Higher taxes sure to come to pay Covid-19 costs

 

Gordon L. Weil

Behind almost every action by government lurks a single question.  How do we pay for it?

The answer seems easy:  either by taxes or debt.  But taxes must pay off the debt, making the real question not “how” but “when” we ante up.  At the federal level, the answer is often “later.”

These days, the country is ringing up massive new government spending.  Think of Covid-19 economic recovery, including Maine’s struggle with taxing federal aid to business, plus the Texas energy collapse. 

The pain of Covid-19 will be long-lasting when it’s added to other debt and the bill has to be paid.

President Joe Biden has proposed $1.9 trillion as an economic stimulus to get out of the coronavirus slowdown.  Eventually, the cost will be close to that.  

Economists have widely agreed that federal government stimulus spending works in producing renewed economic activity.  They also agree that, with the slack economy yielding reduced tax revenues, the stimulus must be financed by borrowing.

The economic bet is that a newly restored economy will boost tax revenues to pay for the cost of borrowing.  Right now, with unusually low interest rates, the government can inexpensively take on more debt.  But, beyond the interest, the principal amount must also be repaid.

The argument against spending as much as Biden wants is that the government keeps piling on debt.  That’s traditionally the Republican position and where that party stands today.  Sen. Susan Collins and her GOP allies proposed $618 billion in stimulus spending, far removed from an ominous sounding “trillion.”

Yet when the GOP controlled Congress, it freely added to debt while cutting taxes.  That suggests that taking on new debt for an economic boost may be more a matter of politics than economics.

The public seems to favor Biden’s proposal, supporting short-term economic recovery and a return to work over the cost of later paying the bill with interest.  Trump himself wanted a bigger bill than many GOP senators.  Maybe, deep down, most people are crypto-Democrats.

In the U.K., the government just announced that it would move to seek higher taxes to being to pay the Covid-19 bill.

Then, there was the Paycheck Protection Program tax ploy.  The federal government made PPP loans to business, which did not have to repay them if they kept people at work.  The loan would than count as taxable business income but that could be entirely offset by deducting the payroll expense.  In short, the PPP would be taxable income, but it would be erased by payroll outlays.

In the December 2020 Covid relief bill, Congress switched the policy and decided that businesses would not have to count the forgiven loan as income.  That meant a company would get a tax deduction for doling out federal money. 

The PPP benefit suddenly doubled, including both the payroll funds and the tax break. The shortfall in tax revenue would be picked up by taxpayers.

Maine taxation usually tracks federal rules. At first, Gov. Janet Mills favored the original tax-neutral policy.  She did not like Maine going along with the free ride on PPP income.   The blowback from the GOP and business groups was immediate, and she retreated.  Companies with up to $1 million in PPP would get the new break.

Mills believes she can shield taxpayers from picking up the resulting $82 million tab for the state. The cost would be covered by federal funds and state reserves, all of which comes from taxpayers. Nothing really new here, though the tax trail may be difficult to follow.

Texas got into a lot of trouble when it was hit by real winter.  It faced electric blackouts and frozen natural gas pipelines. Even while the federal Covid-19 cost was mounting, Biden declared a state of emergency there, setting in motion a flow of federal aid to Texas.

Ironically, Biden aided Texas, which had asked the Supreme Court to block him from becoming president. The Republican governor thanked Biden, but wanted even more help.  The federal aid came from debt, which the GOP dislikes, and from taxes, which it wants to cut.

States must balance their budgets and could not take on debt fast enough to meet the Covid crisis. The federal government can pile on debt without knowing how to pay it off. That’s why states have turned to Washington, adding to the federal debt.

Also, relying on federal debt, states and individuals may feel that somebody else is paying the bill.  They fail to recognize they are “somebody else.”

People are constantly told that taxes take their hard-earned dollars. But just as they make household purchases with those dollars, they buy services they want, from stimulus aid for small business to emergency help for states, with their taxes.

In the end, we must pay for what we buy. Higher taxes are inevitable, not for a “socialist” government, but to pay for what we’ve already bought.

