personal income taxes or nothing. House Republicans insisted on broadening the sales tax base and were suspicious of income tax cuts in a deficit environment. Week after week neither side moved. The Democrats were impotent on the sidelines and the Governor lurched from one folksy hyperbole to the next, offering some bone-headed proposals of his own. The whole process was a disgrace.

The Legislature gathered in general session knowing in advance that revenues in the state’s General Revenue Fund were projected to fall short of the spending level from last fiscal year. The shortfall was roughly $500 million. There has been agreement on both sides of the aisle that tax reform will be necessary for West Virginia to stabilize and increase revenues and avoid volatility in our budgeting.

But for many Republicans, particularly a Senate faction led by Robert Karnes (R, Upshur), tax “reform” meant radical reductions to the personal income tax, the largest single source of state revenue. Karnes and his crowd actually think that cutting income tax for wealthy “job creators” will raise revenues.  By allowing these people to keep more of what they make, reasons Karnes, they will leap into action, juicing up business and the economy. This widely debunked nonsense was exposed most recently by the Kansas experience where substantial income tax cuts put the state’s economy into the toilet.

Karnes and the Senate Republicans labored under a false belief that also afflicted House Republicans. It can be reduced to a simple equation: tax = bad. In an environment where we needed more revenue to avoid harmful cuts, only the House Republicans were willing to put their toe into the water to find new revenue sources. Even then, House Republicans wanted to add new items upon which to levy sales taxes rather than raise the tax rate itself, presumably so they could then claim they didn’t raise taxes. They rejected a Senate bill because it “amounted to a tax increase.” The conservative Tax Foundation, which followed the situation in West Virginia closely, said “It would almost be easier to enumerate the taxes the legislature didn’t consider as possible solutions to the budget shortfall over the past few months.”

West Virginia has well-documented problems. On just about any measure of successful governance we are last in the country or very close to it: per capita income, workforce participation rate, educational attainment, health indicators and obesity, opioid addiction. You name it. Governor Justice’s initial proposed budget recognized that important spending on education and social programs had to be retained in order to ensure that we did not become a failed state. But later he seemed to lose his head by aligning himself with Senate Republicans and their income tax cuts, presumably on the theory that even a bad idea is better than no idea. In the end he lost respect from everyone, even members of his own party.

The best summary of the cuts our FY 2018 budget will make versus the spending from FY 2017 (which itself involved cuts from prior years) has been provided by the West Virginia Center on Budget and Policy.   The budget cuts $7.5 million from colleges and universities and $2.5 million from community and technical colleges. Public broadcasting was cut nearly $1 million, the line item for the Division of Culture and History was cut 14%, and the West Virginia Commission on Women, the Division of Educational Performance and the Tobacco Education Program were all completely defunded.

We need some new thinking and new leadership who recognize that good government is expensive and that we cannot cut our way to prosperity. If West Virginia is determined to elect Republicans to majority roles in the House of Delegates and Senate, these public servants need to rise above squabbling among themselves, reject the latest fashion in right-wing economic theory, and a find a way to grow revenues over the long haul. Yes, that might mean even raising taxes, which West Virginians would welcome if we applied the revenue toward solving some of our many problems.

 

The Carbon Dividend: An Environmental Proposal to Consider

/in , , /by

In February 2017, the U.S. Supreme Court dealt a blow to the Obama Administration’s climate centerpiece, the Clean Coal Plan. The Court put a hold on federal regulations to implement the Plan that would have curbed carbon-dioxide emissions from power plants. These emission reductions were the main way the U.S. proposed to meet its commitment under the Paris Climate Accord. The legal case attacking the Clean Power Plan was commenced by West Virginia Attorney General Patrick Morrisey, among others . Then President Trump doubled down by “withdrawing” the U.S. from the Paris Accord, claiming that our commitment forced American workers and taxpayers to absorb the cost “in lost jobs, lower wages, shuttered factories, and vastly diminished economic production.” Now given the hostility of EPA Administrator Scott Pruitt to the mission of that agency, it is hard to be optimistic about our chances for avoiding climate disaster. Where do we go from here?

At least one suggestion has come from an unlikely source. Several elder Republican statesmen have come forward with a proposal for a gradually increasing carbon tax imposed at the first point that fossil fuels enter the economy – the well, mine or port. The tax might start at $40 per ton. The revenue from this tax would be returned as a tax-free dividend to each American with a social security number in periodic checks or direct deposits. At $40 per ton the dividends would be $2,000 for a family of four in the first year. The initial proposal is that all of this tax revenue would go directly to dividends – none would be diverted to other purposes, even to climate R&D.

