New America Voices

Campaign Narnia: A Deeper Magic?

David Gray — Wed, 04 Jun 2008 14:22:00 -0400

Prince Caspian, the much anticipated second movie based on the books of C.S. Lewis' Narnia series, opened earlier this month. It follows the The Lion, the Witch and the Wardrobe.

As I watched Senator Clinton speak after the Montana and South Dakota primaries last evening, I can't help but think of that first Narnia book.

On first glace, John McCain would seem like the lion. Strong willed, sometimes to a fault, with a sturdy constitution that has withstood great pressure and pain. Lions lead battles. They are kings of the wild. In the books, the lion in Narnia has existed "since before the beginning of time." That is not far from the description Senator McCain uses for himself, "I'm older than dirt," and in the spirit in which the Senator from Illinois reminds Americans of every time he thanks Senator McCain for his "more than half century of service."

Senator Obama is like the wardrobe, something magical that helps bridge between two worlds. In the wardrobe's case, one in England and one of Narnia. People come in contact with the wardrobe and are transported to a new place in time. Obama's personal story, racial background and post-partisan outlook places him between two worlds. In the case of the Pevensie children in Lewis' books, the wardrobe helps take them from life as usual in war-time England to a new hopeful world of dreams. Obama's appeal, in part, is his ability to transport his audiences to a new place of possibility. Even dreams for some.

That would leave only one descriptor left for Senator Clinton. Described too often as icy and tough and literally described by Don Imus in 2006 as a witch, Clinton would on the surface play the White Witch in campaign Narnia.

However, watching Senator Clinton over the past few weeks, she seems to be more of the lion who comes back to life. Hardball's Chris Matthews said it well in watching Senator Clinton's victory speech following the West Virginia primary, she looks like "she knows something we all don't know." We saw that same smile following her win in Kentucky and we saw it last night in her speech in New York.

I have to agree. The campaign is over and yet she continues to campaign, and she seems to have an odd confidence - as if she knows something we don't know.

Have more delegates than we know privately endorsed Clinton, allowing her to reveal them at the convention? Maybe there are more Democratic superdelegates available than the public knows of? What if there are super-duper delegates in the Democratic primary who can trump the super-delegates? The Clintons have, after all, been through Presidential campaigns before. Maybe they know things; things we don't know.

At the end of The Lion, the Witch and the Wardrobe, the lion is seemingly killed by magic, but comes back to life in order to win the great battle.

The lion's opponents are stunned. Their jaws drop and all they can say is, "No!"

The lion explains, "that though the... knew the Deep Magic, there is a magic deeper still which....did not know."

For all Senator Obama's magic, Senator Clinton continues to smile. Is there a deeper magic still that we don't know?

The Rich Will Always Be with Us

Mark Paul — Mon, 12 May 2008 22:26:00 -0400

Like generals who are always fighting the last war, California's pundits are still fighting their way out of the last budget crisis. Latest case in point: George Skelton of the Los Angeles Times, who recently complained again that California's income tax "depends too heavily on the wealthy." In Skelton's world, the wealthy are just like those men mothers always warn their daughters about: they'll show you a good time, and then disappear, leaving you heartbroken. "Their incomes rise and fall steeply with the economy," he writes, "and therefore so do state budget deficits."

Except that's not why California has a budget crisis. As the state controller reported on May 9, personal income tax collections for the first nine months of the current budget year are $1.4 billion over the estimate in Gov. Schwarzenegger's January budget and within a whisker of the amount budgeted last summer. Through the first nine months California revenues are up 1.2 percent over a year ago, thanks entirely to the income tax, which has more than made up for the decline in sales tax revenues caused by the housing crash.

The pundits' obsession with the volatility of income tax revenues is a holdover from the past. In 1999 and 2000 the incomes--and income tax payments--of the wealthy, powered by huge capital gains and stock option grants during the Internet stock market bubble, soared. Then they fell back to earth in 2001 and 2002, dragging California into a budget crisis. But as I've explained in more detail elsewhere, the bubble and its subsequent popping were an unprecedented event. Just look at the chart below, showing California's four largest sources of general fund tax revenue over the last three decades.

