INVESTING IN INFRASTRUCTURE AND A GREEN ECONOMY

In previous posts, I’ve noted that with Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law (because they aren’t passed by the Senate or are vetoed by President Trump), they will frame the debate going forward and into the 2020 elections. Raising substantive issues will shift the political discussion to meaningful policies to address important problems rather than tweets and meaningless bluster.

Readers’ feedback on the list of topics in a previous post identified infrastructure investment and environmental policy issues as the two top priorities. Coincidentally, these two issues have become linked. They were described in my post as follows:

  • Infrastructure: repair roads and bridges; repair and improve mass transit including railways and airports; provide quality school buildings for all children; repair and enhance water, sewer, and energy systems; provide universal, high speed, affordable Internet access; restore and enhance public parks; provide good jobs with good wages and benefits through work on infrastructure projects.
  • The environment: move forward with the Green New Deal, which supports the development of renewable energy and green jobs while aggressively addressing climate change.

The American Society of Civil Engineers’ (ASCE) 2013 Report Card for America’s Infrastructure gave the U.S. a grade of D+ and estimated that an investment of $3.6 trillion was needed by 2020. No significant improvement has occurred since the report card was issued. (A new report card, which is done every four years, will be out on March 9, 2019.) ASCE describes infrastructure as the backbone of our economy and notes that there’s a significant backlog of maintenance and a pressing need for modernization. The overall grade is a summary of grades in 16 areas from schools to water and waste systems to transportation and energy systems.

Large portions of our deteriorating infrastructure were built in the 1930s under the New Deal’s Works Progress Administration (WPA). The WPA built electricity generation and distribution systems, constructed dams and water distribution systems, restored ecosystems, built national parks, and rescued the Midwest from the Dust Bowl. During World War II, the government built factories that produced military equipment and supplies, which after the war produced consumer goods. After WWII, the government subsidized housing construction and invested in human capital through the GI bill, which subsidized education for veterans. In the 1950s, public money built the Interstate Highway System and our aviation system. [1]

By the late 1960s, public infrastructure investment began to slow and by the 1980s, with privatization, deregulation, cutting taxes, and shrinking government at the top of the political agenda, the decline in infrastructure investment accelerated. The public seems to have quickly forgotten that it was public investments that built the infrastructure everyone takes for granted in their everyday lives.

Today, recognition is growing that our failure to invest in maintaining and modernizing infrastructure is hurting our global competitiveness and inconveniencing our everyday lives. A growing number of voices are noting that infrastructure investment is needed and would be a much better use of public funds than spending $5 billion on a wall to prevent immigration from Mexico or $1.9 trillion over 10 years on tax cuts (largely for wealthy individuals and corporations) as was done in December 2017.

Investing in green industries, particularly clean and renewable energy, thereby addressing climate change, is one component of infrastructure investment. This is also an opportunity to revitalize the U.S. economy and to foster our ability to compete in the growing international market for green technology.

Infrastructure investment can also be a means to address under-employment and inequality. Although overall unemployment figures are low, many people who lost good, blue collar, union jobs to global trade are still earning less and are less secure economically than they used to be. Many recent college graduates are struggling to find good jobs and unemployment is still high for people without college degrees, especially those who are not white. Ensuring that the many jobs created by infrastructure investment are full-time jobs with good wages and benefits would be an important step toward reducing economic inequality and insecurity.

Although President Trump has expressed support for infrastructure investment, his approach would privatize public infrastructure, unfairly enrich private developers, and fail to build much of the infrastructure that’s need. (See my earlier post, Trump’s Infrastructure Plan: A Boondoggle, for more details.) Furthermore, it would not promote the greening of our economy or reducing inequality.

My next post will review some infrastructure investment proposals, including the Green New Deal, which has been getting a lot of attention lately.

[1]      Rynn, J., 6/28/18, “What else we could do with $1.9 trillion,” The American Prospect (https://prospect.org/article/what-else-could-we-do-19-trillion)

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THE DOWNSIDE OF PHILANTHROPY

Philanthropy, particularly at this time of year, is typically viewed as the ideal expression of caring for others and contributing to amelioration of social problems. However, philanthropy, particularly when tax-subsidized and done by the super-rich, has a significant downside.

