From Golden’s gambit to Rittenhouse verdict, a political grab-bag for the season

Gordon L. Weil

It may be early for packages under the tree, but Thanksgiving has offered a seasonal grab-bag of intriguing and important stories.  They range from Jared Golden’s gambit to almost unnoticed talks about the future of the U.S. Supreme Court.

The political system worked in mysterious ways.  As the U.S. House of Representatives struggled to decide on Biden’s social and environmental bill, two people stood out by their unusual moves.  One was House Republican Leader Kevin McCarthy and the other was Maine Democratic Rep. Jared Golden.

McCarthy apparently read the results of the 2021 elections as a sign the Republicans are on a roll. If he used opposition to Biden’s Build Back Better bill as a rallying point, he might give a new push to his hopes of becoming Speaker in 2023.

No great orator, he may have hoped that a record-breaking speech would gain him attention that his words might not.  He spoke longer than anyone ever had on the floor of the House.  It was about as impressive as the longest partial lunar eclipse in over 500 years, the same night. Few people stayed awake for either.

His questionable tactic failed. All he accomplished was to delay the House vote on BBB for a few hours.  No Republican vote was changed and Golden, the sole Democrat who voted against the bill, was likely engaging in a political maneuver that might work and make him look good to both sides.

Golden opposed one feature of the BBB among its many benefits for a lot of quite different groups.

Under current tax law, taxpayers who itemize their deductions can exclude no more than $10,000 in state and local property taxes. People in high-tax Democratic states, especially if they are wealthy enough to own expensive property, may pay a lot more than that. The bill would raise the limit to $80,000.

Many in Congress dislike that feature, but their districts would derive great benefits from BBB. So they reluctantly voted for the bill.  But Golden strongly opposed this aid to the wealthy, and he voted against the bill.

BBB now must be considered by the Senate, which is likely to cut that piece out of it.  The House will probably have to accept the Senate version.  Golden could then vote for the final bill. Running in a swing district, he could skillfully take credit for both finally lining up with the Democrats, but having stood alone against a tax break they favored.

Unlike such inside politics, the Rittenhouse case in Wisconsin grabbed national attention. Did young Kyle kill two people in self-defense or was he a right-wing vigilante asserting gun rights?  After his complete acquittal, sages lined up on both sides, drawing sweeping meaning from the decision.

The 12 jurors may not have seen their role as taking a position on these big questions.  Their first responsibility was to see if he was guilty “beyond a reasonable doubt” of illegal killings.  The system left it to these people to exercise their judgment on one person’s case, not to make a political statement for the country.

Maybe the prosecutors brought charges that were too extreme. Maybe Rittenhouse should not have gone to Kenosha, in a state where he did not even live.  But those factors could not count for the jurors.  Each juror had a reasonable doubt about his guilt. That’s all.

Cutting through all the clashing punditry, President Biden got it right.  "Look, I stand by what the jury has concluded," he said. "The jury system works, and we have to abide by it."

With public attention directed elsewhere, few were aware of a public session of the commission considering Supreme Court reforms. Yet it’s possible that such reforms would be more important than the other events.

Two interlinked issues dominate the Supreme Court review.  The Court is likely to be controlled by conservatives for many years, and it has come to act like a lawmaking body as much as a court.  Similar situations have existed earlier in American history.

With slim congressional majorities, the Democrats would like to make changes, especially those that can by handled by Congress without a constitutional amendment.  Enlarging the Court is being discussed, but the commission is divided on making such a recommendation.  It’s possible the reform effort could fizzle.

But the commission could look at two ideas.  Congress controls what the Court covers, making it possible to block some of its legislative moves. And, as I have previously proposed, Congress could authorize temporary justices, similar to what it now does for other federal courts.  That could improve the balance without permanently enlarging the Court.

What’s common to all these dubious gifts of the season, except possibly Golden’s, is how they mirror the deep political division in the country. 

Climate change comes slowly, at high price for consumers

 

Gordon L. Weil

The weak agreement at last week’s Glasgow climate change summit and double-digit rate increases for power and its delivery in the bills of Maine’s largest electric utilities have a lot in common.

They both showed that fighting climate change faces daunting obstacles, and it comes at great cost.

Facing entrenched economic interests, the U.N. summit struggled to agree on a new target for halting the steady increase in the world’s temperature.  It renewed hopes without much assurance they can be realized.  It recognized that goals set just a few years ago are being missed.

Some small island nations, facing the prospect of literally going under, issued desperate pleas. For example, the government of the Maldives, a group of islands in the Indian Ocean, claimed the country could soon be drowned out of existence.  Meanwhile, India, its big neighbor, refused to kick the coal habit.

Countries broadly agreed on the need to fight climate change. Who pays and how much could not be settled at a meeting of diplomats, where talk is cheap but change is not.  Tougher action might come next year.

Some countries have promised to fight climate change, but not kept their commitments.  The dangers remain. But, would American taxpayers back a seawall around the Maldives?  What about helping developing countries exposed to expensive energy standards that had not applied earlier to American and European industry?