Uploaded with plasq's Skitch!

Take out the bubble years, and revenues don't resemble a "roller coaster," as Skelton puts it. They rise when the economy grows and flatten out when it shrinks, as it did in the sharp recession and restructuring that hit California in the early 1990s. Charts of federal revenue, also dependent on income taxes, show the same pattern. The Internet boom was an anomaly.

But let's suppose for a moment that it wasn't. What would the pundits do so that California no longer "depends too heavily on the wealthy"?

Raise taxes on the poor and middle class? According to an analysis done for the California Budget Project by the Institute on Taxation and Economic Policy, low- and middle-income households already pay a higher percentage of their incomes in state and local taxes than do those in the top 1 percent.

Cut income tax rates on the wealthy? California has already done that. The state had top marginal rates of 10 percent and 11 percent on the wealthy through the 1970s, most of the 1980s, and some of the 1990s, but lowered them to 9.3 percent (in 2004 voters added, by initiative, an extra 0.7 percentage points on incomes over $1 million, with the funds earmarked for expanded mental health care.) Yet the amounts collected by the income tax continue to grow.

Why? Because of an underlying economic shift the pundits rarely mention: California gets an increasing share of its budget from income taxes on the wealthy because that's where all the money is. According to California Franchise Tax Board data, in 1979 the top 10 percent of taxpayers had about one-third of the state's total adjusted gross income. In 2005, their share had grown to roughly half.

If the pundits know a way to balance the budget, reduce the share of taxes paid by the wealthy, and not widen this growing income gap between the wealthy and everybody else, they should let us in on the secret.

A Quick Thanks for Mother's Day

David Gray — Fri, 09 May 2008 17:21:00 -0400

This Sunday we honor the 83 million moms in America on Mother’s Day. We owe our Moms our lives and our thanks. Mother’s Day also turns our attention to our children and the need for more focus on them. Unfortunately, families with children receive a dwindling share for federal expenditures. Scholars Eugene Steuerle and Adam Carasso have found that between 1960 and 2005, federal spending on children declined from 20.1 percent of the domestic budget to just 15.4 percent, while non-child Social Security, Medicare, and Medicaid spending soared from 22.1 percent to 45.9 percent. This is not good for the development of our future generation.

It is within families that many Americans find the support and love to live their lives with joy. Many Americans work increasingly hard and it is within families that they experience unconditional love and support in times of trouble. For couples that do not have children, nuclear and extended families provide critical emotional support. In a variety of emotional and psychological ways, families enhance the lives of millions of Americans. And through children, mothers help ensure our future.

Let’s thank our mothers for all they do to make our families what they are.

Let’s let Mother’s Day be a wake-up call for us to invest more in our children.

Rev. Gray directs the New America Foundation’s Workforce and Family Program.

Budget Confusion in California

Mark Paul — Wed, 07 May 2008 20:25:00 -0400

As usual, California faces a budget crisis. And just as predictably, Californians are mired in budget confusion.

How big is the crisis? a conscientious citizen might ask. The answer is: As big as you want it to be. Just take your pick. An "$8 billion budget shortfall," reports the San Jose Mercury News. "A $10 billion gap," says the Sacramento Bee. Gov. Arnold Schwarzenegger uses a more technical description: "$20 billion out of whack," he recently said.

This cacophony of numbers and nouns is a big piece of California's budget problem. Not only does California routinely fail to balance its budget, it can't even talk straight about its finances.

In normal accounting and common understanding, a budget is balanced when spending doesn't exceed revenues in a budget year. If revenues are greater than spending, the difference is a surplus; if spending exceeds revenues, the difference is a deficit. Revenues are the proceeds of taxes, fees, and interest on investments.

