Monthly Archives: February 2021

Into the Woods


Last week, I mentioned how current events have triggered reminders of past life experiences.  This morning was one more of those occasions.  The prompt was a CNN report under the heading, “Tiger Woods won’t face charges after sheriff says car crash was an accident.”

The year was 1993.  I was lead staff for a National Governors Association project to establish uniform state policies for the regulation of the hazardous materials (HM) trucking industry.  The first step involved formation of a working group consisting of state and local officials, environmental interests and the industry.  In preparation for the first meeting I met with staff from the National Highway Transportation Safety Agency (NHTSA) to confirm what I believed to be the primary goal of the project: reconcile the myriad difference in HM regulations among the contiguous 48 states while still ensuring safe movement of some pretty nasty stuff within the legal definition of HM ranging from large quantities of nail polish to radioactive waste.

The project was a compromise with the industry which pushed for federal preemption of state authority.  During congressional hearings for what became the Hazardous Materials Transportation Uniform Safety Act of 1990 (HMTUSA), states made the case they already had the infrastructure in place to regulate the industry.  To shift responsibility to Washington, D.C. would require a significant increase in federal resources and staffing, something the George H. W. Bush Transportation Department was not ready to support.

At the NHTSA briefing, I asserted the states’ primary objective was prevention of accidents which resulted in HM spills which threatened both human safety and the environment.  I was immediately stopped and told (paraphrasing}, “There are no such things as accidents.  DOT uses the term ‘incident.’  There is either equipment failure or operator error.”  For example, metal fatigue results in a broken axle.  A driver falls asleep after violating mandatory rest stops.  The shipper inadequately secures the cargo.  Even incidents related to so-called “acts of God” are avoidable if the proper preventive measures are employed.

Too bad Los Angeles County Sheriff Alex Villanueva had not been in attendance at that briefing.  On a Facebook Live chat about Tiger Woods, Villanueva said:

We don’t contemplate any charges whatsoever in this crash.  This remains an accident. An accident is not a crime. They do happen, unfortunately.

Accidents do not just happen.  Villanueva reminds me an of old Joan Rivers joke about the business executive calling a tryst with his secretary an accidental affair.  His wife responds, “Did you slip on a banana peel and fall into her vagina?”

Used 2019 Genesis G80 5.0 Ultimate Sedan 4D Prices | Kelley Blue BookNone of us knows exactly what happened, but if you look at the following range of possibilities, it is hard to call what occurred at 7:12 am this past Tuesday an accident.

  • The steering rod breaks or other equipment on the Genesis GV80 Woods was driving fails.  Not a great advertisement for a car with a $48,900 base price and title sponsor of last week’s PGA tournament for which Woods was the host professional.  Though the price seems worth it based on the survivability factor in such a horrific crash and rollover.
  • Woods was late for a photo session at Riviera County Club and may have been exceeding the speed limit to make up time.
  • Two days earlier Woods had talked with CBS’ Jim Nance about his discomfort from December back surgery.  One would think he might consider a driver as the normal one hour drive from his  hotel to the Club would test his tolerance level to be strapped in, relatively immobile for that length of time.
  • There could have been an object in the road (e.g. animal or pothole) in which case the driver would be expected to slow down to avoid it.
  • Though the police at the scene claims he did not seem to be impaired, his condition and the need to get him to the Harbor-UCLA trauma center ASAP meant that normal on-site breath or dexterity tests were not employed (now known as the Bruce Springsteen defense).
  • Perhaps conditions demanded vehicles proceed at less than the posted speed limit.
  • Or Woods simply did not appreciate how fast the car was going due to the exceptionally smooth ride, quiet interior and the 375 horsepower engine under the hood.

Surely, no one believes Woods intended for this to happen.  But it is just one more example of the difference between intent and accountability.  I will leave it to the judicial system to decide if any laws were violated.  Though there is a touch of irony.  A major objection to the use of excessive force by police in several noted cases is when the arresting officer exceeds his/her authority becoming the judge and jury.  In this case, Villanueva did much the same thing, except, playing prosecutor, judge and jury, he singlehandedly acquitted the suspect.