Philanthropy in the U.S. is subsidized for those who itemize deductions on their income tax returns. Deducting charitable donations from taxable income means that the donation costs the donor less than its full amount. For a high-income tax payer paying roughly 40% of income in taxes, the donation only costs 60 cents for every dollar donated. For a lower-income taxpayer paying a 15% tax rate, a donation costs 85 cents for every dollar donated. Furthermore, it’s primarily high-income taxpayers and home owners who itemize deductions. So, both of these factors skew the financial benefits of philanthropy to those with high incomes and provide lower or no benefit to those with lower incomes.

Therefore, our current system of tax-subsidized philanthropy favors the giving preferences of the wealthy over those of low income or poor people. This problem was exacerbated by the 2017 tax cut. It raised the standard deduction for income tax calculation, which means that only the top 10% or so of incomes will still find it worthwhile to itemized deductions. Therefore, our tax system will now subsidize the philanthropy of only the top 10%.

Poor and middle-class people give away as high a percentage of their incomes as the wealthy, which suggests that the tax subsidies for philanthropy are rewarding the wealthy for behavior they would most likely engage in anyway. Charitable activities have occurred for centuries, but we have provided tax benefits for them only for the last 100 years. Therefore, these tax subsidies may well just be a benefit, a pat on the back, for high income people. If this is the case, it makes no sense to give away the tax revenue or to allow the wealthy to avoid paying their fair share in taxes by giving them a tax break for their charitable giving. [1]

Because of the growth of income and wealth inequality, and the huge amounts of money the super-rich can easily afford to give away, increasingly the philanthropic preferences of the wealthy are shaping our society. However, the giving preferences of the wealthy do not reflect the philanthropic preferences of the rest of society. [2]

Rob Reich, the author of “Just Giving,” would prefer to see society pursue democratically identified goals rather than private projects selected by wealthy philanthropists. The big splash that big philanthropy makes, such as Amazon’s Bezos’s recent announcement of a $2 billion commitment to address homelessness and improve early childhood education, distracts us from crafting policy solutions that will systematically address problems and help everyone who is facing a challenge rather than the subset who fall within the purview of a philanthropic project.

When the super-rich decide which institutions to support (e.g., universities, museums, hospitals) and which social problems to tackle (e.g., homelessness in the U.S., hunger and health in poor countries), they are usurping the role of public decision-making and priority setting that should be done by democratically run organizations, particularly governments. [3]

Charitable donations have been increasing since the 2008 recession, exceeding $400 billion for the first time in 2017. However, fewer households are giving, dropping from 66% in 2000 to 55% in 2014. While Giving Tuesday this year set a record with $380 million raised from 4 million individuals (an average of about $100 each), this represents only 0.1% (one tenth of one percent or one thousandth of overall giving).

Non-profit organizations are relying on fewer, larger donations. This means their support is less reliable from year to year and that they may tweak their missions to fit the interests of large donors. Overall, it means the favored institutions, causes, and projects of the wealthy are funded, while others struggle to survive. For example, it may mean that there is one awesome charter school for a hundred or so children, but that quality public education for all gets left behind.

Large-scale philanthropy can cause public organizations, such as public schools, to alter policies and procedures to qualify for philanthropic funding. For example, billionaire Bill Gates’s foundation’s grants for public schools have pushed school systems and states to adopt the Common Core learning standards and to internally subdivide schools into “schools-within-a-school” in accordance with grant requirements.

Super-sized philanthropy can’t replace broad-based public programs and investments that improve overall public well-being. An irony is that the super-rich may oppose public policies that would address issues they tackle through their philanthropy. The most dramatic and recent example is that of Amazon’s Bezos. He announced $2 billion in philanthropy to tackle homelessness and early education, but vehemently opposed, successfully, a per person tax on employment in Seattle to address the growing homelessness there. [4] Seattle’s homelessness problem is exacerbated by escalating housing prices driven in significant part by the need for housing for the growing number of Amazon employees in the Seattle area.