But not in California. Here, state leaders (and the press) variously and promiscuously refer to the state's budget problems as a "shortfall," a "hole," a "gap," and a "deficit." Sometimes they actually mean to talk about the annual deficit. More often than not, though, they are referring to an amalgam of the state's cash reserve at the beginning of the current year, a current year deficit, a projected budget year deficit, and the desired reserve for the budget year. As UCLA Prof. Daniel Mitchell, who's campaigned tirelessly (and, alas, so far unsuccessfully) for budget transparency, points out, California's bad habit of talking about this "shortfall" confuses a stock (your savings account) and a flow (your paycheck), obscuring the true size and nature of the state's deficit. Most households understand that if they earn $50,000 a year and spend $100,000, making up the difference from their savings, they don't have a balanced budget. California doesn't. Even if it spends more than it collects in taxes, California counts the budget as balanced if has sufficient cash reserves to make up the difference.

To understand how badly confused California is, just imagine what national budget discussions would be like if the same loose terminology were used in Washington. News reports would be talking about Washington's "$5.5 trillion budget shortfall": the $350 billion deficit for the current year and the projected $200 billion deficit for the 2009 budget year, all topped off by the $5 trillion of outstanding public debt rung up by Congresses and presidents since they powdered their wigs and buckled their knee britches.

California is also confused about the meaning of "revenues." For example, at a recent budget conference, Thomas Sheehy, a deputy director of California's Department of Finance, was asked whether Schwarzenegger would consider raising revenues to balance the budget. Sheehy replied that the governor's budget, in fact, already included new revenues: $3.3 billion from the sale of deficit bonds!

Don't try this at home. The cash advance you take out on your credit card isn't revenue. It's debt. And so, of course, is California's borrowing to cover up deficits. When the top people in the state's finance department think debt is revenue, you know California's fiscal problems go all the way to the bone.

Getting the accounting right isn't just a cosmetic nicety. It's essential to making good decisions. In 2003, former Gov. Gray Davis hyped the size of the state's budget problem, talking about a $38 billion "shortfall." He apparently believed the bigger the stated challenge, the more likely California would be to tackle it. He was half right. Californians were indeed appalled by the size of the "shortfall." But they responded not by supporting Davis' proposed solutions, but by recalling the feckless leader who'd let the problem grow so big.

Now Schwarzenegger seems to be taking the same path, talking about a budget that's "$20 billion out of whack," the equivalent of one dollars out of every five in the general fund budget. He apparently hopes to bludgeon lawmakers into budget action. It's more likely, though, that exaggerated figures will only make Californians throw up their hands in hopelessness.

In fact, California's real problem is more manageable: an annual deficit of about $5 billion to $8 billion a year. That amounts to about a half penny on a dollar of state output and is about the same magnitude as the state's annual cost ($6.1 billion) for Schwarzenegger's car tax reduction in 2003. Schwarzenegger has spent much of the year trying to sell Californians on various kinds of budget reform, most of them with little relevance to the crisis at hand. But he doesn't need anyone's consent to insist on budget transparency and clarity. Budget reform could start right at his own desk.

A 'Perfect Storm' for Tax Reform?

Paul McLaughlin — Mon, 28 Apr 2008 19:10:00 -0400

In testimony before the Senate Finance Committee ten days ago, tax expert Daniel Shaviro described the current taxation situation in the United States as a "perfect storm" for tax reform. He's right, and it's about time. Our last major tax reform came in 1986, when Congress set out to accomplish the most vaunted goal of any tax reform attempt: broadening the tax base while lowering tax rates in an attempt to improve the system yet maintain revenue collection. They broadened the base by eliminating a number of "tax expenditures," loopholes in the tax code that the tax literate jump through to lower their tax burden relative to their less savvy peers.