Among the proponents of this plan are James Baker, George Schultz, Lawrence Summers and Henry Paulson, all senior former government officials and thought leaders in the country. They rightly assert that “[t]he opposition of many Republicans to meaningfully address climate change reflects poor science and poor economics.” For them, the Carbon Dividend is a way for the GOP to return to the environmental achievements of earlier Republican administrations and properly align itself with voter sentiments.

Since the Plan was initially proposed in February 2017, it has attracted support from Exxon-Mobil, BP, General Motors, Pepsico, Proctor & Gamble and many other huge corporations. The value for these organizations comes in the form of better public relations, fewer “command and control” regulations and an end to federal and state tort liability for emitters. We should also not discount the possibility that the corporate executives making the decision to support a Carbon Dividend are concerned about the future of the planet like the rest of us.

In any event, the Carbon Dividend proposal shouldn’t be skeptically received simply because it is favored by some Republican conservatives and large carbon emitters. In order to achieve the critical national purpose of controlling greenhouse gasses we will need everybody on board. Instead, the Plan should be evaluated first on whether it would make meaningful reductions in greenhouse gasses and then on whether it could generate sufficient political support for adoption.

The increasing tax on production of carbon-based fuels will make them more expensive relative to renewable energy sources. This tax-created advantage for renewables would spur their use. The higher cost of products made with fossil fuels would be passed on to consumers in the form of higher gasoline prices and electricity bills. Consumers would gradually demand cheaper products and energy from renewable sources.

The dividend feature would also, in theory, encourage more responsible consumption on an individual level. The dividend would be calculated by dividing the total tax revenue by the number of recipients in the taxing jurisdiction. Although this is not explicitly stated, presumably the amount of the dividend would be calibrated to meet the additional cost of fossil fuel products incurred by the consumer. A consumer would be rewarded by reducing his or her carbon footprint, because by doing so the positive spread between the dividend and the higher cost of energy-related goods would increase. It is estimated that approximately 70% of Americans would come out ahead.

But it seems that the real beauty of this proposal is the way it addresses the psychological resistance people have to acting in their own best interest on the climate issue. A white paper published by New America explains this point. The threat of global warming lacks immediacy, seeming to be remote and disconnected from everyday lives. It is difficult to convince people to endure costs now that will benefit others in fifty years. The dividend provides immediate benefits for behavior that is required to secure a much larger, though long-term benefit. It fundamentally alters the cost-benefit time horizon and it would make political support for adoption much more likely.

Is a Carbon Dividend plan politically possible? It would be certain that powerful political interests in states heavily involved with fossil fuel extraction – West Virginia, Texas, Wyoming, Louisiana, and others – would be opposed. Without a “silver bullet” a Carbon Dividend plan would have no better chance than a cap and trade scheme. In other words, no chance. But the dividend might just be that silver bullet. By immediately distributing a financial incentive to support the plan directly to voters, the Carbon Dividend would pay us to do what we should want to do anyway.

There is, of course, the problem of workers whose jobs might be lost because of the decline in fossil fuel industries. This is a problem that exists now for coal miners due to cheaper natural gas prices and automation. A Carbon Dividend Plan would hasten the demise of these industries. Hard as it is for many in West Virginia to accept, the necessity for an effective national response to climate change may require some decisions that have unpleasant local effects. These local effect cannot be the tail that wags the dog.

The West Virginia Budget Crisis

/in , , , , , , /by

Remember the large budget deficit that confronted West Virginia lawmakers at the start of the legislative session? One estimate in November 2016 was that in FY 2018 (beginning July 1, 2017) we would generate only $4.055 billion in revenue, roughly $500 million short of anticipated spending. That brought many legislators to Charleston for the general session prepared to strip spending down to a bare minimum and force the state “to live within its means.” Fortunately, those views softened when confronted by political reality.

Now projected FY 2018 revenues are about $40 million better than first predicted due to an improving coal market and a $33 million transfer from general revenues to the Workers Compensation Fund that won’t be made. But the remainder of the budget shortfall hasn’t disappeared. How the shortfall will be closed is the subject of a House and Senate conference committee meeting today. So far, the fiscal and political stress created by the shortfall has caused Governor Justice and quite a few legislators to behave as if any idea – even a demonstrably bad one – is better than nothing.

