Economic recovery good, but spread unevenly across country

Last week, there was good economic news.  Maybe.

The U.S. Census Bureau reported that household income had risen during 2015 by 5.7 percent.  That was the first increase since 2007, the last year before the Great Recession.  Women employed full-time gained somewhat more than men.  Unemployment was down and millions more had health insurance.

That’s the good news.  The not-so-good news was that, even with the increase, household income was still below what it had been in 2007 and even further behind the 1999 level.

Income inequality, the gap between the rich and the poor, stabilized and did not increase last year, but it was still high and well above what it had been in the 1990s.

For some doubters about the economic improvement, there would be no positive news until people who had quit looking for a job and were no longer counted as unemployed came back into the labor force.  For other critics, improvement would depend on reducing the income gap.

Recovery from the recession has been imperfect partly because of imperfect government policy.  President Obama managed to push through one stimulus boost, but Congress denied him any more jump-start spending. 

Because of the inability to use fiscal measures – government spending and tax tools – all anti-recession efforts have been left to monetary policy run by the Federal Reserve.  It drastically lowered interest rates and added more money to the economy. 

At some point, Federal Reserve policy lost strength.  It has weakened interest rates as a tool by keeping them below one percent even as the economy recovered.  Small increases will not return normal interest rates, with their greater flexibility as a tool, for years. 

But the problem seems to go well beyond simply recovering to the 2007 level.  Many well-paid, relatively less skilled jobs have migrated out of the country.  Now, lower paid workers elsewhere produce competitively priced imports.  That’s one cause of complaints about trade policy. 

The exported jobs won’t come back home.  And technology makes production here possible with fewer workers.  The U.S. needs to provide better training and retraining, so people can add skills and adjust to more advanced needs. 

Workers must now be paid in line with the value of their labor to products or services.  The way to create jobs that pay well is to keep the country ahead of others in developing leading edge products and services.  That requires government help, now lacking.

There’s another reason the good economic news may not feel so positive.  In the U.S., with the third largest population in the world, people spread across a continent are not likely to have the same experience as the national average. 

The American national economy is composed of many smaller economies.  Broad economic policies, as proposed by presidential candidates, have uneven effects across the country.  That should prompt states to take on bigger roles in developing economic growth. 

Traditionally, that has meant offering tax breaks to companies willing to locate in a state.  Such policies do not promote national economy growth.  They are simply aimed at luring jobs away from other states. 

Tax incentives will not do the job by themselves.  They are not targeted and, in light of interstate competition, they are not likely to be notably better that what’s available elsewhere.  They amount to a passive economic development effort.

Some states, like California or Texas, have complex economies virtually the same as that of an independent nation.  But many others, including Maine, must develop and exploit a more limited range of sectors.

With the oldest median age population in the country and as a popular place for retirement, Maine could create a focus on innovative ways of providing living space and health care to seniors.  State educational institutions could increase training of health care personnel.

Such targeted development depends on better marketing of what the state does well.  Let retirees know they are invited and health care professionals know they are needed.

If public funds spent through tax incentives were replaced by targeted spending on sectors in which Maine can specialize, the results could produce more and better employment.  In short, active development effort should replace passive and sometimes questionable tax cuts.

A divided federal government will likely remain unable to produce a consistent growth policy and possibly much else.  Even if Republicans succeed in cutting regulations or taxes, that won’t necessarily boost the Maine economy or that of many other states.

The absence of federal action should lead to greater state action in economic development.  Otherwise, recovery, however good, could pass by some states and workers.

Ranked-choice voting: the alternatives

This is the final part of a three-part series opposing ranked-choice voting, Question 5 on the November state ballot.

Suppose you regret the election of Gov. Paul LePage, the result of his opposition vote being split between two other candidates.

One solution, you think, might be ranked-choice voting, believing that way another candidate would have defeated LePage, despite his having the most first-place votes.

There are at least four other ways of dealing with plurality election winners.  They are less unusual, less complicated and more transparent.  And they are less dangerous to real democracy.

1.  The run-off election.  The most obvious is the run-off, a second round election between the two top vote getters when nobody wins a majority.  Unlike ranked-choice voting, run-offs exist in several other states.