Maybe the Stephen Sondheim musical “Into the Woods” is actually a metaphor for encounters with law enforcement.  If you are a famous athlete involved in a serious car crash which could endanger life and property or rock star arrested for DUI, the relevant song is “No One is Alone” from Act II.  The police and courts have your back.  But if you are an average Joe or Jane with a burned out taillight or you are jaywalking, you have a different take on the encounter. “Agony!”

For what it’s worth.


The Greene New Deal


The sustainability of any business depends on its ability to either maintain and grow its current consumer base or develop and market new products and services to attract a previously untapped market.  Or sometimes both as has been the case of the Ford Mustang.  Facing competition from other automobile manufacturers for the “family car” buyer which had been the mainstay of its success,  Ford introduced the Mustang at the New York Worlds Fair in April 1964.  First year sales totaled 618,000 vehicles, more than five times the company’s pro forma projection.  For many of these initial model year owners, the Mustang was their first new-car purchase.

Image result for mustang mach eMore than a half century later, the average age of Mustang buyers is 51 years old.  As they became empty-nesters, many loyal Ford owners have stuck with the Dearborn-based company, trading in their Escapes and Explorers for the latest version of the “muscle car” including the 2020 Mustang Mach-E, an electric SUV crossover (pictured here).  In other words, Ford used the Mustang brand to first attract the untapped youth market and later to recreate that experience for an older generation.

Based on an article in this morning’s edition of USA Today, I realized the same principle applies to political parties.  When their traditional base begins to dwindle they have the same choices.  Tap a new market, provide policies and programs that appeal to long-time loyalists or both.  Such is the case with the Republican party.  To fully appreciate its transformation, the first task is to ask, “What happened to the traditional base which produced presidential victories in all but four years (Jimmy Carter’s single term) between 1968 and 1992?”

The answer is pretty simple.  Between 1950 and 1980, real family income rose almost equally for all households regardless of economic status.  Since that time families in the top five percent have seen real income increase by 180 percent which median income gains equal 130 percent and lower income growth is less than 120 percent.  (Source:  Center for Budget and Policy Priorities based on U.S. Census data)  In partisan terms, for the first three decades after World War II, an overwhelming majority of Americans were benefiting from the post-war boom and viewed the GOP as the conservative force that would protect those gains.

As upper class households continued to flourish while middle and lower class family income was stagnant, the percentage of voters who identified as and voted for Republicans decreased.  Best evidence?  The GOP won the popular vote for president once (2004) in the last 28 years.  The Republican party was the partisan equivalent of Ford Motor Company in the mid-1960s.  To continue its viability on the national scene it had to stop the loss of traditional voters and fill the gap with new voters.

Which brings me to this morning’s report on a mid-February Suffolk University/USA Today poll of 1,000 Trump voters.  It suggests, even though the GOP hoped to hold on to upper income voters with tax cuts and deregulation, its ability to make the 2020 election closer than predicted is largely due to an increase in voter participation by Donald Trump cultists.  Consider the following Statista exit poll data for 2016 and 2020.  In 2016, voters with annual income between $50,000 and $99,9999 supported Trump by a margin of 50 to 46 percent.  Compare that to a 2020 Biden advantage of 56-43 percent for the same demographic.

But for one income cohort, the tax and deregulation strategy worked.  The 2020 margin of Trump support among voters with an annual income of $100,000 or more increased by almost 10 percent (54-43) compared to a less than two percent margin in 2016.  Unfortunately for the GOP, those voters made up a smaller percentage of the total vote in 2020.

With the decrease in voting power among upper income voters, the GOP needed to look elsewhere to make up the difference.  The USA Today  analysis by Susan Page and Sarah Elbeshbishi makes it pretty clear where they came from.

  • 73 percent of Trump voters still say Joe Biden was not legitimately elected.
  • Trump voters by a margin of 46 to 27 percent would abandon the GOP and join a Trump party if he decided to create one.  A similar margin believes the Republican party should be more supportive of Trump.
  • 80 percent think the seven GOP senators who voted to convict Trump “were motivated by political calculations, not their consciences.”
  • 58 percent believe the January 6th attack on the U.S. Capitol was “antifa-inspired.”
  • 76 percent would support Trump for the 2024 Republican nomination for president and 85 percent would vote for him in the general election.

