NDN Blog

Under 45 Year Olds Swing Hard to Dems in VA

While we all plow through the data over the next few days (Prince William 61-38!), we focus today on the dramatic movement in the under 45 vote in Virginia last night. Using the 2016 and 2017 exits, we know that in 2016 the vote split this way:

• Under 45s - Clinton 54 Trump 38 (plus 16)
• 45s and over - 51 Trump 47 Clinton (plus 4)

Last night in VA it was:

• Under 45s - 64 Northam 34 Gillespie (plus 30)
• 45s and over - Gillespie 51 Northam 49 (plus 2)

For 18-29 years olds it went from 54-36 Clinton/Trump to 69-30 Northam/Gillespie; from plus 18 to plus 39. This is a lot of movement, and not a great deal of movement with people 45 and over.

It is our belief here at NDN that Americans under 45, all of whom came of age after the Reagan Presidency and in this new age of globalization which began in 1989, are a key demographic to watch in the years ahead. They went 53-39 for Clinton in 2016 (45s and over went 52-44 for Trump). And in their political lifetime what they have known are two failed Republican Presidents, 2 relatively successful Democratic ones and now Trump. This age cohort is approaching high 40s of the electorate now, and swings like the one we saw last night if replicated in 2018 spell big trouble for Republicans, particularly in parts of the country with many younger voters, places like CA, FL, TX.

More on this soon.

Release: Can't Be for Tackling Opioids While Cutting Medicare, Medicaid and Sabatoging Individual Market

Washington, DC – “While the President’s diving into the opioid crisis is welcome, the President’s efforts cannot be successful if he simultaneously takes hundreds of billions of dollars out of the US health care system through aggressive cuts to Medicare and Medicaid, and sabotages the individual market which is raising costs for tens of millions of people and causing many millions to lose their insurance and access to basic care.

Today the President will be promising to be give the American people more tools to tackle the opioid crisis. He is in fact giving them far less."

-Simon Rosenberg, NDN 

Invite: Thur, Nov 9th - Protecting Our Elections and Politics from Interference

The very openness of American society is being exploited by foreign actors to further their own political ends. To offer up some ideas on what can be done we will hold an event next Thursday, November 9th in the Rayburn House Office Building. Headlining the conversation will be Rep. Adam Smith (D-WA), ranking member of the Armed Services Committee, and primary author of a bill designed to counter Russia’s rising global ambitions, the “Fostering Unity Against Russian Aggression Act of 2017.”

In addition, we have assembled a trio of thought leaders in this emerging space for what will be a spirited discussion. Joining us are:

Amb. Karen Kornbluh, Clinton/Obama Administrations – Karen will talk about the new information landscape facing modern democracies (bio).

Tim Chambers, Dewey Digital – Tim will also talk about the new information landscape but with a particular focus on tackling the challenge of malicious social media bots (bio).

Greg Miller, OSET Institute – Greg will discuss ways we can fortify and modernize our elections infrastructure (bio).

Simon Rosenberg, NDN – Simon will moderate and offer closing remarks (bio).

This important conversation will take place on Thursday, November 9th in Rayburn House Office Building Room 2456 and run from 10:30 to noon. You can RSVP here.

This event is free and open to the public. All are welcome. Feel free to send this invitation on to others you think might be interested. Seating is limited and first come, first served.

Further Readings

As background reading for the event, be sure to check out the following:

Bringing Transparency and Accountability to Online Political Ads, Karen Kornbluh, Council on Foreign Affairs, 10/30/17. The internet makes it easy for political ad buyers to obfuscate their donors and handlers. Despite the challenges, there are significant steps that Congress and social media platforms can take to improve transparency.

A Primer on Social Media Bots And Their Malicious Use In U.S. Politics, Tim Chambers, 9/13/17. This new, compelling paper by long time NDN collaborator Tim Chambers explains what bots are, looks at their malicious use in US politics and offers some ideas on what to do about it in the days ahead. 