The advanced economies grew partly thanks to the use of fuels, especially coal and oil, that are major contributors to rising temperatures.  Even today, U.S. taxpayers keep subsidizing oil producers, encouraging them to find more fossil fuels especially using high-cost fracking.

If Chinese, Indian or Australian coal production or the fate of far-away island countries seems beyond the reach of the daily lives of Americans, the issue of climate change and who pays to fight it comes home with every electric bill.

To get all electric production worldwide to come from renewable sources is estimated to cost between $8 trillion and $14 trillion.  After China, the U.S. is the second largest electricity consumer, so it faces a big bill to eliminate fossil fuel power.

When federal or state governments set out to reduce the huge American share of the total cost of reducing the effects of electric generation, they support few of their mandates with new taxes.  Openly advocating higher taxes for any purpose has become politically hazardous.

Paying the cost of moving to non-polluting power is left to electric customers. Politicians get to vote for laudable environmental goals without leaving fingerprints on the bill.  It encourages many of them to generously back new renewables and major power lines. 

All electric service is composed of two elements -- power generators and the wires for getting the power to the customer.

Power supply prices are supposed to be set by the market.  But governments can require that an increasing amount must come from renewable sources, displacing fossil fuels.  As these new resources develop, customers must pay the high start-up costs, and rates increase.

It will take many decades to phase out fossil fuels.  Meanwhile, their prices continue to be set without true competition. When state-market countries in the Middle East and Russia decide to manipulate prices, American oil companies, whose own costs have not increased, promptly follow the prices set by those countries.

When Mainers are told that their electric supply rates will increase because of higher fossil fuel costs, they have to accept bigger bills still mostly dictated by political decisions made elsewhere. Nearing self-sufficiency in fossil fuels means little to the U.S., if Americans pay Arabian prices. And it slows reductions in warming.

Economists delete fuel from what they call “core inflation.”  Inflation is supposed to show increases in production and distribution costs.  Fuel prices bounce around largely free from true cost changes while reflecting the price gouging practices of state-run economies.

The situation is even worse on the wires side of the electric business.  The federal government gives utility monopolies attractive profits to build lines connecting remote renewable sources to consumers.  The utilities like to build major transmission lines, paid for by end users, because that business produces good profits. 

In fact, the federal government gives utilities better profits for building high-voltage lines than the states give them for updating local delivery lines. 

The effort to reduce harmful emissions and halt climate change is widely supported.  If they try to accomplish more than merely making Glasgow-style promises, legislators tell regulators to shift the enormous bill onto consumers, boosting generator and utility profits along the way.

The increase in Central Maine Power and Versant bills will carry out government energy policies, both fighting climate change and boosting oil and utility industry profits.

That may look like a rate increase, but it will really be a tax increase that nobody sees.

“What’s the matter with America?” – people vote against themselves

 

Gordon L. Weil

“What’s the matter with Kansas?”

An 1896 editorial in a Kansas newspaper carried that headline.  It became a national mantra, revived in a 2004 book, a film – both with that title – plus a New York Times commentary last week.  They all concluded that average people often vote against their own best interests.

After this month’s elections, political pundits deployed in force.  Most explained to us Washington outsiders that the Democrats had suffered a bad loss, while Trump’s GOP won.  They urged the Dems to tap dance over to the right so they could keep alive their slim chances for the 2022 congressional elections.

If you ever wanted to know the definition of “conventional wisdom,” that was it.  In other words, the “experts” saw the Democratic Progressives having pulled the party and President Biden to the left, away from the political mainstream.  They paid the price at the ballot box.

In this view, the problem stemmed from the extreme policies unduly influencing a party clinging to a bare majority. Policies like paid sick leave, free community college and even tax increases on billionaires were too far ahead of what people would accept.  The country is “center-right” opined Democratic Sen. Joe Manchin (WV), not “center-left.”

Oddly, polling showed that a majority of Americans favor most “center-left” policies.  Maybe the pundits missed something that was bigger than issues.  Perhaps the view that people favored more moderate policies was not the cause of Democratic setbacks.

David Leonhardt in the Times took a different view from the pundits, one consistent with the Kansas book.  Democratic Party losses or narrow wins were not the result of its dalliance with the Progressive Left, but because it had lost its focus on the attitudes of average working people.

In its focus on appealing to suburban voters, traditionally backers of the GOP, it had assumed that generous federal spending would help it retain the support of middle income workers and their families.  It had failed to understand that many of these voters were driven more by their culture than their material interests, he wrote.

As often noted in this space, unhappy voters want change.  Government as usual has produced pointless wars, unresponsive officials, and troubled leadership. 

It’s not surprising that about one-fifth of Obama voters also backed Trump.  Obama embodied change and Trump, an aggressive businessman with no elective history, convincingly promised it.  In the end, Obama did not produce enough change and Trump abused his mandate.

Joe Biden offered calm and cooperation, but his pious hopes could produce neither.  In some respects, he embodied a return to the kind of government that people wanted changed.  The dangerously disorganized Afghanistan withdrawal and the endless haggling among congressional Democrats made him appear weak.

What had aided Trump’s appeal was his decisive style, even if it edged into being authoritarian.  His claim to have kept his promises had a ring of truth.  Even his critics would have to admit that he changed the way the federal government worked.