If half the 2020 Trump vote totals came from those whose first loyalty was to the candidate, not the party, it explains both the continuing hold Trump has over the GOP and the willingness of Republican officials to dance with him and down-ballot candidates like Lauren Boebart and Marjorie Taylor Greene.  If you think Texans were left out in the cold by an increase in renewable energy, that is nothing compared to what the GOP will face if its future is fueled by renewable conspiracy theories which are at the heart of this other “Greene New Deal.”

For what it’s worth.


Texas on My Mind


I woke up this morning
Texas on my mind
Thinking about my friends there
And the times I left behind.

Pat Green/”Texas on My Mind”

Lately, I notice current events have become the equivalent of a personal journal reminding me of good times and bad over the course of seven decades.  For example, Mary Wilson’s passing brought back memories of seeing the Supremes at the Allentown Fair in 1967.  The Baja Marimba Band (with Julius Wechter, who wrote “Spanish Flea” made famous by Herb Alpert) was the opening act.  But nothing matches the flood of recollections this past week about our family’s years in Austin, Texas.

Image result for chuy'sSome are minor moments in time with multiple degrees of separation, insignificant in the broader scheme of things.  Yesterday’s Washington Post reported two former first daughters, Chelsea Clinton and Jenna Bush, joined a group that purchased the WNBA Washington Spirit.  Current and former residents of Austin cannot see Jenna’s or her twin sister Barbara’s name and not think about the 2001 incident when they, then students at the University of Texas, used false IDs to order drinks at the city’s go-to Tex-Mex restaurant Chuy’s, an establishment we patronized on many occasions.  I am sure they were not the first nor the last Longhorns guilty of underage drinking at this cantina known for its paintings on velvet canvas or the wooden pterodactyls hanging from the ceiling.  Their particular crime, of course, was being  very recognizable presidential offspring.

Of course, this week’s Lone Star State main event was the once in a generation freeze exacerbated by the inexcusable response by Texas governor Greg Abbot and junior U.S. senator Rafael “Ted” Cruz.  How do I know it was inexcusable?  Personal experience.  In April 1983, I was appointed state director of Housing and Community Development by Governor Mark White.  On Christmas eve that same year, Texans experienced a similar situation.  The high temperature in Austin was seven degrees, two degrees fewer than the previous all time low.

Image result for governor mark whiteOn Christmas Day, several state officials, myself included, were asked to be in the governor’s office at 8:00 a.m. the next morning.  As is the case again this week, the entire produce industry in south Texas was devastated, and the unemployment rate along the border was projected to reach 60 percent in the most agricultural counties.  Among the resources within my jurisdiction was a $41 million allocation under the federal Community Development Block Grant Program (CDBG).  As I tell this story, keep in mind my only prior interaction with Governor White had been a brief introduction during my first visit to the capitol as a state employee.  He more likely associated me with the letters he received, including one from the city manger of Three Rivers, suggesting “Sam Houston was spinning in his grave” for White’s having hired “a gringo from Washington, D.C. for a job that should have gone to a native Texan.”

As the governor went around the table, he asked each of us what we could do immediately to alleviate the situation. I brought up the CDBG funding and the fact 20 percent was set aside for discretionary and emergency projects.  White:  “How soon can you start writing checks?”  To which I replied I was sorry, but the law required the funds had be used for tangible projects.  As I listened to accounts of Abbott’s actions or even New York Governor Andrew Cuomo this week, I wonder what I would have done if White had said, “I don’t give a damn what the law says.  Start writing checks or pack you carpet bags and go back to D.C.”

But that was a different time.  Instead he reiterated his goal was to get money into the hands of people who needed it.  Within 24 hours my team put together a public works program which included everything from repairing government facilities to removing and replacing palm trees along the Rio Grande highway which had not survived the cold.  As a result, local governments were able to put thousands of displaced workers on the public payroll for the remainder of that winter.

The memories did not stop there.  On Wednesday, the Austin American-Statesman ran a story under the headline, “St. David’s, other hospitals struggle with loss of water pressure, heat.”  St. David’s has a special place in our family history.  It was at that very hospital our daughter was born in September 1983.  Nothing that happened over the next five and a half years could outshine that one moment.