 

 

 

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Democrats and Anti-Democrats – American politics today

 

Gordon L. Weil

The U.S. has only one political party.  The Democratic Party.

For almost a century, the country has been given a choice between conservative Republicans and liberal Democrats.  But that has changed – radically.

When Donald Trump entered the GOP primaries in 2016, he faced a collection of traditional conservatives.  One of the defenders of traditional Republican conservatism was radio host Rush Limbaugh.  He opposed Trump.  In Limbaugh’s view, the New York real estate figure was not a real conservative.

But, in what must be seen as an excellent political analysis, Limbaugh understood the essence of Trump’s appeal. It had nothing to do with conservatism.

He said, “if conservatism were this widely understood, deeply held belief system that united conservatives and united people as conservatives, then outsiders like Trump wouldn’t stand a prayer of getting support from people. Yet he is.”

Limbaugh concluded, “there are other things at play.” He  found, “The thing that’s in front of everybody’s face and it’s apparently so hard to believe, it’s this united virulent opposition to the left and the Democrat Party and Barack Obama.”

In short, there stood the Democratic Party, which had long set the legislative agenda of the country.  Its progressive or left-of-center approach had brought Social Security, Medicare, the Affordable Care Act, the election of an African-American president, and the likely nomination of a woman as its presidential candidate.

The way to stop the Democrats was not to offer an alternative and hope to arrive at some kind of compromise between the parties.  That would be what conventional Republicans do.

The answer, as Limbaugh would soon come to agree, was to attempt to destroy the Democrats.  The opposition would not have to offer alternative policies to deal with common problems.  It would simply be dedicated to repealing as much of Democratic policy as possible and to preventing it from holding power.

Driven by intense personal ambition, Trump did not have much of a policy of his own, but he set out to benefit from the equally intense feeling among many Americans that the Democrats had gone too far. 

He picked the most obvious sore point with them: the election of Barack Obama. The absurd charge that Obama was not born an American became a ready rallying point for people who felt that Democrats had showered privileges on minorities, women, and environmentalists at the expense of their jobs, homes and hopes.

In a badly split presidential race, Trump was able to exploit enough support to knock off his opposition and gain the nomination. The desire of the traditional GOP to recapture the White House and widespread dislike of the Democrats’ Hillary Clinton narrowly carried him to the presidency.

He revived the Republican Party by bringing into it people ranging from the ignored to the ignorant, the struggling middle class to outright racists.  The party’s newfound strength and the ardor of his followers led to a transformation in party leadership and activists.

Trump developed a co-dependent relationship with the GOP.  The people he added strengthened the party, while making it subservient to his whims.  But, without much of a program of his own, he became a conduit for conservatives and the far-right.  By courting their support, he might remain in office.

The GOP saw itself at war with the political system created by the Democrats.  The recent poll showing that most Republicans see Democrats as the enemy not the opponent reflected this view.  It means that the only policy the GOP needs is to tear down the Democrats’ work.

Look at Trump’s hallmark policies.  Reduce environmental rules and taxes, abandon the world from NATO to free trade to disarmament, abolish Obamacare, and even downplay the federal role in dealing with a national health emergency.  All negative, all anti-Democratic.  But they did cut unemployment, whatever the cost.

Despite promises for an infrastructure program and a replacement for Obamacare, nothing was forthcoming. Nothing needed to be proposed, because the Trump policy was to destroy the Democrats’ programs.  The Wall was to be built not only against refugees, but against progress.

Calls for cooperation across the political spectrum may appeal to independents but they are a sham.  There are no moderates who consistently seek compromise. At best, Republicans in Democratic states, like Maine’s Susan Collins, and Democrats in Republican states, like West Virginia’s Joe Manchin, would be swing voters.

The situation that Trump exploited left the country with the Democrats and the anti-Democrats as its two parties.  The traditional Republican Party can only be revived if it has supporters.

Meanwhile, President Biden, recognizing that compromise won’t work and that he may have a small window of opportunity, is moving briskly to restore the momentum the Democrats had lost.

