'Go it alone' – Brexit, ExitUS, Statoil – a dangerous policy

“Go it alone” is becoming the political policy of our times. It can be dangerous and costly.

The best known case is the decision of the United Kingdom to quit the EU, a move known as Brexit. A majority of UK referendum voters decided that their country could achieve to its former glory as a world power while ridding itself of immigrants the EU deal forced it to accept.

The Brits were promised they would get almost all of the EU benefits without the cost of membership or the immigrants. In fact, the EU savings would cover needed improvements to the national health program. And the UK was such a valuable trading partner, it would be able to dominate the exit negotiations with the EU.

While the UK government opposed Brexit and knew those promises couldn't be kept, it campaigned poorly, and Brexit carried the day.

Things are not quite working out as promised. Britain will have to pay tens of billions to leave. The EU won't give it nearly as good a trade deal as the EU insiders. There are big problems with Ireland, which remains in the EU and currently, as part of the Irish peace deal, has no trade border with Britain.

The UK's principal port is actually Rotterdam in the Netherlands. Workers are leaving the UK and now there's a nurse shortage there. Major international banks are moving out. “Go it alone” looks less rosy, but nobody yet has stepped up to try to reverse Brexit.

Brexit looks like a bad mistake for the Brits. The U.S. would never adopt “go it alone” like that.

Except that President Trump has done it many times over. You might call the policy “ExitUS,” which sounds like “exodus.”

Because of his misguided and partial understanding of the Paris environment agreement, he has made the US the only country in the world to quit it and remain outside. If there's an international agreement that every country can accept, it probably isn't all that tough. But the US is out.

What about the NAFTA agreement with Canada and Mexico? The US has received a bad deal, Trump says, and that settles the matter. He refuses to acknowledge that the US runs a positive trade balance with Canada and insists there's a deficit. When Canadian Prime Minister Trudeau corrected him, he implied Trudeau shaded the truth.

At the NATO summit meeting, Trump had difficulty convincing others that the US would keep its mutual defense commitments. He topped that off by rudely pushing aside, without the slightest acknowledgment, the Prime Minister of Montenegro.

International relations are complicated and interconnected. Harm me now, a country can say, but don't expect my help later.

The US was desperate for support at the UN opposing a resolution against the decision to move the American embassy in Israel to Jerusalem. Out of almost 200 votes, it received 9, from small, dependent countries. The US did not get the votes of Canada and Montenegro.

Under Gov. Paul LePage, who some see as Maine's mini-Trump, “go it alone” has also been a central policy with negative results.

Statoil, a Norwegian energy company, sought to build a major wind farm off the coast of Maine. According to the Forbes survey, Statoil annually ranks high among the largest 500 corporations in the world. It received the necessary approvals and, according to knowledgeable people, was in line to get major federal support.

LePage, engaging in a bit of legislative blackmail, got the Legislature to reopen the process so the state could switch from Statoil to backing a University of Maine project. This is pure “go it alone” with the usual adder of patriotic boosterism.

It didn't work. UMO did not get the big federal grant. Statoil decamped for the UK, where it built a large fleet of floating wind generators, the first such major commercial generation. That could have been Maine.

What is most important is that “open for business” Maine pulled the rug on one of the largest corporations in the world. How many other such outfits are likely to consider Maine in the future? The LePage switch probably will cost for decades.

It would be fair to ask candidates for governor this year how they voted or would have voted on the Statoil switch.

“Go it alone” may make people feel better, but it can produce dangerous and long-term results. Acting in isolation may have been possible in simpler times, but it is not a workable solution in today's more complex and interconnected world.

Year ends with more questions than answers

As the year turns, there are some things I haven’t been able to understand. I figure I'm like most people.

Why doesn’t President Trump get it? His popularity is in the steepest free-fall of any president, yet he keeps promising policies most people don’t want and whose implications for America's role in the world and the economy at home many don’t like.

Does he understand that running for president and being president are two quite different things? His presidency seems to be more about salesmanship than leadership.