June 12 is the sixteenth day of a special session devoted to this project. The extension to allow the conference committee to meet expires on June 13 and if a solution is not reached immediately the tax reform effort may be abandoned entirely. The two opposing camps are the Governor and Senate Republicans — who want to reduce income taxes — and nearly the entire House who want to raise sales tax rates and coverage without reducing income taxes.

Neither approach is progressive. Sales taxes hurt lower and middle income citizens who have no choice but to spend almost all of their income on taxed items. Because income taxes are generally paid more heavily by wealthier citizens, the proposed income tax reductions coupled with the sales tax increases would result in an overall tax decrease for the wealthy but an overall tax increase for lower and middle income taxpayers. According to the West Virginia Center on Budget and Policy, the plan lowers taxes on the top 20% of West Virginia households and increases taxes on the remaining 80 percent of households.

Nevertheless, a sales tax increase seems likely to be in any budget deal. But it is uncertain what the new rate will be. The conference committee is now considering an increase from 6% to 6.5%. Whatever higher rate is chosen, it would be applied to previously untaxed items such as telecommunications services, digital goods, electronic data processing services and health fitness memberships. The 6.5% rate is projected to raise $96 million in FY 2018 and $106 million in FY 2019.

Beyond that, the thinking of the Governor and the Senate Republicans has come unmoored. They want to reduce income taxes by 7% in FY 2018 and in similar amounts staged over coming years. What should trigger these further reductions has been the difficult issue. Senate Republicans have only agreed to this “modest” series of reductions in income tax because opposition to their original proposal was fierce. An income tax reduction is the brain child of Sen. Robert Karnes (R, Upshur), a conservative ideologue, who headed the Senate Select Subcommittee on Tax Reform. You may wonder how a reduction in income tax collections will close the budget gap?

You’ve heard the Republicans’ answer before – tax cuts will lead to more growth and job creation, which will lead to higher tax collections. The problem is this theory has never worked. While there may be some small growth benefit in tax cuts, it never amounts to as much as the tax revenue lost. This played out painfully over a decade in Kansas, which finally abandoned its tax cutting regime by adopting tax increases passed by a Republican legislature over the veto of Republican governor Brownback.

But it is Governor Justice who has gone the furthest into fantasyland. After properly opposing massive spending cuts that would have rendered West Virginia a shell, Justice has gone over to the income tax views of the Senate Republicans in order to get a deal. He defends their position because “just think of how far they’ve come” from their original proposal to cut income taxes 30%. In other words, we should all support a bad proposal because it is not insane like the first one.

Governor Justice has engaged in what can only be described as weak and illogical explanations for his positions. He acknowledges that increasing sales taxes may swamp any benefit low and moderate income taxpayers would get from a reduced income tax. But then referring to that reduction he asks why we wouldn’t want to “give money back to the guy mowing the grass?” When pressed he has further supported the reduced income tax idea by suggesting it would be “a great move for our image and a great move to potentially bring people to our state.” Don’t bother looking for any hard numbers.

Governor Justice also has urged the adoption of a tiered coal severance tax that would generate less tax revenue when coal prices are low and increased revenue when they are high. The net impact would be a $49.9 million reduction in severance tax collections for FY 2018. This proposal is either the result of strong coal industry lobbying or faulty thinking, or perhaps both. Surely other industries in the state with greater economic impact than coal, such as healthcare, would benefit from favored tax treatment. This is just one more example of pandering to extractive industries that do not represent our future.

So in the end, how does Governor Justice believe the budget gap will be closed? He predicts an additional $100 million in tax collections from economic growth that will result from the tiered coal severance tax and his $2.8 billion infrastructure spending plan. This guesswork, called “dynamic scoring,” is so speculative it would make Donald Trump blush. There are easily a hundred ways that this tax revenue could fail to materialize even if the infrastructure plan is pursued. This is why state budgeting based on estimates of economic growth is considered unsound.

Governor Justice once appeared to be the sensible, stable player in the budget and revenue battles. Now he seems to be the chief inmate in the asylum.