But since 1986, the number of tax expenditures has slowly crept back up, and now stands at 172 according to the Joint Committee on Taxation. By adding up JCT's revenue loss estimates for all of them, one arrives at a total of $1 trillion a year in forgone revenue (though it is imprecise to add the numbers.) Not only is that an awful lot of money, tax expenditures have many shortcomings--they are distortive, regressive and receive too little oversight.

So tax expenditures are one section of the code that could stand to be reformed. But, as Shaviro and his co-panelists pointed out, there are numerous others. Corporate taxation is horribly complex, causing businesses to waste time and money and make suboptimal decisions. Individual and Corporate income tax compliance costs Americans billions of dollars worth of time and money each year. And, worst of all, despite all of the effort that goes into complying with it, our tax system fails to cover the costs of running the government, as we run deficit after deficit.

The coming presidential election needs to be a forum to address these issues, as well as many others facing the nation. We can't continue to allow our tax code to become more complicated and special-interest oriented; we need to simplify and streamline it, and make it work for the average American. To hear more about ways we can do that, I will be attending this forum, hosted by the Committee for a Responsible Federal Budget, in association with American University and the Tax Foundation. Tax reform is only one of the topics they'll be discussing; they'll also be addressing climate change and health care reform. The panels are going to be credibly bipartisan, so I'll have my ears open to answers from both sides of the debate. With problems this big, the answers are going to involve compromise, and this event should give some sense of the contours of the compromises that may eventually be reached.

Steve Coll on The Daily Show

Troy K. Schneider — Thu, 10 Apr 2008 15:20:00 -0400

New America President Steve Coll was a guest on The Daily Show last night to discuss his new book, The Bin Ladens. Video of his clip can be viewed below:

$110 Crude Goodbye for Man Who Said Gas Costs $10.07 a Gallon

Lisa Margonelli — Thu, 13 Mar 2008 18:37:00 -0400

Crude oil hit $110 today and it was an ironic farewell to Milton Copulos, late of the National Defense Council Foundation, who led a campaign to promote the "true" costs of gasoline over the past few years. I spoke with Milt in January and he gave me his latest estimate: We pay an extra $10.07 for every gallon we buy.

First, let me say that I never quite knew whether to trust his numbers -- after all, there really aren't any good numbers for the externalities of gas. But I found his background -- in defense, the Heritage Foundation, and then alternative fuels -- intriguing, provocative and a good starting place for trying to figure out how much a gallon of gas really costs us. (Milt also offered a heck of an interview, ranging through housing stock in China to military plans to turn garbage into fuel, to his children, his wife, with time for a short primer on flash pyrolosis.)

Here's how he broke it the cost of of a gallon of gas:

Asthma treatment: $.51 per gallon
Environmental pollution: $1.21
Oil supply disruptions: $1.34
Defense: $1.39
Total economic costs including employment and investment: $5.19
Government revenues: $.43

According to his numbers, oil's total cost to the American economy was around $300 billion in 2003, rising to $825 billion by 2006 and $995 billion by last year. He said he was working on another paper, "which pinpoints when the situation becomes critical." I wish I'd gotten to read it -- and I'll miss the visceral shock of seeing Milt's next set of numbers.

$100 for the Oil/How Much for the Frustration?

Lisa Margonelli — Thu, 06 Mar 2008 00:06:00 -0500

Everyone's trying to forecast how Americans will react to oil at $104 a barrel. Yeah, yeah, cutting back on gas use, worried financial markets... But the overall mood is a defiant shrug, typified by the president, who told a renewable energy conference today that Americans have to “get off oil,” right after mentioning that he’d shown up in a motorcade of twenty cars. It’s fair to say that with neither a plan nor collective will to change, Americans will stay in oil’s motorcade.

However, while we’re watching ourselves, another possibly very significant conflict is forming in two of the most important oil-producing countries. After years of rising oil prices and escalating nationalist rhetoric, the poor in Venezuela and Iran are not getting what they were promised -- according to two separate but strikingly similar reports. Their reaction to rising prices, and increasing sense of disenfranchisement and disappointment, may ultimately force Americans out of the motorcade.