The run-off allows for a second round of campaigning, giving voters a close look at the finalists, and a real choice.

In 2015, the Lewiston mayoral race failed to produce a majority winner, so the city held a run-off between the top two vote getters.  The second-place finisher in the first round was elected after a fresh discussion of the issues.

Critics say second-round run-offs have lower voter turnouts and impose an added cost on taxpayers.  In Lewiston, the turnout for the second vote was about the same as the first. 

As for cost, run-offs are not expensive and what voters buy is a real chance to vote, the most important role most people play in a democracy.  Is a real election worth the cost of a candy bar?  Remember, there are added costs for ranked-choice as well.

2.  Top-two primaries.  All candidates run against each other in the primary, and the top two finishers go onto the election ballot.

There are no party primaries.  The result may even be that two candidates of the same party or with similar views face each other in the election.  In contrast, run-off elections are usually between candidates of different parties.

This system has real advantages.  It can save money by replacing two political party primaries.  It prevents split voting from affecting the result.  It’s used in California and a few other states.

In Maine, that system could have yielded an election between LePage and independent Eliot Cutler in 2010 and between LePage and Democrat Mike Michaud in 2014.

3.  “Plural nomination.”  A candidate may appear more than once on the ballot.  That could allow a candidate to run as both a party nominee and an independent.

In closely contested elections in recent decades, the candidates for governor were a Republican, a Democrat and a former Democrat running as an independent.  These independents were Jim Longley, the 1974 winner, Angus King, who won in 1994 and 1998, and Cutler in the two LePage elections. 

King looks like he could run as a Democrat in 2018, but he might remain an independent.  The Democrats will want to have a Senate candidate on the ballot, because a failure to field a candidate for statewide office could affect the rest of the ticket.  Right now in Maine, a candidate can only appear once on the ballot.

This solution, also called “electoral fusion,” would require only minor legislative changes and could prove a viable alternative to ranked-choice voting.  A candidate like King could run on two different lines on the ballot, say Democrat and independent, avoiding a split that LePage might try to exploit. 

This procedure is authorized in nine states and has been frequently used in New York.  Earl Warren was elected this way as governor of California and went on to be U.S. chief justice.

What all these voting methods have in common is they are used in other states and are part of the American political tradition, while ranked-choice voting is not used in any American statewide election.  They all accomplish the same purpose sought by ranked-choice advocates.

4.  Status quo.  The best solution is probably to stick with the current use of plurality elections, also used by the overwhelming majority of states.  The person with the most votes is elected.  Of course, a candidate lacking a majority may win, but that’s also true in ranked-choice voting.

The system imposes an obligation on voters to be aware of the risks of divided opposition.  The media and civic groups must do a better job of educating and informing voters on those risks. 

In the current system, the voters must inform themselves and then decide.  While there are workable alternative methods, untested ranked-choice voting is an unsatisfactory substitute for widely accepted ways of providing real voter choice.

Ranked-choice voting: a dangerous shortcut

This is second in a three-part series opposing ranked-choice voting, Question 5 on the state ballot in November.

What’s wrong with ranked-choice voting?  Shouldn’t voters be able to express their second and lower choices in a single election?

These questions get right at the heart of the election process.  Elections take place after political campaigns in which candidates make the case for themselves and try to highlight their opponents’ weaknesses.

Each election is a distinct political event, and no two are exactly alike.  Candidates carry out highly individual campaigns and voters’ sentiments change over time, especially during the campaigns themselves when they have the chance to compare the candidates.

The media plays a special role, providing current information on the candidates, their evolving political positions and their supporters and alliances.

The voters then choose from among the candidates.  They are expected to vote for the person they want to hold office or for the one they dislike the least.

Ranked-choice voting departs completely from this electoral process to force a choice that may not represent the popular will after a full campaign.  If nobody receives a majority of the votes, it could well produce a winner who, in the absence of a head-to-head campaign, turns out to be the first choice of few voters.

That makes ranked-choice voting nothing more than a dangerous shortcut to democracy.