 

 

 

Rep. Alex Mooney’s Feckless Vote on Healthcare

/in , , , /by

On May 4, 2017, the United States House of Representatives voted to pass the American Health Care Act (AHCA) by a narrow margin of 217 to 213, sending the bill to the Senate for deliberation. This Bill would repeal the majority of the Affordable Care Act (ACA) known as Obamacare, a promise made by Donald Trump and numerous Republican legislators during the 2016 campaign.

It is hard to describe in measured words the destructive impact the AHCA would have on West Virginia. Obamacare permitted the expansion of Medicaid benefits to large numbers of uninsured West Virginians. Because of this expansion we made great progress insuring low income, working adults, reducing the uninsured rate from 17% of the population to 5%. Repealing this feature of the law will cause 175,000 West Virginians to be uninsured once again.

One effect of the loss of health insurance is that people who need to see a doctor simply won’t. These people are at risk that their health status and earning capability will decline. Then there is opioid addiction, which has reached epidemic proportions in West Virginia. In 2016 approximately 20,000 people were treated for substance abuse disorder under the Medicaid expansion. This treatment will evaporate under AHCA. Some of the newly uninsured will get emergency treatment for illness and injury at hospitals and clinics. This is called uncompensated care.

When there is no insurance, who actually pays for uncompensated care? The people receiving care could pay out of their pockets. More likely, state and local governments or the hospitals and clinics themselves could be forced to absorb the cost. One projection estimates that West Virginia hospitals would be asked to provide $135 million more in uncompensated care annually.

Numerous national trade associations and interest groups operating in the healthcare space strongly opposed the AHCA. These included the AARP, The American Medical Association, The American Hospital Association, and Catholic Health Association of the United States. Even conservative groups such as Heritage Action and the Cato Institute opposed the AHCA.

In a series of three letters beginning in January 2017, two West Virginia Governors and the West Virginia Cabinet Secretary for Health and Human Services warned our Congressional delegation about the consequences of a repeal of Obamacare. On January 9, Governor Earl Ray Tomblin wrote to House majority leader Kevin McCarthy and the West Virginia delegation, noting that West Virginia’s population is one of the most rural and oldest in the nation, with poor health indicators. He said, “Federal funding must be maintained or West Virginia’s health care infrastructure will collapse.”

On February 15, Governor Jim Justice wrote a number of U.S Senators and sent copies to Rep. Mooney and the others in the West Virginia delegation. Justice said “Repeal of Medicaid expansion would eliminate up to $900 million from West Virginia’s healthcare economy annually” leading to the potential loss of 16,000 jobs.

None of these entreaties had the desired effect on Rep. Mooney — he voted in support of the AHCA. His official statement began as follows: “Today, I was proud to vote for the American Health Care Act. I pledged to voters in the Second District that I would vote to repeal and replace Obamacare and today I fulfilled that pledge.” His statement pointed to the “collapsing market” for health insurance and asserted that the free market would provide better options for people who can afford insurance, but offered not one word concerning the large swath of West Virginians who will be rendered uninsured or the impact of repeal on West Virginia’s economy.

Why would our Congressman vote for the AHCA in the face of unrebutted information that it would devastate the lives of many West Virginians and deal another blow to our economy? One answer is to take him at his word – he promised to do it and he was determined to keep his promise. While there is something to be said for keeping promises, the moral value of doing so here is petty in comparison to the moral imperative to protect hundreds of thousands of people who would lose healthcare coverage.

There is a less attractive explanation that may be closer to the truth. A vote in favor of the AHCA was demanded by President Trump and the House Republican hierarchy, and Rep. Mooney did not have the fibre to oppose them despite the cost to his constituents. More likely he was happy to join with them for ideological reasons despite the costs to his constituents.

As for being “proud” of his position on the AHCA, Rep. Mooney certainly has not acted like it. In March when he and Senator Joe Manchin met with constituents at a state Congressional reception in Washington, D.C., many of the attendees aggressively questioned Rep. Mooney about the AHCA. Mooney fled the room when he could no longer provide answers. Subsequently, he was quoted in the Martinsburg Journal claiming that these people were “professionally trained radicalists.” But in the comments submitted by readers of the Journal’s original March 11, 2017 article about the incident, Sara Le Rana said:

I was in attendance as an interested citizen. I WAS NOT paid or a “professionally trained radicalist.” I’m uncertain what that is. Mooney RAN, not walked, he RAN rather than stay and do his job. Manchin listened, encouraged the guests closer to him. Mooney refused to listen or stay to respond in a respectful manner . . . . The dude ran.