In Foreign Affairs, Francisco Rodriguez writes a fascinating and thoughtful article about Chavez’s failure to deliver oil money to the poor, despite years of talking and spending.

Rodriguez writes:

[Chavez's] mismanagement of the economy and failure to live up to his pro-poor rhetoric have finally started to catch up with him. With inflation accelerating, basic foodstuffs increasingly scarce, and pervasive chronic failures in the provision of basic public services, Venezuelans are starting to glimpse the consequences of Chávez's economic policies -- and they do not like what they see.

And Jahangir Amuzegar, writing in the Middle Eastern Economic Review, delivers a similar critique of Iran.

The president has failed to deliver oil to the tables of the poor, he writes. “In fact, the unexpected oil bonanza has gone hand-in-hand with virulent and rising inflation, stubborn double-digit unemployment, further recession in the country’s industrial sector, and reportedly larger gaps in domestic income distribution. More troubling still, while oil prices are expected to remain at current high levels, the mid-term economic outlook for Iran presented by international organizations (eg, the IMF) and foreign private sources (eg, the Economist Intelligence Unit) -- show slower GDP growth, higher inflation, and larger unemployment in the next few years.”

Now here’s my question: If rising oil prices are not delivering benefits to people in these countries, what will their reaction be? In the past, both Chavez and Ahmenijhad have delivered nationalism when they couldn’t get their hands on the money. But these articles suggest even that is falling flat, and there’s nothing in the oil market that suggests that prices will start spiraling downward. So what will it be? Will leaders ramp up nationalist rhetoric further, trying to force a U.S. reaction? Will the rhetoric simply push prices higher? Will other power centers in Venezuela and Iran push their presidents toward another strategy, or push them off the stage altogether? Will other producers change their behavior? What is the cost of built-up frustration?

The only certainty is that we’ll pay if we don’t "get off" the angry shrug and come up with short-term and long-term plans to reduce oil consumption.

Loophole Heaven

Mark Paul — Tue, 04 Mar 2008 19:51:00 -0500

Just as major league ballplayers were taking the field for the first spring training exhibitions on Feb. 28, Arnold Schwarzenegger was putting taxes in play in California's budget debate.

"I am a big believer that when we have a financial crisis like this, we all should chip in," California's governor said about his state's two-year, $16 billion budget shortfall. "This why I totally agree with the Legislative Analyst’s Office when she says we should look at tax loopholes.... We should go after those tax loopholes."

It won't be hard to find them. California is a big-league loophole-creating machine. It takes only a simple majority of California's Legislature to carve out a tax loophole, but it takes a two-thirds vote to close a loophole or pass a budget. That imbalance has created a ratchet effect in California's tax code.

Legislators disinclined to support the annual budget have found that they can trade their vote for a nice tax loophole for their favorite group or industry. And once in law, the two-thirds rule makes loopholes nearly immortal. For example, even as the Legislature struggled in February to begin attacking the budget crisis, it failed to muster the two-thirds vote needed to close one of the most egregious loopholes, which allows buyers of yachts and private jets to duck paying sales and use taxes on their toys.

The result is a Swiss-cheese of a tax code, with little grounding in either economic efficiency or logic.

The California sales tax, as Irvine Fellow Annette Nellen pointed out at the Feb. 27 tax reform workshop jointly sponsored by New America and the University of California Center Sacramento, piles some of the highest rates in the nation on one of the narrowest tax bases. It exempts diesel fuel in trucks that carry cotton to market but not in trucks that carry cotton shirts to stores. It taxes the magazine you buy at the newsstand but not the same magazine you buy by mail subscription. If you wash your own clothes or mow your own lawn, you pay sales tax on your washer and your lawn mower; if you can afford to send your laundry out and hire a gardner, you pay no tax.