A more equitable and democratic system would stop providing a tax benefit for the philanthropy of the rich and more fairly tax the high incomes and wealth of individuals and corporations. The increased public revenue could be used to broadly and equitably improve societal well-being. For example, if we had increased the minimum wage to keep up with inflation and productivity since the 1960s, if we had reduced executive salaries and shareholder rewards in order to benefit employees, and if we provided affordable, quality health care for all, maybe we wouldn’t need super-sized philanthropy to help people afford a place to live or child care.

Charitable giving is not a bad thing, although giving of one’s time can be as valuable and more rewarding than giving money. However, our current system of tax-subsidized charitable giving and super-sized philanthropy based on great disparities in wealth is not good for democracy nor the best way to maximize social welfare.

[1]      Ortiz, A., 12/2/18, “The price of philanthropy,” The Boston Globe (This article is an interview with Rob Reich, the author of the new book “Just Giving.”)

[2]      Ortiz, A., 12/2/18, see above

[3]      Loth, R., 12/10/18, “We can’t privatize our way out of poverty,” The Boston Globe

[4]      Loth, R., 12/10/18, see above

ELECTION AND ETHICS REFORM

With Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law (because they aren’t passed by the Senate or are vetoed by President Trump), they will frame the debate going forward and into the 2020 elections. Furthermore, policies can become law by attaching bills or provisions to must-pass bills such as those funding the government. This is a tactic that has been used for many, many years and has been used frequently by Republicans over the last 12 years. Talking about substantive issues will shift the discussion to ideas from personalities and to meaningful, long-term policies to address important problems rather than short-term, idiosyncratic, one-off deal making.

Two key topics will be the focus of the first bill in the new House in January. They were the first two topics on my previous post’s list of possible issues for House Democrats to address. They are:

  • Elections: stop voter suppression, encourage voting, stop gerrymandering, and reform campaign financing (e.g., limit contributions, provide matching public funds, and require full disclosure of spending and donors)
  • Ethics: address conflicts of interest for Congress and all federal workers; stop the undue influence of special interests obtained through lobbying, the revolving door, and campaign expenditures

Rep. Nancy Pelosi, the current leader of the House Democrats (and likely Speaker of the House come January), has stated that the first bill in the new House in January, known as H.R. 1, will address the restoration of democratic principles and procedures. It will address election and integrity issues where government of, by, and for the people has been undermined by wealthy individuals and corporations. The overall goal of the bill will be to end the ability of special interests to bend public policies to their benefit and against the interests of hard-working Americans and our democracy. This will restore Congress’s and the federal government’s abilities to enact policies that address the problems of average Americans. This is essential to renew the public’s faith in our democracy. [1]

Pelosi’s bill would do many of the things President Trump promised to do during his campaign when he stated he would “drain the swamp” in Washington, D.C. His actions and appointments have done nothing to drain the swamp and have probably made things worse.

This bill will address the huge amounts of money in our elections and the significant portion of that money that is “dark money” – money where the identity and interests of the true donor are hidden. The bill would require all organizations making donations to or expenditures on campaigns to disclose who their donors are. [2]

The proposed legislation would also take steps to increase the impact and number of small-dollar campaign donors. Incentives would be provided for individuals to make small campaign donations and the impact of those donations would be multiplied by matching them with public funds. Candidates who agree to accept these matching funds would have to limit the size of donations they accept and, perhaps, their overall spending.

The Pelosi bill would re-establish the Voting Rights Act’s protections of every citizen’s right to vote and would stop voter suppression. It would make it easier to vote through automatic and on-line voter registration while strengthening election infrastructure to prevent hacking and ensure accurate, auditable, tabulations of votes. To ensure that everyone’s vote has a fair chance of being meaningful, it would end gerrymandering, probably by requiring that an independent redistricting commission in each state draw congressional district boundaries.