Critical Democracy Infrastructure, OSET Institute, September 2017. OSET addresses the criticality of the technology infrastructure of election administration and operation.

Simon on the Great Battlefield Podcast on the Bright Future of the Democratic Party

Simon recently joined Nathaniel Pearlman, host of The Great Battlefield podcast, for an interview about his time in Democratic politics and his thoughts on the future of the party. Simon recounts his time working on the Dukakis and Clinton campaigns, establishing NDN and details the organization's history, and reflects on the state of the Democratic Party – Simon is bullish on the party's future.

Be sure to listen to this fun, inspiring account of Simon's experience in politics. This interview is Episode 57 of The Great Battlefield Podcast, "The state of the Democratic Party – it's not all bleak – with NDN's Simon Rosenberg."

Will Cutting Corporate Taxes Raise Wages?

This essay was posted originally at The Pointwww.sonecon.com

Real disputes among professional economists rarely make their way into political debates. But that’s what’s happened with the issue of whether the Trump administration’s proposal to cut the corporate tax rate from 35 percent to 20 percent would mainly benefit shareholders or workers. Both sides make coherent arguments – but in the end, the evidence supports the proposal’s opponents.

Those opponents start with a traditional tenet of public finance: Taxes on assets are borne by the owners of those assets, so cutting taxes on corporations would mainly benefit their shareholders.

The proponents cite another tenet of public finance: Taxes are borne by those unable to escape them or, in more technical terms, corporate taxes fall on the least mobile factors of production. U.S. multinational companies have shifted substantial capital assets to other countries, from their patents to factories;. But American workers are stuck here. This suggests that much of the burden of U.S. corporate taxes could fall on workers – and consequently cutting corporate taxes should benefit them.

Economic researchers have found support for both tenets, but most of the economic literature has estimated that 70 percent to 85 percent of the burden of corporate taxes falls on shareholders and 15 percent to 30 percent on workers. A 2012 study by the U.S. Treasury – one recently excised from the Department’s website – calculated those proportions at 82 percent for shareholders and 18 percent for workers.

Conservatives insist that globalization has rendered those findings outdated. Citing research by Kevin Hassett, chair of the Council of Economic Advisers (and my friend) and others, they point to strong statistical associations between reductions in corporate tax rates over the last two decades and strong wage gains, especially in Eastern and Western Europe. Their logic is as follows: As U.S. and native corporations sited more production in low-tax countries, those capital investments raised both the demand for and productivity of workers in those places, driving up their wages.

I have no doubt that those findings are correct – but it does not follow that cutting U.S. corporate taxes would drive up investment and the wages of American workers.

First, the studies do not show that U.S. companies invested in those countries to avoid high U.S. corporate taxes. Certainly, the large U.S. software and pharmaceutical companies that transferred the ownership of their patents and copyrights to their Irish subsidiaries did so to elude U.S. taxes – transfers which created very few jobs in Ireland. By contrast, U.S. foreign direct investments that involve building factories and setting up new organizations in other countries occur to serve foreign customers in the regions of those investments. Lowering our corporate tax rate will not change that.

Similarly, U.S. and foreign companies invest here to serve the world’s largest national market. Moreover, taxes are not a barrier, since Congress provides a cornucopia of tax breaks to reduce corporate tax burdens well below 35 percent. According to a 2016 Treasury study, the effective corporate tax burden averaged 22 percent over the period 2007 to 2011. Some of that certainly reflected U.S. companies’ foreign earnings that remain untaxed by the United States. But some industries with few foreign operations also paid below-average rates. For example, the effective tax burden on U.S. utilities and real estate companies averaged, respectively, 10 percent and 20 percent. Right now, then, companies can operate in the United States at an effective tax rate equal to or lower than the administration’s proposal.

In the end, the only real issue is whether the tax proposal would induce U.S. or foreign companies to expand their American operations in ways that raise the demand for and productivity of U.S. workers. We cannot know for certain. Nevertheless, the 2016 Treasury study does provide on-point support for its opponents.