The California income tax is just as holey. It incorporates most of the exclusions, exemptions, and deductions in the federal tax code, including the biggies like the mortgage interest deduction and the exclusion of employer-paid health insurance premiums, then adds more than two dozen of its own, both big (a total exemption for Social Security benefits, which costs $1.8 billion) and small (a rice straw credit and a credit for transporting donated farm products.)

My two favorite loopholes (because they are among the most perverse) are those that give privileged treatment to the lucky over the diligent, to chance over work.

The first, a California special, exempts state lottery winnings from the state income tax. If you work hard in California, you pay tax on your wages. If you save and invest well, you pay tax on your dividends and gains. But if you pick the right six numbers in the state lottery, you're home free.

The second, which conforms to the federal code, awards a tax exemption to capital gains on inherited property (at an annual state revenue loss of $3.1 billion). This provision adjusts upward the tax basis on inherited property to its value on the day the giver dies, wiping out the receiver's for any gains previous to inheriting the windfall.

In other words, if you are shrewd enough, say, to have bought 100,000 shares of Cisco System at 8 cents a share in 1990, you would be looking at paying income tax on a $2.4 million gain if you sell. But if you are lucky enough to have had a parent shrewd enough to make that same trade (and generous enough to will the stock to you), you'd have the $2.4 million gain and no tax liability (and depending on when the parent died, perhaps a big paper loss to offset other gains.)

Favoring luck over work and saving may be bad tax policy. But then maybe that's what to expect in a state that got its big start when James Marshall came across gold in his sawmill. Eureka, indeed.

There Will Be Greed...

Lisa Margonelli — Mon, 25 Feb 2008 04:31:00 -0500

Daniel Day Lewis just won an Oscar for his performance the embodiment of greed in There Will Be Blood. His character, Daniel Plainview, is a ruthless, scheming, tooth sucking, over-the-top wanna-be oil tycoon who kills to turn the dry hills of California into his personal bank account. He is exactly the kind of greedy oil baron Americans have loved to hate since John D. Rockefeller first landed in the Pennsylvania oil fields in the 1860s. Everyone who sees the movie leaves the theatre convinced that what's wrong with us is greed, and oil is a metaphor for that.

I loved this movie (particularly the way it shows crude oil rocketing out of the ground) but I dont think greed is the problem -- it's the answer.

American voters and politicians buy into the greed and oil myth, but with a twist: We're happiest when were condemning the greed and taking the oil. Everyone from Pelosi to Huckabee has trotted out the "G-word" when discussing high gas prices. (In 2006, Bush coyly referred to illegal manipulation or cheating.) But I think the tycoon story is pretty much dead. If we're going to deal with the current problems of oil -- high prices, smog, greenhouse gases, geopolitical problems, traffic jams -- were going to need to ditch the oil and embrace the greed.

The reason we're so dependent upon oil is that it was such a natural fit for greed. It was greed that motivated wildcatters like Plainview to go prospecting for oil when nine holes out of ten yielded nothing. Greed built the pipelines, refineries, and corner gas stations, and even the highways that make us creatures of oil. (One of the big promoters of the first cross-country highway was a man who hoped to sell more auto headlamps. Boy did he ever!)

Recently I was researching a gas station near my house and found it was built by a brand produced by a refinery built in Avon California. Why was the refinery there? In 1901 a man named W. S. Porter wanted to sell a lot of pipe, so he convinced a group of Southern California oil producers to form a company, build a refinery in the North, and buy his pipe to connect the two. What I love about this story is how dumbly powerful greed is at building infrastructure.

To build a new, reduced carbon infrastructure we'll need to start by re-engineering greed into something more green, call it greendy. We'll need policies that don't give the advantage to the dirty greed (ie grandfathered coal plants and Hummers) but to the greendy (distributed generation of recycled waste for power, for example, or biogas from farm manure, or hydraulic hybrid trucks.) If policies make green and greed align, then the Daniel Plainviews and Rockefellers will start trying to sell pipe. Anyway, I'd love to see Hollywood make a movie about a ruthless solar entrepreneur.