 

Many GOP senators are all profile and no courage

 

Gordon L. Weil

Seven Republican senators, including Maine’s Susan Collins, voted to convict Donald Trump, and they are getting a bum rap.

It’s not because of attacks from home-state Republicans for disloyalty; it’s because some pundits suggest they assumed no risk in voting against Trump  thanks to their not facing the voters in the near future.

Collins and two others aren’t up for re-election for almost six years, while two more plan to retire next year.  The remaining two are mavericks, already known for challenging the ex-president.

But this conventional wisdom misses the point.  Their votes involve courage with or without risking punishment at the polls.

The issue of risk in principled voting was described by President John F. Kennedy in his “Profiles in Courage.” He cited Republican senators, including Maine’s William Pitt Fessenden, who opposed their party in 1868 and refused to convict impeached Democrat Andrew Johnson.

To Kennedy, this showed courageous sacrifice.  He claimed that they suffered politically because of their votes.  In fact, the decisive vote for acquittal came from a senator who was paid for it and who suffered little undeserved  consequence. Neither did the others. 

But Kennedy enshrined the concept of political courage: taking a risk by putting principle above party. If the Trump Seven might not face anything more than meaningless censure for making an independent judgment, did they lack courage?  Such an allegation would amount to an insult to Collins and the others.

Here’s why.  Of the 43 GOP senators who voted to acquit, 16 are at the start of six-year terms and at least one more will retire next year.  Only 10 of these 17 senators, who enjoy the same “immunity” as the Seven, were needed to hold Trump responsible for inciting the Capitol insurrection.

They would have had historical cover. In 1974, President Richard Nixon resigned when no more than 18 GOP senators would vote to acquit him of covering up his campaign’s break-in at the Democratic National Committee headquarters. At least 25 GOP senators were ready to vote against their party and their president.

In 1999, Collins and Olympia Snowe, the two Maine GOP senators, joined a small group of Republicans who went against their party and voted to support the acquittal of President Bill Clinton on charges of lying in a lawsuit having nothing to do with his presidency. 

Still, aligning with Democrats seems hard for Republicans.  A recent poll reported that 59 percent of Republicans see Democrats as “enemies,’ not merely as “political opponents.” For Democrats, the numbers are almost the reverse; they see 57 percent of Republicans as opponents, not enemies.

As an aide to Sen. George McGovern, Nixon’s 1972 Democratic opponent, I was on Nixon’s so-called “enemies list.”  Yes, “enemies.”  Nixon tried, but failed, to get the IRS to audit my taxes and find something wrong. 

A GOP senator voting to convict Trump might be seen as giving comfort to the enemy.  Regardless of the risk, it takes real leaders to reveal that Nixon’s and Trump’s attempts to undermine elections should be understood by any American as a threat to democracy.

Lisa Murkowski, who voted to convict, faces reelection to the Senate in 2022.  “If I can’t say what I believe that our president should stand for, then why should I ask Alaskans to stand with me?” she told reporters.  That’s leadership. 

The quick take on the meaning of the Senate vote ignores the longer term evolution of voter reaction across the spectrum, especially if there are new revelations.  What will the pundits say if Murkowski wins next year?

The media with its “breaking news” focus and punditry often lacking in perspective have breathlessly pounced on the instantly negative reaction in the home states of GOP senators voting to convict.  They imply that some senators may have suppressed a vote against Trump out of political fear. 

Some of the possibly immune Republicans might have shown profiles in courage.  Like Minority Leader Mitch McConnell, they might have believed that Trump really is guilty, but voted to acquit. Unlike Kennedy’s heroes, they are all profile and no courage.

Others, perhaps most of the Republicans, may totally back Trump and stand ready, like the Nixon faithful, to allow him any transgression.  They want him back or at least a Trump family member.  They would crush the traditional Republicans, but could themselves fade if enthusiasm for Trump wanes as it did for Nixon.

The Senate vote clearly reveals the choice for Republicans to be made over the next four years.    The country needs a strong center-right party to balance the center-left without seeing their opponents as the enemy.  It does not need political thugs.