The bill would strengthen ethics and conflict of interest laws governing Congress and federal government workers. It would ban members of Congress from serving on the boards of for-profit companies, which presents a clear conflict of interest. It would also enhance disclosure of who’s lobbying the federal government, so these efforts would be publicly known and not hidden in the shadows. And it would require Presidents to disclose their tax returns.

Pelosi’s bill would implement a code of ethics for Supreme Court Justices, who are currently exempt from the code of ethics that applies to other federal judges. [3]

It would close the revolving door of personnel between government positions and private sector jobs, which creates major conflicts of interest and is a major avenue for undue influence by special interests. It would prohibit employers from giving bonuses to reward employees for moving into public sector positions (as Wall St. has done repeatedly in the past). These individuals often go back to the same private sector employers later. The bonuses present the individuals with a significant conflict of interest from day one in their public sector job, particularly if the bonus is being paid out over time and, therefore, is being received when they are in their public sector role.

Tackling elections and ethics reform as a top priority makes sense for several reasons. First, these issues are very much on voters’ minds. Voters passed several ballot measures addressing them at the state and local levels in November, as was summarized in a previous blog post. Publicity about voting and ethical scandals in the Georgia election, as well as in Florida and North Carolina, have heightened the public’s awareness and concern about these issues. [4] In addition, candidates who refused corporate and PAC money fared very well in November. Noting incumbents’ acceptance of special interest money and linking it to specific votes was an effective tactic for beating them. [5]

Second, over the longer-term, addressing elections and ethics issues is critical to restoring democratic decision-making to government by ending the undue influence of wealthy individuals and corporations. This is essential to making progress on every other issue that would advance the public good. A fairer political process, where government is truly of, by, and for the people, is necessary to eliminate the system-rigging power of wealthy individuals and corporations. This will actually drain the Washington swamp. [6] Restoring faith in the fairness and integrity of our elections and policy making is a necessary first step toward restoring trust in our government.

If Democrats are willing to commit to a new code of conduct and to stand up for true democracy, they could reap the benefits of the current backlash against corrupt behavior by elected officials and the overall corruption of our political processes. There’s an opportunity to lead on re-establishing fairness and integrity in our politics. Some Democrats will resist this, fearing the loss of campaign donations and spending by wealthy individuals and corporations, but not doing so will risk losing a tremendous opportunity, both politically and for the good of our democracy.

I encourage you to communicate with your elected officials at the national and state levels about these issues. Nothing is more likely to persuade them than hearing from constituents who care about fair and ethical elections and behavior by government officials. I welcome your comments and feedback on steps you feel are needed to make our elections and policy making fairer and more responsive to regular Americans.

Thank you for your feedback on the list of topics in my previous post. In upcoming posts, I will delve into infrastructure investment and environmental policy issues since these were the two topics that were most frequently identified as priorities.

[1]      Pelosi, N., & Sarbanes, J., 11/25/18, “The Democratic majority’s first order of business: Restore democracy,” The Washington Post

[2]      Wertheimer, F., 10/10/18, “House Democratic challengers demand campaign-finance reforms,” The American Prospect (http://prospect.org/article/house-democratic-challengers-demand-campaign-finance-reforms)

[3]      Mascaro, L., 12/1/18, “House Democrats’ bill seeks reforms,” The Boston Globe from the Associated Press

[4]      Carney, E. N., 11/29/18, “Read it and weep: Georgia lawsuit paints stark portrait of voter suppression,” The American Prospect (http://prospect.org/article/read-it-and-weep-georgia-lawsuit-paints-stark-portrait-voter-suppression)

[5]      Lardner, J., 11/30/18, “What the Democrats must do first,” The American Prospect (http://prospect.org/article/what-democrats-must-do-first)

[6]      Lardner, J., 11/30/18, see above

DEVELOPING AN AGENDA FOR THE DEMOCRATIC HOUSE

With Democrats taking over control of the U.S. House in January, there’s a wide range of issues they might tackle. Even if many of the bills they propose, and hopefully pass, don’t become law because they aren’t passed by the Senate or are vetoed by President Trump, they will serve an important purpose. The bills will make it clear where the parties and candidates stand on issues and make the 2020 election, at least in part, a referendum on these issues. Furthermore, issues can be successfully addressed by attaching bills or provisions to must-pass bills such as those funding the government. This is a tactic that has been used for many, many years and has been used frequently by Republicans over the last 12 years.

