Tuesday, February 21, 2017

How To Repeal And Replace Obamacare And Pass Tax Cuts/Tax Reform By April 15, 2017

The first law of Congressional dynamics states that Congress will delay action on any important policy as long as possible until it’s too late to pass legislation in any given two-year Congressional session.  As an illustration, the last overhaul of the federal income tax was President Reagan’s Tax Reform Act of 1986, 31 years ago.

Republican members of Congress have discussed repealing and replacing Obamacare for the past six years, but have been (seemingly) unable (unwilling) to design its replacement.

What’s needed is a good, swift White House kick in the a** to force Republicans in Congress to act, NOW!

There is a model to achieve that goal.  Recall that a major financial crisis, which erupted in 2008, was threatening to shut down the U.S. banking system.  (Details are described in a NYT article by Mark Landler and Eric Dash entitled “Drama Behind a $250 Billion Banking Deal,” dated October 14, 2008.)

On Sunday, October 12, 2008, Treasury Secretary Henry M. Paulson, Jr. called the heads of the nine largest banks in the United States, inviting them to a meeting at the Treasury to be held at 3:00 p.m. on Monday October 13, 2017.  Joining them were Paulson, Federal Reserve Chairman Ben Bernanke, and president of the Federal Reserve Bank of New York, Timothy F. Geithner.

The nine banking heads were presented with an ultimatum to accept a $700 billion bailout package, supplemented with a government guarantee of $1.5 billion in new senior bank issued debt, and government insurance for $500 billion in non-interest bearing deposit accounts held by the banks.  They were told these confidence measures were necessary to sustain bank lending.

The meeting was contentious, but by 6:30 p.m. the nine bank executives signed the agreement.

Back to Congress, which will return from a weeklong break on February 28, 2017.  The White House should issue an (mandatory) invitation to the chairmen and one or two other key members of the House Ways and Means and Senate Finance committees and the House and Senate Leadership (Speaker, House Majority Leader, Senate Majority Leader) to meet with top administration officials (Treasury Secretary, Chairman of the National Economic Council).  A few number-crunching and legislative drafting aides as required would be included.

President Trump would inform these men that, like a jury, they would be sequestered in a room until they agreed unanimously to specific legislation for tax cuts/tax reform and to repeal and replace Obamacare.  Each person would also be required to sign a pledge to support this agreed-upon legislation.  They would be provided with food, cots, clothing, an hour of outdoor exercise per day in a fenced area, and other necessities.  They would be permitted to retain their mobile phones to communicate with family at specific times of the day.  But like a jury, they would not be permitted to go home or discuss their deliberations with anyone until they reached a deal.

At that time, President Trump would join them at a press conference in which the signed agreements would be displayed.  Members of Congress would then return to their respective chambers and promptly proceed to pass the legislation to be delivered to the president for signing.  Any member who changed his mind would be placed in a stock for public humiliation and punishment, which would be part of the overall agreement.

Desperate times require desperate measures.  Congress must not be allowed to dilly-dally.

Tuesday, February 14, 2017

Mark Cuban For President

On November 29, 2016, your friendly proprietor was among the first, if not the first, to predict that Mark Cuban would be the next Democrat Party nominee for president.  This would pit two billionaires against each other.

The story has now appeared in the February 12, 2017, edition of Newsmax.  Stay tuned.

Monday, February 13, 2017

Tax Cuts For Trump Are Equivalent To D-Day’s Breakout At Omaha Beach

The allied invasion at Normandy on D-Day, June 6, 1944, is a model for Trump’s invasion of Washington, D.C.

D-Day consisted of America, Canadian, and British troops landing on five beaches codenamed Juno, Gold, Utah, Sword, and Omaha. The landings at the first four were relatively successful.  In marked contrast, things were going so badly at Omaha Beach that Supreme Allied Commander Eisenhower at one point considered retreat.

After large losses in men and material, U.S. forces finally broke through German defenses and seized higher ground.  However the objectives sought for D-Day required three more days for consolidation.  If Omaha Beach had not been secured, it is likely the invasion would have failed.  I leave it to historians to contemplate the counter-factual.

The Trump administration is working to change policy on a number of fronts.  The White House website lists several issues on the Trump agenda, but jobs, jobs, jobs tops them all.  The success of President Trump depends on higher economic growth and job creation.

Tax cuts and deregulation are the keys to growth.  Deregulation can be done piecemeal over time, but the effort to secure tax cuts needs an immediate, comprehensive, coordinated push on all fronts lest tax cuts get bogged down in hedgerows of interest group politics and conflicting personalities.  Each day that goes by without tax cuts, despite happy talk from Republican congressional leaders of a 200-day timetable, puts the objective of job-creating tax cuts at risk.

The White House and the House of Representatives agree on several features of tax cuts--lower rates on corporations (15-20%), small business (25%), individuals (top rate of 33%), and investment income (dividends, interest, capital gains). They agree on replacing multi-year depreciation with first-year write-off (expensing) of investment.  They agree on repealing the estate (death) tax.  They should wrap these measures up in a bill, with the tax cuts backdated to January 1, 2017, quickly move it through both houses of Congress, and send it to the president for his signature.

That would represent the equivalent of the breakthrough at Omaha Beach.  Thereafter, if it wishes, Congress can debate other aspects of taxation.  But if Congress gets bogged down with such peripheral issues as revenue neutrality and border adjustability, the overriding objective of tax cuts risks being trapped on Omaha Beach facing withering fire from artillery and machine guns.  Failure on tax cuts likely means failure on growth, jobs, and President Trump.