In short, the vote made clear that the struggle is now under way to find just who are “Republicans in Name Only.”

 

 

Washington's Birthday prompts comparison of the first president and 45th

 

Gordon L. Weil

They both made their wealth in real estate.

They both were considered “the greatest” in their lifetime, one called that by himself and the other called that by everyone else.

One named buildings and golf courses after himself.  The other had the nation’s capital and a state named after him by grateful Americans.

One was Donald Trump, the most recent ex-president, and the other was George Washington, the first president.  The latest and the first.

Each year, I pay tribute in this space to Washington on the occasion of the national holiday still officially called “Washington’s Birthday,” not the commercial “Presidents’ Day.” It is particularly timely to recall Washington as Trump’s historic second impeachment trial takes place.

The contrasts are stark between the man who dedicated his presidency to the service of his country and the man who dedicated his presidency to the service of his ambition.

Washington reluctantly served as president but for only two terms, a custom that became a constitutional amendment.  Trump, believing he would be elected to a second term, mused that he would “negotiate” a third term to compensate him for facing charges that the Russians helped him win the first time.

Trump encouraged insurrection against Congress, urging supporters of his lost election cause to intimidate Vice President Pence and Congress, then meeting in the Capitol, into ignoring millions of votes and handing him a second term.

Washington fought insurrection by leading troops to put down an uprising against an early and unpopular federal excise tax adopted by Congress.

Trump adopted openly anti-Muslim policies and supported anti-Black and anti-Semitic groups.

Washington owned slaves.  He ordered that they be freed right after he died, and they were.  That occurred six decades before the start of the Civil War.  If the country divided over slavery, he told a friend that he would align with the free northern states, not his Virginia home.

Washington sought conflicting opinions before making presidential decisions. He included in his cabinet both Alexander Hamilton and Thomas Jefferson, opponents over the size and role of government.  Washington shared Hamilton’s view on a strong federal government.  But he did not attack Jefferson, even when attacked by his fellow Virginian.

Trump also supported a strong federal government. He demanded loyalty from his appointees and brooked no dissent. When a person’s opinion differed from the president’s, he was “fired” and subjected to withering personal criticism.

While Washington refused to exploit his national prestige at the expense of the other branches of government or his subordinates, Trump saw the federal government in personal terms.  A French king once said, “I am the state.” That seemed to be Trump’s style as well.

Trump and Washington were unusual among presidents in heading outside economic enterprises while serving in office.  It’s likely they were among the wealthiest presidents. Trump tried to justify his business activities by making the ludicrous claim that Washington had two desks – a government desk and a business desk.

Washington devoted himself to the presidency from behind his single desk and ignored his property interests.  Trump undoubtedly gained from his presidency. The first president donated his salary for the operation of his federal office.  The latest president claimed to have donated his pay, but without access to his tax returns, that cannot be verified.

Children have been taught to tell the truth by the recounting of an obviously fanciful tale of the young Washington having chopped down a cherry tree and then admitting it because, he said, “I cannot tell a lie.”

Of course, nobody can entirely avoid lying, including Washington.  But the U.S. has never had a president like Trump whose persistent lies were the hallmark of his public statements.  The Washington Post Fact Checker counted 30,573 distinct falsehoods in his single term.

A few years ago, a survey supposedly revealed that a significant segment of the American population thought Trump was a greater president than Washington.  His partisans idolize him. He expressed the hope that his image could be added to the Mt. Rushmore depiction of great presidents.

Trump has been impeached twice. But, in the end, it is not your face on Mt. Rushmore or even the verdict of Congress that counts.  It is the verdict of history, and that comes slowly.

The importance of his impeachments, his encouragement of the insurrectionists, and his deadly failure to deal with Covid-19 will contribute much to the judgment of history, which is more than an academic exercise.  It is the ultimate report card and a lesson for future American leaders.

George Washington led the country in war and peace as it was formed.  History records that his care, competence and commitment helped create a democratic system that, so far, has withstood the challenges of a president like Trump.