A backlog of issues needs to be addressed given the decade-long gridlock in Congress and the federal government. A stalemate has prevailed ever since the Republican Congress declared in 2010 that it would not pass anything President Obama supported. It’s hard to set priorities and focus because there’s so much that needs to be done and many areas warrant urgent attention. I look forward to your comments on priorities among the following long list of topics:

  • Elections: stop voter suppression, make voting and voter registration easy, reform campaign financing (e.g., limit contributions, provide matching public funds, and require full disclosure of spending and donors), stop gerrymandering
  • Ethics: address conflicts of interest for Congress, as well as all federal employees in the executive and judicial branches; stop the undue influence of special interests through lobbying, the revolving door, and campaign expenditures
  • Health care: expand and strengthen Medicare and move toward Medicare for All; strengthen the Affordable Care Act (aka Obama Care); expand and strengthen Medicaid; improve health care access (including to women’s and reproductive health services); improve quality while controlling costs (including drug costs); move toward an efficient single-payer health insurance system; undertake a comprehensive and well-funded effort to address the opioid crisis
  • Retirement security: expand and strengthen Social Security, encourage individuals’ saving for retirement
  • Infrastructure: repair roads and bridges; repair and improve mass transit including railways and airports; provide quality school buildings for all children; repair and enhance water, sewer, and energy systems; provide universal, high speed, affordable Internet access; restore and enhance public parks; provide good jobs with good wages and benefits through work on infrastructure projects
  • Criminal justice system: eliminate racism, make the system more effective and efficient, eliminate for-profit prisons
  • Workers’ rights: strengthen the right to organize into unions and bargain collectively with employers; enhance domestic workers’ rights; guarantee meaningful work; raise the minimum wage; regulate part-time and contingent work
  • Family and child support: provide economic security by paying a living wage and providing family and medical leave, paid sick and vacation time, affordable, high quality early education and care, and an effective safety net; value and reward work in the home particularly caring for children and seniors
  • Education: provide high quality, affordable education from birth through career
  • Safety net: rebuild an efficient, effective economic support system including unemployment benefits, as well as food and housing assistance
  • Civil and economic rights and justice for all: protect and provide fair treatment for Blacks and people of color, women, immigrants, the LGBTQ community, and the otherwise-abled
  • Gun violence reduction: require a background check for the purchase of any gun; ban automatic and semi-automatic guns, as well as high capacity magazines for bullets
  • Immigration: stop the separation of children from parents at the border and reunite families that have been separated; ensure that all children and other immigrants who are detained are treated humanely and have their cases processed expeditiously; define a path to legal residency and citizenship for Dreamers and other long-time, law abiding immigrants; create a guest worker program to allow immigrants to legally work temporarily in the U.S.; address the underlying conditions that lead to refugees, asylum seekers, and immigration
  • The environment: move forward with the Green New Deal, which supports the development of renewable energy and green jobs while aggressively addressing climate change
  • Tax policy: reform the Republican tax cut bill, make our tax system fair (for all people and businesses) and a vehicle to reduce income and wealth inequality, generate the revenue needed to provide the programs the public wants
  • Corporate and the financial sector regulation: ensure corporations and financial firms serve the public good; stop privatization of public goods and services; stop financial manipulation that enriches private interests while undermining workers’ jobs and retirement benefits; enforce and enhance anti-trust laws so corporations aren’t so big that they present risks to our economy if they fail or have the economic and political power to unfairly benefit themselves
  • Fair trade: ensure trade agreements protect workers, consumers, and the environment; control international financial manipulation by eliminating tax havens and ensuring all individuals and businesses pay their fair share of taxes
  • Balance military spending and actions with diplomacy and humanitarian actions

I will do future posts on some of these issues to provide more detail on the related problems and policy solutions.

In the meantime, I welcome your comments on priorities among these issues, details about them, and any other issues you think should be on this list.