In the U.S., democracy has always meant election either of a candidate by an outright majority or the election of the person with the most votes, even if not a majority.  It has never meant on the federal level or in any statewide election, the selection of a candidate based on his or her second-choice votes.

So ranked-choice voting would be an American political revolution, caused almost entirely by regret about the election of Gov. Paul LePage, who won twice by a plurality.

How ironic it would be that one of the most disliked governors in state history would be allowed to change its political system.

What is most concerning about the proposal is its lack of confidence in the voters themselves.  The LePage elections could have taught Mainers a political lesson.  If you think they are passive and ignorant, what is essentially an electoral gimmick must be imposed on them.

The ranked-choice voting proponents attempted to show how it would work by running mock elections among various kinds of Maine beer.  What may be acceptable for picking your favorite brew is unlikely to be as acceptable in electing the state’s chief executive.

As with the choice of beer, ranked-choice voting trivializes elections, the most important expression of our political system and the one open to all citizens at regular intervals.

And it is complicated.  Voters may select as many ranked choices as there are candidates.  After their first choice is counted, they have no idea of how the voting proceeds.  A computer keeps reshuffling the votes, eliminating the weakest candidate after each pass.  It then spits out the result, which may well be a surprise to the voters.

That means voters cannot even guess the consequences of their actions.  If you voted for one of LePage’s opponents, you could judge if your candidate could win.  With ranked-choice voting, you are ignorant of the vote counting process and of your chances of backing a winner.

It is mathematically possible for a candidate receiving the second or third highest number of first-place votes to win a ranked-choice election.  Is that what voters really want?

Another major problem with the proposal is its constitutionality.  The Maine Constitution specifically allows plurality elections.  Simply passing a law, even one voted in referendum, couldn’t change that fact.

Both houses of the Legislature would have to vote by two-thirds to propose it and then a majority of state voters would have to approve an amendment, before ranked-choice voting could take place.  In short, even a positive vote this November would not assure adoption.

Ranked-choice voting has not been adopted by any other state because it would depart so far from the American political tradition. 

If voters in other states conclude that a simple election in which a candidate may be elected by gaining more votes than all others is not satisfactory, other solutions are possible.  In all cases, the essence of the political system has been preserved without ranked-choice voting. 

Elections should give voters a real, clear and understandable choice.  Unhappiness with the outcome of a couple of elections should not be allowed to undermine that basic truth. 

Next: Alternatives to ranked-choice voting.

LePage elections the issue; ranked choice voting not the cure

This is the first in a three-part series opposing ranked-choice voting, Question 5 on the state ballot in November.

“Democracy is the worst form of government, except for all the others,” said Winston Churchill.

The famous British Prime Minister thought our democratic system of government was inherently and intentionally inefficient and lacked the streamlined nature of systems placing efficiency above the popular will. But its inefficiency gives the people time to consider the results of their votes.

The American democratic, electoral system is “presidential.” Unlike a parliament, where all candidates of several parties run by district with no general election of the head of government, the U.S. system has statewide elections, usually with a choice between candidates of only two parties.

The state-based system used by the federal government is also used in the states themselves – including Maine. The governor is elected statewide, while the Legislature is elected by district.

From 1820 until 1879, the system generally worked well in Maine. But that year, three candidates gained votes – Republican, Democratic and Greenback. None had a majority, throwing the election into the Legislature.

Disagreement centered on whether the old Legislature or the newly elected one should pick the governor. Conflict threatened, and Joshua Chamberlain, former governor and former Civil War general, was asked to separate the armed parties. Finally, the state Supreme Court decided and a Republican became governor.

To prevent such an embarrassing and dangerous situation from arising again, Maine amended the state constitution to allow for “choice by plurality of all the votes.”

Since 1974, Maine has experienced a series of multi-candidate races for governor, usually with three leading candidates and usually won by a plurality not a majority. Four former Democrats have run as independents and two were elected. Another came close, while the still another sharply reduced the incumbent’s vote

The frequent selection of the governor by plurality raised little or no concern until the 2010 election of Republican Paul LePage. The majority of voters supported either independent Eliot Cutler or Democrat Libby Mitchell. A fourth candidate also gained votes.