This evasive behavior on the part of Rep. Mooney has been typical of his lack of responsiveness, and that of his staff, in large part around the healthcare issue. West Virginians deserve better than this.

2018 cannot come soon enough.

Bank Regulation and Bubbles

/in , , /by

The bubbles referred to here aren’t in Champagne or a luxurious bath. They are the rapid inflation of value in an asset class – maybe stocks or single-family homes – to unsustainable levels inevitably followed by rapid, uncontrolled deflation. The unmistakable pop. Those my age have muddled through a number of these bubbles. There was the incredible run-up in value of tech stocks in the 1990s. Then came the sub-prime mortgage lending bubble that popped in 2007.

Bubbles are important to consider these days because a central brake on the conduct of banks in contributing to bubbles, called the Dodd-Frank Act, is under attack by the de-regulators in Congress. Banks and bankers provide a crucial function in our economy. We need them to extend credit, which is the lubricant of the economy, but to do so in a prudent manner. Unfortunately, like most every industry, the banking industry is not self-regulating. Left to govern itself completely, the industry will engage in excessive and risky behavior. This has happened time and again and is just the nature of things.

Man Controlling TradeThe image to the right is a statue called Man Controlling Trade installed outside the Federal Trade Commission in Washington. It was commissioned in 1937, before the United States had completely crawled out of the Great Depression. Most historians agree that among the causes of the Depression was the credit banks granted for speculative investment in stocks. This was followed by the stock market crash of 1929, which led to the failure of 9,000 banks. This risky behavior with depositors’ money had been completely unregulated. The statue’s powerful horse is meant to represent the danger of uncontrolled economic behavior.

To bridle this risky bank behavior, Congress passed the Glass-Steagall Act in 1933. The principal feature of this law was a separation of commercial banking from investment banking. Commercial banks, which took in deposits and made loans, were no longer allowed to underwrite or deal in securities. This regulated environment continued until 1999 when it was lifted by the Gramm-Leach-Bliley Act, which allowed banks, securities firms and insurance companies to affiliate with one another through common holding companies.

The conventional wisdom is that deregulation under Gramm-Leach-Bliley led to the sub-prime mortgage crash in 2007. This is incorrect. The two portions of Glass-Steagall that Gramm-Leach-Bliley repealed had nothing to do with the issuance or purchase of mortgage-backed securities. Banks had been issuing mortgages, securitizing them with other financial instruments, and buying mortgage-backed securities for years before Gramm-Leach-Bliley. But unfortunately there was no regulatory structure that prevented banks from lowering underwriting standards on the underlying mortgage loans as the market overheated. This lack of regulatory control led, as it always does, to excessively risky lending and a bubble.

The Great Recession that began in 2007 spurred the adoption of the Dodd-Frank Act, a massive piece of legislation. Dodd-Frank was designed to reorganize government financial oversight and give greater transparency to the finance industry. It sought to address the notion that some financial institutions are “too big to fail” and end taxpayer bailouts of failed banks. It also sought to protect the consumer from abusive conduct in the finance industry. But it has been a regulatory nightmare. One commentator has noted that the Act requires regulators to create 243 rules, conduct 67 studies, and issue 22 periodic reports.

Dodd-Frank has been on the books only seven years and it is too soon to know how successful it has been and can be. We do know, however, that there has been no financial bubble since it was enacted. Nevertheless, Rep. Alex Mooney (WV 2nd) and others whose mission is to dismantle anything created during the Obama administration want a complete repeal of Dodd-Frank. Mr. Mooney is now on the House Financial Services Committee where he can do some real damage.

Rep. Mooney recently met with roundtables of community bankers in Charleston and in the Eastern Panhandle. The bankers complained that Dodd-Frank was designed for huge banks and doesn’t “scale down” to banks the size of most in this state. They claimed that over-regulation has raised their costs and made it harder and more costly to make loans. Maybe this is a legitimate complaint for small community banks, but what regulated industry ever believes that the hand of the regulator lays upon it too lightly? There are even some in the banking industry who argue that  community banks are “too small to succeed” because they cannot generate the return on assets of larger banks, a problem that cannot be blamed on Dodd-Frank. Whatever their regulatory burden, community banks do not seem to be hobbled in West Virginia – auto loans and home equity loans are a booming business now.