For the fourth memory, I return to the less significant.  At a cousin’s recommendation, my wife and I binge-watched the HBO documentary “The Lady and the Dale.”  In the final episode, the protagonist G. Elizabeth Carmichael organizes an “army” of street corner flower vendors in Austin.  The time period?  The mid-1980s, concurrent with our residency there.  Our departmental offices were housed in a converted hospital down the block from a major intersection, the corner of West 5th Street and Congress Avenue.  Those flower guys were always there, yet we had no idea of the intriguing back story about who they were and how they were recruited.

We left Austin to return to the D.C. area in 1988.  And more recent events have displaced our Texas experience over the nearly three and a half decades since we departed.  So let me end with a thank you to Jenna Bush, Greg Abbott, Mark White, the staff at St. David’s hospital and Liz  Carmichael for jogging my memory of the “friends there and the times I left behind.”

For what it’s worth.


The New GOP Mascot


In the spirt of what has become known as the “let elephants be elephants” movement in which these animals are no longer being exploited for entertainment or as caged curiosities, perhaps it is time for the Grand Old Party to do likewise and look for a new mascot.  HISTORICAL NOTE: Although most people believe the origins of the Republican symbol are tied to an 1874 political cartoon by Thomas Nast, it first appeared in a Civil War illustration years earlier.  Union soldiers used the phrase “seeing the elephant” to mean experiencing combat. Nast is credited with making the association stick having represented Republicans as elephants continuously during the 1870s.

If not a pachyderm, what would be most representative of the modern day Republican Party?  One potential answer comes from a most unexpected source, Senate Majority Leader Mitch McConnell.  Following his vote to acquit Donald Trump of inciting an insurrection, he took to the floor of the upper chamber to affirm Donald Trump incited an insurrection.  But that is not what caught my attention as it was nothing new.  During the Trump era, more than one Republican had morphed into a rhetorical pretzel to defend the indefensible.

In this case, McConnell decided to take the law into his own hands in what can only be called anti-vigilantism.  His words:

If President Trump were still in office, I would have carefully considered whether the House managers proved their specific charge.

But in this case, that question is moot. Because former President Trump is constitutionally not eligible for conviction.

One more reason to remove the elephant as his party’s standard bearer.  McConnell displayed a mammoth lapse of memory that would put the beast to shame.  Just four days earlier the U.S. Senate had taken up this exact question.  By a vote of 55-45, including five members of his own party, the Senate affirmed just the opposite.  As pointed out by the overwhelming majority of constitutional scholars, this vote established the rules for the trial.  It was the equivalent of a judge’s refusal to dismiss a case on technical or procedural matters.  Once that judge determines the trial must proceed, the jury CANNOT use those same arguments to excuse the defendant’s behavior.

But not Mitch McConnell.  He announced to the world, “I don’t care what the rules are.”  Think about it.  Much of the defense’s arguments during the trial, and Republican oratory surrounding it, focused on precedence.  Ohio Senator Rob Portman:

Think of the precedent of saying that Republicans could go after President Obama or President Clinton or Democrats could go after George W. Bush as a private citizen.

But think about the precedent of this newly manufactured McConnell Doctrine.  Imagine you or I decide to ignore a congressional action.  For example, Congress votes to raise taxes to support an increase in defense spending.  What if I follow McConnell’s lead and say, “I don’t care.”  I then choose to use the previous year’s rate when calculating my income tax.  Is there any doubt I would be excused of tax evasion because I chose not to accept a congressional vote as binding?

So far, I have focused on Mitch McConnell as he is now the highest ranking federal official in the Republican party.  But “I don’t care” is often the mantra of the entire caucus.  One hundred forty seven Republican members of Congress, when presented with evidence Joe Biden had been elected president in what a Trump appointee affirmed was “the most secure election in American history,” said, “I don’t care.”  One hundred ninety seven Republican House members experienced the terror of January 6, 2021 and said, “I don’t care.”  Forty three GOP senators looked at the evidence before, during and after the insurrection and said, “I don’t care.”