Why did President Obama screw up so badly in Syria, allowing Russia to dominate matters there? He made a great speech in Cairo early in his administration, but never followed up with leadership on Middle East policy.

Obama left us with Democratic congressional leaders who repeat old slogans rather than offering positive, even bold, alternatives. Are there any young, national Democratic leaders outside of Washington? Like Obama was.

Why is Gov. LePage unable to understand how government works? He lets partisan petulance get in the way of leadership. He might have achieved more of his goals by compromise than he will by confrontation. He seems to think it’s all about him, when it’s really all about us.

Why do the Democrats desert their key constituencies? They are the party of working people and minorities. That was the magic of the presidency of Franklin Delano Roosevelt. But they focus their attention on less important issues and their preoccupation with the GOP's shortcomings.

Why don’t they focus on bread-and-butter issues like how to create jobs for the future, boost pay and protect retirement? Why does most of the talk either amount to complaints about the wealthy (which most working people would like to be) and social issues, which obscure more basic concerns?

Can we adjust to the speed of change? Our lives are changing at an ever-increasing rate. It is amazing to see how quickly same sex marriage gained acceptance and Supreme Court approval.

Now we are seeing long overdue but nonetheless warp-speed changes in dealing with sexual harassment and worse. Attitudes need to be fixed immediately, but society should also make sure this is permanent change, and not a frenzy that will soon pass, and that it is fair.

Why can’t we accept that the climate is changing with some unfortunate and dangerous results? It matters little if human beings are the cause, but it matters a lot if human beings, eager for short-term gain, refuse to do anything about it or make it worse.

Why can't we deal quickly and effectively with wildfires in California or major power losses in Maine, when we know both are sure to come?

Why are we still fighting a war in Afghanistan? This has never really been a country. Every outsider – the British, the Russiand now Americans – has failed to create a stable and unified country. It is tragic to waste American and Afghan lives in the longest American war, which cannot end in victory.

Why don’t we squash fake news? Trump labels anything he doesn’t like as “fake news” and he is a major producer of it. Enough people have come to believe fake news that they think all news they like is accurate and all news they dislike is fake. Fake news is taking down the real thing.

Before something is labeled as news, it should have passed before an editor or fact checker. All media – print and electronic -- ought to do what the Washington Post does and have fact checkers who report daily. The evening news would do its job better with fewer feel-good reports and a daily fact check.

Why has baseball so demeaned the job of manager that they are selected based on how well they can coddle their big stars? When a manager gets $2 million and a pitcher gets $25 million, that could be why. The result is that the manager gets no respect, and the game is more of a business and less of a sport.

I find all these questions bewildering. Of course, there may be an answer. A Persian fable told of a king who sought an all-purpose bit of wisdom. He was advised that wisdom could be summed up by the words, “This, too, shall pass.”

Abraham Lincoln reportedly once talked about that message. He said, “How much it expresses! How chastening it is in the hour of pride! How consoling in the depths of affliction!”

Amen. Happy New Year.

Income gap grows, even before tax bill's effect

The rich are getting richer and the poor are getting poorer, and that's before this year's tax bill.

While the Washington debate has focused on the size of tax breaks and who will get them, the tax overhaul takes place against a background of major growth in the gap in family assets between those at the top and everybody else. It will make it the difference even greater.

Do people care about the wealth and income spread? It may become a problem for society when those at the low end simply cannot meet their basic expenses as government faces the need to cut spending.

In 1963, the wealthiest had six times the assets of middle-income families, according to Urban Institute statistics. By 2016, they had 12 times as much as middle-income families. Meanwhile, the poorest went from having assets of about $1,000 to bearing debt of $1,000.

The biggest cause for the gap is the meteoric increase in the wealth of the top 10 percent. In the past 20 years, their wealth has taken off, leaving others behind.

With higher incomes, people can save more and make investments that increase their wealth. There’s obvious momentum that shows that having some money is the best basis for making more money.

What’s the reason for the widening gap? Wealthier people have higher incomes. And they enjoy the effect of government programs to stimulate growth in family wealth far more than the rest of the population.