LePage again profited from an opposition vote split between Cutler and Democrat Mike Michaud, and was reelected in 2014.

Two conclusions seem clear from his elections. LePage would not have won if the opposition had not been split. And he benefitted from the tea party wave in 2010 and became one of the most controversial governors in state history, being for many an embarrassment to the state, because of remarks many thought racist.

The divided opposition had reason to regret their having failed to unite behind either Cutler or the Democrat. But some voters felt they should have to abandon their first choice in the name of the practical politics that could have stopped LePage.

As unusual as this situation might appear, it isn’t. While many developed countries use the parliamentary system, voters in these countries also understand that their district choice is a vote for the top executive.

No further away than Canada, there are three major parties that run candidates in districts all across the country. The party gaining the most votes – virtually always a plurality and much less than a majority – names the country’s prime minister and the premiers of its provinces.

There are no coalitions; the minority rules. The system works satisfactorily, because all parties are committed to making it work.

In the U.S., the plurality system, used nationally and in 39 states, works. Major new parties seldom arise, but third parties come and go. Remember in 1879, the third candidate came from the long-forgotten Greenback Party.

For a new party to establish itself as an alternative, it must win its way into the top two. The last new party to make the grade was the Republican Party in 1860. The ranked-choice system could inadvertently and easily create new parties and always prevent majority winners.

Ranked-choice voting, in which voters can also pick second and third choices, might have prevented LePage’s elections. But it would have been a revolutionary and unprecedented change in the American political system.

Today, voters must make their own choice whether they prefer to vote on principal or party, even if that means seeing their candidate lose, or to pick an acceptable alternative. Ranked-choice voting would promote even more split voting with the ultimate winner hidden behind a computer calculation.

The problem with the LePage elections may have been more with divided voter opinion than the voting system. You cannot fix one by changing the other.

Next: The problems with ranked-choice voting. Third: Alternatives.

Trump’s wealth, real or unreal?

Donald Trump’s political rise was due partly to the widely held belief that he is a multi-billionaire whose wealth comes from his business skill.

If he could become a billionaire as a tough negotiator in real estate deals, he could be the kind of strong and successful leader the U.S. needs.

Supporting his reputation, he projected the greatest self-confidence about his ability to solve problems and lead the country just as he had led his vast network of companies. He proudly splashed his name on his enterprises, thanks to his reputation as a businessman and television celebrity.

Trump claims to be worth $10 billion dollars, placing him among a handful of the wealthiest people in the world. Forbes magazine, which independently rates the rich, says he’s worth $4.5 billion.

But neither Forbes nor anybody else really knows, because most of his investments are in private deals, not in corporations required to publish financial reports. Still, Trump insists people should be impressed by his wealth and even once sued a writer who said he was a mere “millionaire.”

Why is the amount of Trump’s wealth subject to so much doubt?

Anybody is free to set a value on his or her assets and Trump seems to say he has done that to come up with $10 billion. His holdings are worth that amount – in his opinion. But when a bank is asked to accept the property as security for a loan, it may find it has a lesser value.

Here’s how it could work. Whatever the value of a parcel of land, it might gain in value if you could get the necessary permits to build a skyscraper on it. You value your own property on the assumption that you will get the permits.

In the case of New York hotels, it worked. He might control the land, but need permits and want tax breaks. Thanks to his father’s ability to call in favors for having made political contributions, he received them.

Trump and his many companies own real estate in partnership with others, who control most of the property. But he may attach value to it beyond the scope of his investment on the strength of his name being the building’s “brand” and his company having management responsibility.

“I am the king of debt,” Trump has said. He uses borrowed money to cover his share of investments as much as he can. This at least raises the question if he distinguishes between gross investment and net value.

A piece of property has value, perhaps equal to its cost or to what it might get, if sold. That would be its gross value. Its value at any moment is that gross value less the amount of money borrowed to purchase it and not yet repaid. That would be the asset value of Trump’s share of a building.

If he sets his wealth based on the gross value, without taking into account his debt, his assets would be inflated. Only when he makes debt payments, would his assets grow.