Should we be surprised?  Absolutely not.  The GOP has been singing from the same hymn book for the past four years.

  • An October 2017 Gallup poll showed 96 percent of adults favored “background checks for all gun purchases.”  The GOP:  “We don’t care.”
  • Data for Progress found those who had an opinion supported the creation of a “public option for health insurance” by a 55 to 18 margin.  Even Republicans supported the measure by a 47 to 27 margin.  The GOP:  “We don’t care.”
  • According to a June 2020 Pew Research survey, 74 percent of adults favor legal status for DACA recipients (Dreamers).  The GOP:  “We don’t care.”
  • When Pew Research asked adults about “raising the federal minimum wage to $15 an hour,” 67 percent favored the change.  The GOP:  “We don’t care.”

Which brings us back to the question, “What symbol should replace the elephant as the visual embodiment of today’s Republican Party?”  Who better to make the case than Trump lapdog South Carolina Senator Lindsey Graham?  On “Fox News Sunday” this past weekend, Graham declared:

The Trump movement is alive and well.  All I can say is the most potent force in the Republican Party is President Trump. We need Trump-plus.

There is only one chose for the new mascot based on Trump’s continued presence as the de facto voice of the Republican Party and the GOP’s insistence on ignoring the preferences of an overwhelming majority of Americans.  The good news is we do not need a modern incarnation of Thomas Nast to create it.  It already exists.  (See below.)

Image result for melania i don't really care

For what it’s worth.


WealthFare Queens


The question of the day: “Why is it so hard to come up with solutions to the nation’s most pressing problems?”  Hopefully, the following example sheds some light on this often voiced critique of government as each option requires balancing opposing objectives.

A recent conversation with a long time friend and colleague focused on the pending COVID-19 relief package.  While we agreed those who had suffered the most economically during the pandemic need additional help, he asked the question most fiscal conservatives have ignored the past four years, “Who is going to pay for it?”  He then challenged me to come up with a way to pay down the national debt.

Within 24 hours I gave him one option based on the following facts and assumptions.

  • The national debt is approaching $28 trillion.  With the addition of a $1.9 trillion relief package it will top $30 trillion in the coming fiscal year even with an anticipated rebound in GDP and employment.
  • Labor is already heavily taxed when you take into account income tax, social security and Medicare.
  • Non-labor income has had a relatively free ride.  Dividends and capital gains are taxed at a lower rate than labor-based income.  Hedge fund managers (you know, those people who bet AGAINST the U.S. economy) can defer income and have it treated as capital gains rather than management fees.
  • Increasing government revenue is about more than tax rates.  It also depends on the base, i.e. the goods and services to which the rate is applied.  States and localities, most of which are required to balance their annual budgets, have added once tax-free commodities (e.g. downloaded software) to the list of taxed items to meet their constitutional requirement to match revenues and expenditures.

These facts and assumptions set the direction in which I sought a solution to the debt.  Was there a  currently un-taxed good or service that could generate enough revenue to pay off the national debt?  If so, could it be taxed and how?  And finally, would such revenue source infringe on state and local receipts?

The answer to the first question was easy.  How is buying stock different from purchasing a computer, car or clothing?  And stock transactions are not taxed by state or local governments.  The logical conclusion?  Impose a sales tax on the value of a stock purchase.  But would it generate enough income to eliminate the debt.  To determine this, I looked at the data about stock transactions on one day (December 31, 2020).

  • The value of all stock sales (including all U.S. exchanges) totaled $411.2 billion.  I chose New Years Eve because sales volume is historically lower than an average day making any annual projection more conservative than might be expected.
  • A 2.5 percent national sales tax would generate $10.3 billion on that one day.
  • The markets are open 253 days annually.
  • The annual revenue from the sales tax would be $2.6 trillion.
  • At this rate, the current debt of $28 trillion could be paid off in less than 11 years.

If, however, you thought a 2.5 percent rate was too high, lower it to 1.0 percent.   Annual receipts would fall to $1.04 trillion, eliminating the current debt in just under 27 years.

I then applied it to my own stock transition history for calendar year 2020.  I had purchased stock valued at $30,053.  At 2.5 percent my contribution to debt relief would be $751 for 2020.  That seemed to make sense as a fair share for someone with our net worth.