In an economy with high employment, concerns now focus on the lack of progress in improving family income. The average expected tax cut of about two percent will do little to solve that problem. In fact, the gap is likely to grow thanks to bigger breaks for the wealthy.

Technology and imports have undermined pay raises for people with less skilled jobs. The value of their labor in the market cannot grow when they must compete with production by robots or low-income foreign workers.

To see their incomes increase, workers will need training for more advanced jobs. The looming problem is that the number of jobs based on technology may be less than the number of jobs performed by lower skilled workers. That may help explain why so many people have dropped out of the work force.

Not all people are economically equal. The lifetime income of white men is $2.7 million compared with $1.5 million for African American men. Men of either group do better than women of any group.

Another reason why most families have relatively little wealth is the emphasis on consumer spending as the chief driver of the American economy. High retail spending means little income is left for savings. Automatic savings plans have been consistently opposed by retail business.

The main sources of family wealth are home ownership and retirement funds. Tax laws are designed to support the growth of both of these assets, but the benefits flow mostly to higher income families.

Before the new tax bill, the federal government spent about $400 billion a year to help people boost their wealth, according to the Urban Institute. Almost half of these tax breaks goes to supporting employer-sponsored retirement plans, which mostly benefit the wealthiest 20 percent.

Next is the tax write-off for mortgage interest and an even larger share goes to the wealthy few. The tax break is designed to encourage home ownership, but Canada, without such a benefit, has a higher share of families that own homes. The U.S. system serves mainly to encourage buying bigger homes.

The ability of many people to survive through their retirement results from federal government programs like Social Security, Medicare and Medicaid. These programs essentially replace what would ideally be income from personal savings.

Because these so-called “entitlements” form a major part of the federal budget, and House Speaker Ryan will propose next year to reduce them. Employers are unlikely to step in to fill the gap. What will happen to those dependent on them for their economic survival?

In the end, the only solution to avoid an economic crisis may be targeted tax increases. The ceiling on the mortgage interest write-off could be lowered further and the proceeds used to assist first-home buyers.

Social Security and Medicare benefits might be taxed more at top income levels. The wealthy are not heavily dependent on these programs, but a higher tax on their payments could be used to protect people who need them to survive.

The federal government now leans toward promoting the growth of wealth for the already wealthy. At least, it should do the same for everybody else.

Another surprise winner in Alabama: The Constitution

The Senate election victory in Alabama of Democrat Doug Jones over Republican Roy Moore has led to much analysis of what it meant and who the real winners and losers were.

One winner that may not get much attention was the U.S. Constitution. It needed a win.

Why? Moore’s comments a few years ago to Maine conspiracy theorists had become part of the campaign. He said that he favored eliminating all amendments after the first ten. As a hard right Republican, he was ready to roll back history.

His principal target were the three amendments adopted after the Civil War. He noted, correctly, that the 11 states of the Confederacy had been forced to choose between accepting them and regaining their seats in Congress or continuing to be territories under Federal military control.

The Confederacy has declared war on the Union in violation of the Constitution. It lost and they ratified the amendments. Today, Moore and others want to act as if the war went the other way.

Moore argued that amendments ratified at the point of a gun should be repealed. He went further, saying America was at its best before the Civil War. He painted a totally false picture of the happy family life of slaves.

He dislikes intensely the Fourteenth Amendment, one of the post-Civil War package, because it means the federal government can require the states to accept the Bill of Rights, the first ten amendments he said should survive. In short, those freedoms should apply to the federal government but also in the states.

What was most worrisome about Moore’s proposal, which he did not reject after it became public, was that it revealed that the so-called “alt-right,” which hopes to gain control of the Republican Party, wants to abandon much of the Constitution.

The hard right is not merely seeking to cut taxes for the wealthy or end net neutrality. They want to rewrite history. Moore would eliminate the end of slavery, votes for African Americans and women, and popular election of the Senate.

The Constitution survived his attack. Even if the GOP regains the Alabama seat, it’s not likely to be with a candidate supporting Moore’s views.

But the Constitution is not safe. Political partisanship has become so intense that it remains under attack. While lawful constitutional change is necessary over time, trying to undermine it for short-term political gain is a serious threat.