If he does not make debt payments, his companies may seek bankruptcy protection from making further payments and the property passes to the lender. Trump companies have been involved in at least four bankruptcies to shed financial responsibilities.

The exact amount of debt existing behind his investments remains unknown, but the New York Times recently dug up at least $650 million in debt on his U.S. investments. The more he and his companies owe, the less wealthy he is.

Trump has thus far refused to disclose his tax returns. While they would not necessarily expose his net worth, they could provide important clues to his wealth.

Even if they showed he legally paid little tax, which he suggests is the case, he would have revealed his gross income and the allowances he used to reduce it for tax purposes. For example, losses in some activities could be used to offset gains in others, this reducing his tax liability.

Using Forbes’ estimate, his annual income would be $45 million assuming he gained only one percent on his investments. Perhaps he lost more than he profited, thus paying little or no taxes. So his tax returns matter, especially in light of his claims of business success.

Trump’s fame depends on beliefs about his great wealth and the skill and intelligence that made it possible. If he has greatly exaggerated his financial success as businessman, what might that say about his possible political success as president?

LePage, GOP use stealth to cut social welfare

Republican policy maintains government has grown too large and should be cut back. Not only should it get out of the way of business, but also a reduced government would allow for generous tax cuts.

That sounds like a simple proposition to tame a government that issues too many regulations and pursues goals that could be better left to the private sector.

But, below the surface, this argument is not about government in general. It is targeted at social welfare policies that grew up during and after the 1930s New Deal. Conservatives want to repeal these policies regardless of the assistance they provide to tens of millions of Americans.

If adopted, this policy would amount to a rollback of history to the period between the end of the Civil War and the Great Depression when the federal government’s prime role was to aid business, even if it exploited workers.

But it is clear that a frontal assault on social welfare policy won’t succeed. Virtually all Democrats support New Deal social policy and millions of voters have come to benefit from its programs.

Recently, it has become evident that advocates of cutting government have not given up. Instead, they pursue their goals more indirectly and patiently.

Gov. Paul LePage has created a classic example of this more subtle approach. His tactics undermine the widely held belief that the essential function of government is to maintain public health and safety.

The Maine Legislature has funded public health efforts to fight disease when it appears and to promote healthful conditions to protect people. In recent years, this has included fighting tuberculosis and flu and assisting in the survival of infants.

Funding supported 50 public health nurses. Now, there are only 25. As nurses retired or left, they were not replaced. The survivors are now spread so thinly as to be unable to do much of the job assigned to them by law.

The next step is not difficult to forecast. LePage wants to cut 2,300 state jobs. He suggests that this can be accomplished mostly by eliminating vacant positions, so few state employees would lose their jobs.

First, his administration artificially creates vacancies and then he seeks to eliminate the vacant positions as unnecessary. To accomplish his policy, he ignores the statutory requirements for public health nurses and refuses to spend money appropriated for them. But he cuts the size of government and produces savings for taxpayers.

At the federal level, the GOP tried to convert Social Security into what would amount to a private retirement scheme. The proposal flopped when the votes in Congress to adopt it were lacking.

Congressional Republicans, unable to transform Social Security into an investment fund, are attacking the money to administer it. While benefits are financed by employer and employee contributions, the operation of the program is subject to the normal congressional appropriation process.

Suffering from funding cuts, the program will increasingly falter and public discontent can be expected to rise. Then, the time may be ripe for killing Social Security, as we now know it.

In both the public health nurse and Social Security moves, field operations are now being drastically cut and the provision of services slowed.

A closer look reveals that cutting government spending is more about reducing or eliminating targeted social programs than about meaningful change in the size of government.

Total federal outlays in 2015 were $3.7 trillion. Cutting Social Security administrative costs, as now proposed, would produce savings of two-thousandths of one percent.

While that could undermine Social Security, it will not produce tax cuts. It would cut the size of government only by laying off people who help beneficiaries.

The Defense Department receives half the funds subject to annual appropriation, a total amount equal to all other federal government agencies combined. While its spending could make it the prime target for reducing the size of government, if that’s what voters really want, it is not the focus of budget cutters.