My friend, who lives on the other side of the tracks (the good side), suggested his 2020 contribution would have been $300,000, to which he added the word, ‘Gulp!”  But, if you do the math, that meant he purchased $12 million in stock value last year.  To which I replied I doubted anyone who could spend $12 million on stock in a single year would miss a meal because of the new tax.  And then asked, “Would you prefer we treat dividends and capital gains as regular income subject to your marginal rate?”  He did not even reply to that inquiry.

Image result for social securityI then anticipated an additional objection.  Any new tax, regardless of its initial purpose, would be more federal revenue and would only lead to more spending, not debt reduction.  So, I suggested any new tax must be dedicated to that specific purpose.  Right on cue, he asked, “Wasn’t that supposed to be the case with Social Security.  Yet Congress raids it constantly to cover the deficit?”  Yes, that is why this new tax should be created by amending the constitution as was the case with the income tax.  The 16th Amendment put restrictions on the imposition of a federal income tax.

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

Those restrictions have been upheld time and time again by the courts.  Therefore, the “power to lay and collect taxes” on the value of stock purchases for the sole of purpose of paying down the national debt could have the same judicial weight if violated by any future Congress.

After he shared my idea with several wealth managers, my colleague said their message was crystal clear.  Wall Street will never accept a tax.  I needed to focus on fees.  He recommended a $1.00 fee on transactions over $100.  Unfortunately this option had two drawbacks.  First, even if the $1.00 fee was applied to all transactions, the total daily revenue would be approximately two billion dollars, one fifth of that generated by the 2.5 percent sales tax.  Therefore, eliminating the current debt would take 55 as opposed to 11 years.  Second, a fee per transaction is highly regressive.  If I buy one share of IBM at $128, the fee would be equal to 0.7 percent of my purchase.  If my colleague buys one share of Berkshire Hathaway Class A stock for $365,000, his fee is 0.00027 percent of his transaction.

He came back with a suggestion the fee apply only to transactions over $1,000.  Okay, that makes it a little less regressive.  However, the average value of all transaction is approximately $117.60 (total dollar volume divided by block volume). In other words, the cost of making any fee less regressive is a corresponding decline in the revenue needed to erase the debt.

Which brings me to the title of this post.  After raising the more regressive nature of the fee over a percentage tax on transaction value, my friend responds, “Life isn’t fair.”  To which I reply, “You’re right about life not being fair.  But it’s fairer if you are rich and have lobbyists.”  Let me explain.

We hear a lot from fiscal conservatives about the cost of the social safety net.  Of course there are abuses, but the general principle is the “net” is designed as a hand up, not a hand-out, especially when Americans fall on hard times.  What we never hear about is the “corporate safety net.”  Consider the following occasions on which corporate America turned to the government for assistance which responded with the associated federal outlays.

  • 1980s savings and loan crisis ($132.1 billion)
  • 2008 subprime crisis ($700 billion)
  • 2018 tax act yearly impact on corporate tax receipts ($116 billion/Source: Forbes)
  • 2019 farm crisis due to Trump tariffs ($41 billion)
  • 2020 pandemic relief to major industries in the CARES Act ($208 billion)

Image result for fossil fuel industry subsidyIn contrast, the FY2020 federal budget included $16 billion for Temporary Assistance for Needy Families (TANF). $66 billion for Supplemental Nutritional Assistance Program (SNAP) and $60 billion for HUD Housing Assistance.  Compare that to the estimated $649 billion in direct and indirect U.S. subsidies to the fossil fuel industry in 2015.  (Source: International Monetary Fund).

So, the next time you hear a politician rail about entitlements and the welfare state being responsible for the national debt, those living in poverty are not the only beneficiaries.  Or when you hear Republicans accuse Democrats of wanting to give everything away for free, think about who else is currently on a free or heavily subsidized ride in America.

Deficit hawks who constantly preach about the critical need to bring down the national debt are no better than those they claim are living off the American taxpayer.  They want to balance the budget and eliminate the national debt.  But please, please do not ask them to pay to do it.  That is what makes them “WealthFare Queens.”

For what it’s worth.