DOMEocracy

hardline political news and analysis

Month: May, 2016

Forthcoming Soon: THE CLASS

An atypical edition of DOMEocracy today to announce that I’ve reached an agreement with Johns Hopkins University Press to publish my book on the House Class of 1974 and the dramatic impacts, and unintended consequences, of congressional reform.

As many DOMEocracy readers know, this historical study has been a major project over the past 3 years, and has involved interviews with over 40 members of the Class and others who worked in, reported on, and were involved with the House of Representatives during the crucial 94th Congress.  Thanks to their sharing with me unique recollections and insights into the reform efforts of the 1970s, THE CLASS contains substantial material never before included in any account of this crucial era of House history.

I have completed a draft of the book, but now will be editing it for presentation to JHUP by the end of the year.  There will still be inevitable editing and production time, but with any luck,  THE CLASS will be published next year.  I will keep you informed of progress, but wanted to share the good news with readers of DOMEocracy, and to thank you for your allowing me to use this blog to hone my research and writing skills over these past 3 years.

 

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Advice to Democrats: ‘Assume Nothing’

Throughout my four decades of work in the House of Representatives, I kept a small poster prominently displayed in my office. It advised simply: “Assume Nothing.” Still good advice.

Democrats might be excused for performing private celebratory dances after Donald Trump became the certain Republican nominee for President. Trump enters the general election campaign with huge negatives, a fragmented party, and a slew of quotes by and about him that cannot be described as anything but catastrophic to any other candidate.  It might not be enough, particularly since millions of Americans might believe the description also fits Hillary Clinton.

We have always had snake-oil charlatans maneuvering for political power — demagogues including Joe McCarthy, George Wallace and Huey Long.   Somehow the system managed to shake them out before they were able to reach the highest rungs of power. Many Democrats assume that some historical fail safe mechanism is still in working order.

Maybe, but don’t bet the White House on it. So a few words of advice to Democrats as we slide deeper into the muck of this Fall’s campaign.

  1. Assume nothing. There will be a temptation to conclude that Clinton has it in the bag.  Wrong.  Regardless of Trump’s buffoonery, Clinton has to sell herself and articulate clear policies to a skeptical electorate. Assume there will be unpredicted turns in the road; assume Trump will manage to cobble together a badly fragmented Republican Party highly motivated to defeat Clinton; and assume a serious Clinton blunder or two  (by Hillary, Bill, or both). It will not take much for the polls to narrow and when they do, the press will latch onto the “horse race” aspect of the campaign. Come October, the chances are it will look like a serious contest.
  2. Do not take Trump lightly, however much his antics invite you to do so. The new Quinnipiac poll showing razor thin races in Ohio, Florida and Pennsylvania may be slanted towards Trump (Quinnipiac polls lean right) but it suggests this election may not be a blow-out. Celebrity at Trump’s level – tabloids, reality TV, eponymous products – combined with his “outsider/not politics as usual” message has a distinct and powerful electoral value regardless how simplistic the message (or the candidate) may be. If there is any doubt, read up on Gov. Arnold Schwarzenegger or Gov. Jesse Ventura, both elected in reliably Democratic states.
  3. Take the debates extremely seriously. Barack Obama suffered a totally avoidable self-inflicted wound when he flubbed the first debate against Mitt Romney in 2012. Similarly, Al Gore incomprehensibly lost debates to George W. Bush in 2000 because he believed the electorate would recognize that he was smarter and better informed. Like many experienced politicians, Clinton can get mired in the weeds, while Trump glibly ignores questions, hurls insults, and enunciates his top line themes that seem compelling to a not-to-be ignored segment of our country. Clinton cannot risk poor debate performances that elevate Trump’s standing simply for surviving on the stage with her. She needs to practice with an attack dog, not a bank of think tank experts, until she can reflexively recite taut, pithy and effective points and rejoinders. And, yes, she must avoid that stridency that can make her presentations unappealing if not alienating. She cannot take the high road: if he hits, she has to prove she cannot be bullied or intimidated, while not stooping to his juvenile level.
  4. Don’t bet that fear of Trump will produce huge turnouts that favor Clinton. The widespread ennui that has gripped the electorate could easily dampen voter participation among the very portions of the electorate that Clinton still needs to convince: youth, minorities and suburban women. A full out battle in the mud over the next six months could dispirit millions of exhausted and demoralized voters. Since Sanders will likely fight into June or even later, a very aggressive strategy is essential for enticing his dispirited supporters and ensuring their turnout. Trump’s base, while filled with infrequent voters, may well be energized to turn out in large numbers. Clinton needs to aggressively use surrogates – President Obama, celebrities, local officeholders and Bill Clinton – to get her core constituencies jazzed about her message and worried enough about Trump to turn out and vote.
  5. Devote substantial energy to the down-ballot races. The electoral catastrophe that may be awaiting Trump presents invaluable opportunities for Democrats at the congressional and state and local levels that are essential both for carrying out the Clinton policy agenda (including appointees), and also to regaining many of the governorships and the nearly 1,000 state legislative offices lost to the Republicans since 2009. Democrats need those victories desperately so that they go into the 2020-2022 reapportionment timetable with strong incumbents in office who can reverse the egregious gerrymandering that has cost Democrats a dozen – and probably many more — House seats. Clinton needs to devote sufficient time and resources to promoting down-ballot Democrats at the local Congressional district level so that if Trump trips up and 2016 becomes a Democratic wave year, as many Democrats are riding the curl as possible.