In effect, Trump’s presidency raised the question “What’s the matter with America?”  He wanted to slash medical insurance, reduce air quality and cut taxes for the wealthiest.  He let roads and bridges deteriorate. Yet he would gain the second largest popular vote of anybody who had ever run for president.

It’s possible that Trump has no deep-seated principles.  Instead, he recognized voter discontent with policies ranging from affirmative action to foreign wars and managed to make it look like he had led in shaping the opposition.  In reality, he exploited political and social discontent, and left what many saw as uncomfortable or fringe issues to the Democrats.

While this analysis may be pure speculation, conventional wisdom may itself be nothing more that that.  Cable “news” and social media spend little time reporting events and their background, while leaping into instant, poorly considered analyses.

For example, the GOP gain in the Virginia governor’s race is extensively interpreted as a nationally significant rejection of the Democrats in favor of Trumpism without Trump. Little attention is paid to the Democratic candidate’s well-intentioned, but breathtakingly inept gaffes.

Maybe something was the matter with Virginia, and it wasn’t about Trump.  But that’s too boring for the pundits.

Biden could benefit by asserting leadership of congressional Democrats to produce results, like the prompt post-election passage of the infrastructure bill.  It means taking bold, even risky action to get them to pass voting rights and popular parts of his economic and social programs.   

He should stop talking about his tough Scranton background and start acting like it. 

Biden is less than one year into his presidency and already he is being written off.  That’s too quick a judgment.  The challenge for him in the next year is less about policy and more about leadership. 

Covid 19 changed the economy; we won’t go back

 

Gordon L. Weil

To many people, “inflation” is a dirty word.

It means higher prices at the store and higher interest rates at the bank or auto dealer. The basic rule of inflation is that prices rise when too much money chases too few goods.

Yet the Federal Reserve, which can control the nation’s money supply, likes two percent inflation. That rate shows a growing economy in which business is trying to keep up with demand.  Along the way, that effort can create more jobs and, as a result, more demand.

The neat trick is to keep inflation from getting out of hand. If prices and interest rates increase too rapidly, the economy can slow down.   The mismatch between supply and demand becomes too great until the slowdown helps restore a more manageable balance.

For several years, the inflation rate has been at or below the Fed’s target.  But it has climbed in recent months and some market experts believe it will stay high.  They watch to see what moves the Fed will make to raise interest rates and when.  It will act sooner than planned.

Why is inflation increasing?  Its climb is yet another symptom of the Covid 19 pandemic.

When the coronavirus hit, the U.S. and much of the rest of the world hunkered down.  Some businesses closed, travel almost collapsed and many people began living on reduced incomes.  Less money was chasing fewer goods at the store – notably in the strange case of the run on toilet paper.  The federal government moved aggressively to prop up household incomes.

As the economy recovered from the depths of the pandemic, prices began to rise. That created inflation well above the target two percent, though the Fed concluded that the level is both natural, given the low 2020 base, and temporary.  The effect of the inflation surge can be seen in the big boost to Social Security payments for 2022.

While the Fed has been expected to allow small increases in interest rates as the economy returns to something like the 2019 level, what looked like temporary inflation now may extend as a changed economy begins to emerge.   The virus won’t go away and neither will its effect.

One of the biggest changes has come in labor.  Government policy assumed that almost all workers would want to come back to their own jobs just as soon as they could. Trucking companies, offices and restaurants were poised to open.  But something funny has happened on the way to recovery.

During the slowdown, workers had the time to learn something about their place in the market economy.  Employers have traditionally paid them at levels linked to the cost built into the prices they charge.

The Covid 19 quarantines allowed workers to better understand that their value to their employers was more than they were being paid.  Places of business closed for lack of workers.  If you withheld your labor, you might get paid more.  It began to feel like a giant national labor union.

Only a few months ago, debate raged over a $15 minimum wage.  Companies claimed that prices would have to increase, cutting sales and causing unemployment.  When workers did not return as expected, major employers boosted wages in an attempt to lure them back.  The minimum wage is now being set by the market and it could end up higher than $15.

Higher pay can translate into either higher prices, cuts to executive pay, or a reduction in booming investment gains.  Right now, it’s higher prices. That yields higher inflation than originally expected.

The prospect of better pay should bring more workers back to the job.  But what has been called the “Great Resignation” is also taking place.  The Covid break led some people to decide on a more simple, family-oriented life, even if that means less income.  When people start thinking “money isn’t everything,” the economy can change.

The impact of Covid 19 has been big enough to raise questions about the American economy itself.  The free enterprise system is alive and well, but the supply chain from some sources, especially China, has been disrupted.  Add to that the changed relationship of workers to their jobs and employers.

President Biden believes the historic opportunity now exists for increased government efforts to develop new economic and environmental rules and social policies.  The next 12 months should reveal if he is right.  If so, sooner or later, somebody’s taxes will have to increase.

Economic change is occurring.   Operating private enterprises is becoming more costly, possibly promoting labor-saving efficiency. In any case, people are likely to pay more and probably buy less.

That could look like inflation.  But it may turn out to be paying something closer to the real cost of what we need or want.