Michael Barr, University of Michigan Law School professor and a key architect of the Dodd-Frank Act, says that the U.S. financial system is “incredibly healthy” in comparison to 2008 and presently in other countries. But not if you listen to House Financial Services Committee Chair Jeb Hensarling (R, Tex.), who blames a slow recovery from the Great Recession on Dodd-Frank. Hensarling has championed The Financial Choice Act, which would gut a number of important Dodd-Frank regulations.  This bill was recently reported out of his Committee on a completely partisan vote of 34-26.

Both sides of this issue have decent arguments. But considering the incredibly damaging effects of bursting asset bubbles, I for one am willing to risk a little sluggishness in bank lending in exchange for solid controls on bank behavior. Perhaps when the Financial Choice Act reaches the House floor, or the Senate, better recognition of the virtues of control will prevail.

Rep. Alex Mooney Ignores the Panhandle’s Economic Needs

/in , , , , /by

Let’s face it. Panhandle voters did themselves no favor when they elected Alex Mooney as West Virginia’s 2nd District Congressman. Characteristics we’d like to see in a Congressman – independence of thought, sensitivity to constituent needs, flexibility in problem solving – appear to be lacking in Rep. Mooney. His actions and statements show him to be one dimensional. Whatever outrage President Trump proposes for the environment with the false promise of putting coal miners back to work is just fine by him.

For proof of this I invite anyone to review Rep. Mooney’s website for his public statements and news releases. Don’t expect to find any evidence of initiative in Congress meaningful to the Panhandle. Instead, a favorite Mooney posting is a “statement” lauding something President Trump has done and repeating tired Republican attacks on the Obama administration. Here is one issued on March 28, 2017:

Today, President Donald Trump signed an Executive Order that rolls back devastating [Clean Power Plan] regulations on American energy production. . . . . This Executive Order is just one of the many ways President Trump is standing up for West Virginia energy production and I am proud to stand with him in this fight. For eight years, former President Barack Obama waged an all-out war on coal and West Virginia values. As unemployment skyrocketed and coal mines closed, President Obama and his left-wing supporters focused on executing on his promise to bankrupt the coal industry.

Earlier, Rep. Mooney celebrated President Trump’s roll-back of the Obama administration’s Stream Protection Rule, which was designed to blunt the harmful effects of mountaintop removal mining. Based on wildly inflated figures from the National Mining Association, Rep. Mooney claimed that the Rule would have cost 70,000 coal mining jobs. Pretty soon Rep. Mooney will have to come up with some ideas that actually move us forward, instead of ritually dismantling what was done during the previous administration. But don’t hold your breath. This may take a while.

Six of eight counties in the Eastern Panhandle are part of the 2nd District – Jefferson, Berkeley, Morgan, Hardy, Hampshire and Pendleton. According to Census Bureau estimates, the 2016 total population of these six counties was 231,766, making up 37% of the 2nd District. Simply from the standpoint of the total votes in the Panhandle, you would expect Rep. Mooney to pay some attention to our economic needs.

There is no coal mining in the Eastern Panhandle. Our economy is heavily weighted toward white-collar jobs in healthcare and government, tourism and agriculture. Our conservation and environmental interest groups are thriving. A ruined environment, fueled by Big Coal and science-denial, directly harms our means of achieving prosperity and our enjoyment of life. Rep. Mooney’s dogged support of the coal industry is completely out of touch with our needs. In fact, it is out of touch with the needs of the entire state. Coal mining jobs make up only a minor slice of West Virginia’s current employment. Counting generously, there are 20,000 miners employed in West Virginia out of total employment of 740,000.

Instead of legislation to improve our economic prosperity, Rep. Mooney seems more interested in right-wing social legislation. He has twice introduced a Bill called the Life at Conception Act (H.R. 816), and has introduced a resolution (H. Res. 514) imploring the states to permit individuals to disregard laws and regulations on the ground of their personal religious beliefs. In the 114th Congress none of the Bills introduced by Rep. Mooney became law.

Certainly, there is more to being an effective legislator than the number of your Bills that are passed. But Rep. Mooney was one of those Congressmen who wouldn’t meet his constituents in face-to-face town hall meetings to explain what he’s doing for us. No doubt he was afraid to hear the pent up anger in his District. There is still time in his current term for Rep. Mooney to demonstrate that he understands the Panhandle’s economic needs. But it is hard to be optimistic.