Thursday, February 9, 2017

The Death Of Think Tanks, Part Four

Holding aside the content-producing research fellows, the governance of think tanks consists of (1) a president (director) and his administrative staff, (2) a board of directors (trustees, overseers), and (3) large donors.

Presidents typically come from the political and diplomatic worlds (e.g., outgoing President Strobe Talbott of the Brookings Institution). They exemplify Washington’s revolving door of professional politicians/diplomats going back and forth between government jobs and think tanks or lobbying firms.  Most think tank presidents are part of the broadly defined political establishment.

Boards of directors also come from political establishments, either of the left or right depending on the orientation of a think tank. 

Large donors to think tanks often contribute to political campaigns or causes (environment, poverty, education, etc.).  Many regard think tanks as extensions of political parties.

Those who govern have been around the political block several times, or as President George W. Bush put it, to more than one rodeo.  They are in their element providing administrative and financial support to their elderly fellow counterparts.

Many think tanks have become Senior Citizens Centers of old politicians, diplomats, civil servants, and research fellows—a Closed Circle.  This is not a recipe for adaptation to paradigm changes in politics.

I have been fortunate to live on the campus of Stanford University for over 40 years.  Stanford has been and remains the intellectual center of Silicon Valley, a magnet for students who create billion-dollar firms that transform our lives in important ways, (e.g., communications, medicine, and so forth).  No important hi-tech firm has been started by anyone over 50, unless that firm was the second, third, or fourth in the career of a serial entrepreneur who started at a much younger age.  Those over 35 in Silicon Valley have graduated into the ranks of corporate managers or angel investors and venture capitalists.

Where are the savvy 30-40 year-olds when it comes to running think tanks, creating new agendas, and promoting new ideas?  There aren’t any.  Could it happen?  Not if the think tank industry has its way.  But then, Brexit and Trump happened.  I’m from Missouri, the “show-me state.”  We’ll see.

Wednesday, February 8, 2017

The Death Of Think Tanks, Part Three

Look around at the researchers who staff the ranks of America's leading think tanks.  The vast majority tout their experience in the administrations of presidents Obama, both Bushes, Clinton, going as far back as Reagan.  Many who served with Bush 43 served with Bush 41. Many who served with Obama served with Clinton.

The defining characteristics of these think tankers is their increasing age.  The most prominent are 65 and older, some well into their 80s. There are only a handful of new, young policy superstars in the leading think tanks.

The median age in many think tanks is 70.  Many of these thinkers have not had a new policy idea in decades. Rather, they recycle, refurbish, and repeat previous work, spending much of their time defending policies they promoted decades ago.

There is a new political movement emerging in the West.  Why would Trump, or those hoping to replicate his success in Western and Eastern Europe, look to the old guard for old ideas?

Making matters worse, every day the old wonks tweet, post, blog, speak, give interviews, and write essays denouncing Trump for rejecting their advice and taking America in a new direction.  These critics are not likely to endear themselves and their ideas to Trump.

As I predicted in a previous post, place your bet on Mark Cuban, or some billionaire like him, becoming the Democrat nominee for president in 2020 and/or 2024.  Look for this trend to fill governorships, mayoralties, and state legislatures.  The new breed of candidates will campaign on its real world experience, differentiating themselves from establishment politicians who have spent their lives climbing the political ladder.

A new paradigm is transforming politics.  The train has left the station. You can stand in front of the train and get run over.  You can stand on the platform and wave goodbye.  Or you can get on the train.  The old order will not easily adapt to the third choice.  It will, like the state in Marxist theory, slowly fade away.

Tuesday, February 7, 2017

The Death Of Think Tanks, Part Two

Throughout the presidential election, with the exception of The Heritage Foundation, the overwhelming majority of think tankers across the political spectrum from liberal to conservative vigorously (viciously) opposed Trump.

Since his election and inauguration, these same thinkers, including those working in the traditionally conservative/Republican think tanks, have intensified their criticism of President Trump.  Some thinkers have called for his resignation or hope for his impeachment before his first, and G-d forbid, a second term expires.

Wonder why he does not look to think tanks for policy advice and White House advisers!

Monday, February 6, 2017

The Death Of Think Tanks

The blogosphere is alive with chatter about the possible death of think tanks.  In marked contrast with previous presidents, Trump has not drawn his economic advisers from think tank land.

Through his first two weeks in office, Trump has only appointed one economist with a Ph.D. to his White House team.  He is Peter Navarro, a 67-year old UC-Irvine professor, who supports President Trump's views on trade.  There are 18,000 members in the American Economics Association, of whom between 95-99% disagree with Trump and Navarro's protectionist approach to international trade.

Apart from Navarro, all of Trump's economic advisers come from the worlds of business, investment, and banking. Many are billionaires. Almost all are men.

The blogosphere has become concerned that Trump may not appoint any professional economists to his Council of Economic Advisers, leaving the three positions vacant.  What if he leaves them vacant for two terms?  (Given the extreme far left direction the Democrat Party is taking, Trump in good health will be easily reelected in 2020.)

Janet Yellen and Stanley Fischer's terms as Chair and Deputy Chair of the Federal Reserve Board expire in 2018.  What if Trump replaces them with businessmen (women), rather than economics professors?

What if the Democrats wise up in 2024 and nominate a businessman (women), instead of a politician, as their party's nominee for president? And what if s(he) chooses all his economic advisers from the business community?

The irrelevance of economic research in think tanks could put many of them out of business.  What if Trump appoints business men and women, instead of professors of education, crime, urban studies, and other fields, to other policy positions in The White House?

Think it can't happen?  But then you were sure that Trump couldn't be elected!