The very Republicans, led by Majority Leader Mitch McConnell, who are the targets of Moore and President Trump, are responsible for much of the attack on the Constitution for partisan purposes.

In 2016, Democrat Barack Obama was president. He sent a Supreme Court nomination to the Republican Senate for its review and possible approval. McConnell blocked the nomination from even being considered. This year, Republican senators whistled through Trump’s pick.

The Constitution says Supreme Court justices are appointed by the president subject to the advice and consent of the Senate. While the Senate can reject a nominee, the clear constitutional intent is that it must act on the nomination, not ignore it. McConnell’s action intentionally ran against the intent of the Constitution.

Or how about McConnell keeping the Senate in phony session, just to prevent Obama from making any nominations when the senators were at home?

Or the Supreme Court deciding that spending campaign money is the same thing as free speech, protected from government action by the First Amendment, and that corporations can spend all they want?

Or, for that matter, the Supreme Court, with judges favorable to one party picking the president, when the Constitution lays out a plan, followed earlier in American history?

Or, in Maine, Gov. LePage imposing his arbitrary conditions to block the application of the voters’ referendum decision on Medicaid, despite the state constitution?

Nothing is sacred. The fabric of the American republic can be torn for immediate, partisan purposes.

For Moore, trampling on the Constitution was all right, because the U.S. should be subject to a higher law, divine law. And if you want to know what that is, just ask Judge Moore.

The U.S. is not governed by divine law; it is governed by the Constitution. To govern ourselves, we look to secular guidance from that document above all and from the votes of the people and their representatives. Judge Moore, the Constitution makes clear you may follow any religion or no religion.

Moore and even McConnell feel free to undermine the Constitution, the only guaranteed link among the people, whatever their politics. This week, the Constitution won.

Tax cut bill shrouded in myths, pure politics

The tax bill to be finally adopted by Congress before the end of the year has produced of a series of myths, mainly the result of its rushed legislative process.

These myths result from ignorance of its content and its economic and political effects. They are separate from the purely partisan debate about who gets what and how much.

Myth 1. We know what the impact of the tax bill will be.

It is designed to give major cuts to the wealthy and corporations to make more job-creating investments. The middle class will supposedly gain. And it will the biggest tax cut in history.

We have no way of knowing what the recipients of the largest tax cuts will do. If they invest, reflecting the most favorable view of the bill, tax revenues from a booming economy might cover the cost of the cuts. If they keep the money, the tax cuts will boost the deficit.

It is impossible to measure tax cuts comparatively, and they vary by income. And we will never know if this really is the biggest reduction. As for the middle class, many will gain a little and some will pay more. Nobody now knows where he or she stands.

Our inability to understand the impact of the tax cuts is partly because we don’t know what all the tax cuts are. The bill is a Christmas tree, decorated with special tax gifts for limited groups.

Some of the tax cuts were added out of sight of the members of the Senate just before they voted on the bill. Looking at the bill, you will see handwritten notes adding and changing provisions. Senators had no way of knowing what they voted on.

Myth 2. The tax bill will simplify taxation.

Its advocates claimed it would simplify paying taxes. The tax code was only simplified by eliminating benefits for average taxpayers. For example, the code drops personal exemptions. And people in high income tax states, like Maine, will suffer from the deletion of a tax deduction for state taxes.

The bill is criticized for being over 400 pages, as if that is an indication of how bad it is. But that’s just another myth. When Congress changes any law, the language required to do something simple may take a lot of words. It’s the content that counts.

Myth 3. The tax bill was given careful consideration.

In fact, the bill was passed in the House and Senate in a hurry, though there was no need to rush. But the GOP wants at least one big legislative win in 2017 to show it was worth turning the entire federal government over to them.

If merely having a bill was more important than what it contained, they will have succeeded. That approach opened the way to all the special interest deals in the middle of the night.

The Republicans wanted to make sure they could pass the bill without any Democratic votes. They know that now they have just barely enough of a Senate majority to pull that off. They avoided the risk of achieving fewer cuts if they proceeded more carefully.