Like virtually any large entity, government can be amazingly inefficient and wasteful. When candidates tell voters they want to cut government spending, their promise is often based on eliminating waste and promoting efficiency, actions that invariably fail for fear of causing major job losses.

The issue is not smaller government or tax cuts. Opponents of social welfare spending sense the time may be ripe to cut it, while promising lower taxes. Their solution is having private sector jobs replace benefits taken from people whom they believe have become too dependent on government handouts.

Why this election is not about the economy

There are at least three big myths about the economy in this year’s political campaign.

In 1992 campaign, strategist James Carville highlighted the key issue for the Clinton staff, saying, “It’s the economy, stupid.” Though there’s a lot of talk, positive and negative, about the recovery from the recession, the economy is not the biggest issue this year.

Second, despite claims to the contrary, incomes have begun to recover. While the rich have grown richer, state and municipal increases in the minimum wage have boosted incomes at the other end of the scale.

Finally, Donald Trump’s business success does not give him any special advantage in improving the national economy. Different rules apply, especially when it comes to using borrowed money. And presidents have less economic influence than they claim.

The economic proposals by the two major candidates run true to form.

Democrat Hillary Clinton would raise taxes on the most wealthy and use the proceeds to fund public works projects. Government would directly create jobs by hiring people to build roads and bridges.

Republican Trump just announced his plan consisting of traditional GOP proposals to cut government regulation and taxes. Business would have more money it could invest in expansion and new job creation.

Trump would reduce government revenues until the economy improves, yielding more tax income. Clinton would cover costs using funds from a tax increase on the wealthy.

Either way, voters are asked to believe that new jobs will turn part-time into full-time employment and bring some people back into the labor force. But the problems of the economy may not be that simple to solve, assuming the proposals would work.

Clinton made some remarks about coal miners that were ripped from their context. Yes, she said, “we’re going to put a lot of coal miners …out of business.” But she also proposed bringing them jobs producing “clean renewable energy.”

Contrast that view with one of a Trump voter shown in a now famous news video. He said that the GOP candidate would “preserve the culture I grew up in.” Trump wants to save the coal industry.

Trump advocates what amounts to recovery of the old economy with traditional incomes – “Make America Great Again.” Clinton looks for a new economy with more skilled jobs and new pay scales.

Jobs are coming back. Last week, the federal government reported 255,000 new jobs in July, topping economists’ forecasts averaging 180,000. And incomes have finally begun to move up.

In the depths of the recession, more than 80 percent of people saw the economy as the country’s biggest problem, according to the Wall Street Journal. Now, the paper reports than only about a quarter hold that view.

Still, President Obama has to do a better job explaining his successful policies. Auto sales had been down 40 percent until the federal government stepped in. The industry was saved and the government got a huge share of its investment back. The single government stimulus program also worked.

Perhaps the end of the economic crisis is why polls now give Clinton and Trump equal ratings on their ability to deal with the economy while showing Clinton ahead in the race for the White House. She leads on dealing with foreign affairs, including threats to the U.S., issues that are unusually politically relevant.

Trump argues that the economy would do even better if immigration was essentially halted and millions of people were sent back to their countries of origin. The implication is that immigrants are taking jobs away from Americans, plus some new arrivals are posing a security threat.

The opposing view is that immigrants both add consumers, needed for the economy to grow, and to take entry-level jobs that Americans don’t want. Deporting millions could undermine growth. Obama’s expulsion of two million immigrants may have slowed recovery.

Trump would also slam the door on major trade deals and try to roll back existing ones in the belief that others are stealing U.S. markets.

Trade provides lower priced goods in the U.S. market and many retail and import jobs. The main reason for huge Chinese imports is the lower price tag on its goods. If trade deals are dismantled and new ones blocked, prices will undoubtedly rise. Are Americans ready to pay more to buy American-made products?

The economy will always be a big issue. But this year, it’s increasingly difficult to make the case it is in bad shape. Voters focus now on candidates’ character and their ability to run the government, fight terrorism and keep domestic peace.