 

 

 

 

One Blow for Income Equity

An article in the May 8th New York Times lays out a golden messaging and policy opportunity for President Obama and congressional Democrats, a huge home run that can trump Trump and expose Paul Ryan and the Republican party in general as the clueless guardians of the one-tenth of one percent. http://www.nytimes.com/2016/05/08/business/ending-tax-break-for-ultrawealthy-may-not-take-act-of-congress.html?ref=todayspaper

As campaign strategists know and Donald Trump has just demonstrated with disturbing effectiveness, messaging is key to political success. The simpler the message, the more easily it is disseminated, and the more often it is repeated correlate with precise accuracy the likely impact.

So far this political season, the effective message has been the unresponsiveness of elected officials to the economic plight of the average American. The candidate and party who can translate concern about the maldistribution of wealth into genuine policy results is going to get a leg up over the next few months.

Now, unfortunately, the details of this proposed message are a bit convoluted, especially if you talk to a tax attorney or CPA; so don’t. Here are the basics. Provisions of the tax code, or tax regulations (which one is actually critical to the outcome) let a tiny fraction of Americans – not the top ten percent or the top one percent that Bernie Sanders rails about, but rather the top one-tenth of one percent (the percent to which Donald Trump belongs) to camouflage the bulk of their sizable annual income as “capital gains” instead of “income” and, in doing so, cut their tax rate in half. And when you shelter the taxes of those folks, that’s a whole bunch of money that goes to promoting income inequality.

Since 2009, President Obama has proposed reforming this “carried interest” provision, but the failure of Congress to pass comprehensive tax reform has left the provision in place, and billions continue to flow into those privileged pockets. Congressional Democratic leaders for the most part are on board with the change (a few Democratic outliers are wary of offending Wall Street buddies), but without Republicans moving along a tax bill, they have no vehicle to force a vote on ending the carried interest loophole.

But there might be another way for Democrats to seize the issue of tax reform and actually strike a blow for greater income equity. Several tax scholars and practitioners argue there is no need to wait for comprehensive tax reform.  Instead, these experts argue, the President could direct Treasury Secretary Jack Lew and the Internal Revenue Service to issue regulations revising how carried interest is taxed, closing the loophole, gaining tens of billions of dollars to help reduce the deficit, and impacting only the swell folks with the big homes, private jets and humongous trusts.

Since the 2012 election, many Democrats have been encouraging Obama to crank out more Executive Orders to effectuate policies that Congress will not debate, let alone legislate.   And while it pains the heart of those who have invested decades in rebuilding Congress as a co-equal branch of government, there is little alternative to policy stasis if Congress is unable, or unwilling, to perform its constitutional responsibilities as has largely been the case since 2011. The fact that many Republicans are delighted with inaction and untroubled by the injurious impact such inactivity has on the reputation of government is irrelevant: when one branch of government shuts down, it should be no surprise that other branches move to take up the slack.

So Obama has been issuing Executive Orders on a wide range of subjects from marriage equality to the minimum wage to immigration. Not long ago, Treasury Department issued welcome rules to prevent U.S. companies from relocating their corporate headquarters (wink, wink) overseas to circumvent American corporate taxes. Now, according to some tax specialists, Obama could do the same with carried interest.

According to Alan J. Wilensky, a former deputy assistant Treasury secretary, changing the carried interest “is something President Obama can do and should do,” an opinion shared by other tax experts. According to Victor Fleischer, a University of San Diego law professor, Congress in 1984 not only intended that hedge fund managers pay income taxes on their earnings, but gave Treasury “broad discretion” to require them to do so. Flesicher estimates closing the loophole could save $180 billion (with a “b”) over the ten year budget window that Congress uses; the Congressional Budget Office says the number is closer to $18 billion.

From my experience, CBO is probably closer to the truth, but why leave even $18 billion waiting on the table awaiting “comprehensive tax reform,” especially since that legislation — whenever it ultimately emerges — undoubtedly will confer addition benefits on the same class of ultra-affluent Americans?

Voters are crying out for somebody to do something that demonstrates  concern about their top issue: economic security. (There is considerable evidence that is the #2 and #3 issue as well.) Closing the carried interest loophole does not exactly require a profile in courage: even Donald Trump admits it is a wasteful abomination. In fact, so few people even bother to justify it that failure to shut it conveys far more political risk than actually doing so.

Acting unilaterally on carried interest might upset some green eyeshade-wearing purists who think major changes in the code should only occur in conjunction with comprehensive tax reform. But there isn’t going to be tax reform, comprehensive or otherwise, between now and Election Day, as Speaker Ryan (the former Ways and Means chairman) has already admitted. So why not act unilaterally to close a loophole, raise a few billion a year and strike a blow for income equity all without hurting 99.9% of the population?

Naturally, the lawyers will caution against such a move by the President, warning that the courts might step in and rule his action an overstep. Well, the courts have done that on other orders, specifically, his immigration directives, but that possibility did not slow down the President. Others may argue acting on carried interest will angry up the Republicans whom we will need on other issues. Right. Like they could be less interested in being cooperative. In fact, far better to take away one GOP chip in future tax negotiations, if and when they ever occur: “You get nothing for ending carried interest because … it doesn’t exist anymore.” Some may complain that, combined with ending the Bush upper income tax cut in 2013, Democrats will look like we are always going after the fat cats. Well, as Willie Sutton used to say when asked why he robbed banks, “That’s where the money is.”

Congressional Democrats should unite behind an effort to close the carried interest loophole: call it “End the $180 billion loophole for the .1%” or something a little more chant-able. Pressure, or encourage, President Obama to take the plunge, now, not a few weeks before Election Day when no one knows it happened, and then message like crazy the blow that was struck to end income inequity. It’s been the party line for 7 years: now, do it! Get carried away.