Myth 4. This tax bill makes permanent changes in the tax code.

Republicans eliminated the ability of a Senate minority to block action. When the Democrats regain a congressional majority, they can amend and repeal the Republican cuts and add some of their own.

The chances of laws swinging wildly back and forth with the change of parties should encourage cooperation and moderation. Not this time. Candidates may claim they can work with the other side, which is what voters want. But once they are in office, they follow the party line.

The last major tax bill in 1986 came during the administration of Ronald Reagan, the model of a conservative Republican president, and it had strong Democratic support. That was real, revenue-neutral tax reform. This year’s bill isn’t; it’s a revenue-losing tax cut.

Myth 5. This is a tax bill.

Not exactly. The Senate version would eliminate the Affordable Care Act mandate, which will mean millions lose their coverage and many will face higher insurance premiums. And it would allow oil drilling in the Alaska National Wildlife Refuge.

This bill is supposedly about cutting taxes for middle-income people. Whether it succeeds in cutting taxes or in creating jobs won’t be known for at least a year.

But the bill is really meant to score political points for its supporters in the 2018 elections. Watch for these myths in that political campaign.

New round in fight between government and private sector

When you hear the term “net neutrality,” do your eyes glaze over?

It may sound techie, but it is about the major issue of the day: the roles of government and private enterprise.

The Internet was a creation of the U.S. Defense Department, allowing almost instant communication between computers. It was soon made available for commercial use so that all computer users could access the Internet. To do so, they must normally use an Internet Service Provider (ISP).

Sharply different views have appeared over what kind of access people should get when they use the Internet. One view – net neutrality – is that the Internet is like a highway and should be open to all to reach any content on an equal basis. The alternative view is that ISPs can manage user access for their own profit.

Under President Obama, the U.S. adopted net neutrality. Now, under President Trump, federal regulators have decided to allow competitive use so that ISPs can control access.

The competitive approach means, for example, that ISPs provide service at differing speeds, direct searches to certain sites and products and away from others, and make it difficult to reach their competitors. The fastest service will cost more. If you don’t pay premium rates, your access will be slower.

By managing access, ISPs should be able to boost their profits. And they will create classes of users based on how much they pay.

Net neutrality is based on non-discriminatory access regulated by the government. The new system eliminates much of a government role and leaves the Internet to the private sector.

This is a classic case of the two competing economic views. Should the government regulate to ensure equality and wide public access or should the system be left to the private sector, protecting what are seen as the liberties of people and enterprises?

In short, however technical it may seem, the issue of net neutrality is new round in the fight between government and the private sector.

Much the same difference in views is the focus of the battle about the Affordable Care Act. The traditional system has been to leave health insurance coverage to competing private companies. That system produced coverage for many, but left millions of others without insurance, limiting their ability to get good care.

Because many people were uninsured under the competitive system, the federal government introduced Medicare for seniors, Medicaid for low-income people and, finally, the ACA, which is meant to subsidize coverage for most other people who had been left uninsured.

This year, the Republican Congress has tried to reduce or eliminate the ACA and cut back on Medicaid, permitting a return to the old, competitive model. They focused on private sector action over government programs and their cost. The model is more important, in this view, than covering the uninsured.

The current tax cut legislation reflects the same divergence of views. The GOP proposals would cut taxes more for the wealthy than for the middle-class and poor. The Republicans maintain that more money in the hands of the wealthy and corporations will lead to more investment in job-creating enterprises.

The Democrats would give biggest cuts to middle-income people who would spend more of their income. While the GOP approach relies on the private sector to promote personal income and growth, the Democrats favor more direct boosts to individual purchasing power.

These divergent views are repeated throughout the national political debate. Will the environment be protected through a competitive market or thanks to government regulation? If competition yields more jobs and profits in preference to better air quality, is that a fair trade-off?

What is the extent of government responsibility for assisting the poor? Should there be government income support programs or should the country rely on charitable aid, possibly encouraged by tax deductions?

As you have read this column, you may have answered these questions in the national debate. These issues are worth consideration. This debate is worth having.

But the main issues are often obscured by partisanship. It is more important for some that their party wins on an issue than the substance of the issue itself. Members of Congress line up on some bills even before they know their content.

Some political leaders try to obscure these basic issues by promoting “wedge” issues like abortion and guns. They expect voters to give them a blank check in return for their position on a single sensitive issue.

The American political system depends on compromise. But getting agreement on basic issues is impossible when partisanship and wedge issues dominate the debate.

Tax cut would bring big increase in national debt

Tax reduction is the hotly discussed issue of the day, but almost no attention is paid to its most important effect.

If any tax bill were passed, it would add about $1.5 trillion to the federal deficit. Trillion.

The added deficit would have to be financed by borrowing, and the national debt would grow beyond its current level of about $20 trillion. The instant gratification of a tax cut will bring delayed pain for future generations. Today’s grandchildren get to pay the bill.

We know this, because Congress intentionally set it up to work that way. All Senate Republicans and all but 20 House Republicans voted for a phony federal budget authorizing the new deficit spending. A deficit increase cap would allow the tax bill to pass without a single Democratic vote in the Senate.

That meant a once numerous Washington bird has almost disappeared. When Democrats proposed deficit spending, the GOP opposed and fought to prevent any more debt. They became known as “deficit hawks.” With the exception of a couple of Republican senators who won’t run again, the hawks have flown.

This deficit game has led to even worse moves. To keep the total shortfall under the cap, the Republicans would make the corporate tax cuts permanent, but the much vaunted help for middle income taxpayers would only last five years. The GOP tax cutters say the middle income tax cut could be extended later.

If they are right and Congress later makes the middle class cuts permanent, the true deficit increase will be more than $2 trillion. In the meantime, corporations get priority over people.

Candidate Donald Trump promised to eliminate “carried interest,” a complicated tax break for the wealthiest. It survives, while deductions for state and local taxes would disappear. It looks like a cosmetic change to the loophole would be made, but the give-away to hedge fund bosses would remain.

How can this preference be justified? Tax cut advocates claim that reduced taxes will leave corporations more money to invest in expansion, thus producing more business activity and jobs, which in turn would produce more tax revenues. If this theory works, the tax cuts won’t add to the deficit.

There’s no way of knowing what corporations will do with more money and if their actions will boost tax revenues. Congressional experts look at the measurable tax cost, while tax cut advocates prefer “dynamic” studies, showing the hoped-for tax growth.

Both ways of looking at the effect of tax law changes are imperfect. Experts lack the tools to forecast accurately revenue gains from tax cuts, if any. Advocates feel free to sell their proposals by relying on unproven optimistic projections. The only known fact is that on Day 1, there will be massive growth in the federal deficit.

Congressional Republicans want to pass the tax cuts quickly for two reasons. President Trump had has no major legislative victories in his first year in office, and his party wants to hand him a win.

Also, GOP congressional candidates promised to kill the Affordable Care Act and to cut taxes. After failing to do the first, they want to produce a tax cut before the 2018 elections to show they keep their promises. Interestingly, polls show that many people don’t care about tax cuts.

To find money to keep the deficit within limits, the Senate bill would end the ACA requirement to buy health insurance, whose premiums are eligible for federal subsidies. No requirement to buy means no subsidies and more money for tax cuts.

That may be an incorrect calculation. Many people buy insurance because of the federal subsidy, not because of the mandate. Eliminating the requirement might not save as much as expected, if people keep drawing on the subsidy. The ACA proposal looks unlikely to survive.

Another major impact of the tax bill that has mostly been ignored is the effect on state taxes. Many states, including Maine, base their individual tax collections on the federal form. For example, the definition of taxable income may be the same.

The Maine Legislature at its session early next year may find itself faced with making big decisions about how much to carry into Maine law of what congressional Republicans and Trump may have enacted. The state is teeming with candidates for governor, so that should make for an interesting debate.

The bottom line is tax cuts would be financed by massively adding to the federal debt. Washington has plenty of coal to put in the grandchildren’s holiday stockings this year.