The Treasury found that while the effective corporate tax rate averaged 22 percent from 2007 to 2011, it actually fell substantially over those years — from 26 percent in 2007 to 20 percent in 2011. We did experience four years of strong employment gains from 2013 to 2016, which mainly restored jobs lost in the financial collapse and deep recession. Yet, alas, the falling corporate tax burden did not ignite the surge in business investment and wage gains predicted by the administration’s logic. That’s game, set and match for its opponents.

Column: Make ACA Sign-Ups an Annual Civic Ritual

Today, US News published Simon's latest column, “Make ACA Sign-Ups an Annual Civic Ritual.”  An excerpt –

.....Somewhere around 1 in 12 Americans of any age – about 25 million people – get their health insurance and health care through provisions of the Affordable Care Act. The annual period to sign up for insurance starts on Nov. 1, and it is critical that responsible members of both political parties – but particularly Democrats – commit time and resources to help people sign up this year.

Why is this so important? Because, remarkably, President Donald Trump's administration has taken a series of dramatic steps to make it harder for his fellow citizens to sign up under the health care law this year. It has cut the enrollment window to sign up from 12 to just six weeks, and is spending far less money marketing the enrollment period to the public (TV ad spending is dropping from $100 million to $10 million). Regional directors in the Department of Health and Human Services were told not to participate in outreach events and administrators will take down healthcare.gov on most Sunday mornings during the already shortened enrollment period. It is likely that without a significant push by office holders, community leaders, health care providers and regular citizens, millions of Americans could miss the deadline this year and end up without insurance. It is hard to believe that our government is taking such aggressive steps to make it harder for American citizens to get affordable care – but it is so. And those of us who believe in the ACA, as the law is known for short, should do something about it.

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.

Blame the Economy for Widening Inequality – And Washington for Doing Little about It

This essay was posted originally at The Pointwww.sonecon.com

America’s widening income inequality has become a subtext across most debates in domestic policy. GOP plans to repeal and replace Obamacare failed in large part because virtually every expert warned that the changes would end coverage for millions of people with modest incomes and cut taxes for high-income people. President Donald Trump’s push to cut business taxes will likely meet a similar fate. He shouldn’t be surprised: The populist revolt that helped elect him has been fueled by popular anger over Washington’s incapacity to do anything about how the economy skews its rewards towards those at the top and away from most everyone else.

Ask the right questions, and the income data reveal a great deal about how this inequality took hold over the last 40 years. It is given that the American economy and politics both changed dramatically over this period. But how did each of those forces affect the distribution of incomes? In a new study just issued by the Center for Business and Public Policy at the McDonough School of Business at Georgetown, I used statistical analysis to explore this question. It turns out that we can track the economy’s role in growing inequality by following the changing distribution of all pre-tax income, and then track the role of politics and the government by following the changing distribution of all post-tax income.

It also turns out that the new populists, or at least their feelings, are justified: As economic changes have produced widening income inequality, the government has remained largely though not entirely on the sidelines.

To begin, the data show that rising inequality in the United States began in 1977, and the same data series ends with 2014, giving us 37 years of income information on both a pre-tax and post-tax basis. Over those years, the share of pre-tax national income going to the bottom 50 percent of Americans – that is, not taking account of changes in taxes and government transfers – slumped from 20 percent to 12.5 percent. This was the doing of a changing economy as globalization and technological advances steadily squeezed the wages and working hours of tens of millions of low, moderate and middle-income Americans.

Over the same years, the share of all pre-tax income going to the top one percent of Americans soared from 10.7 percent to 20.1 percent. The economic drivers were the same. In their case, the rapid progress of globalization and new technologies boosted both the returns on capital – think of soaring stock markets – and the compensation of millions of American business executives and professionals.

“Income shares” are economist-speak, so let’s translate them into the average incomes for each group. The results are sobering. The average pre-tax income of the bottom 50 percent of Americans, in 2014 dollars, inched up from $15,948 in 1977 to $16,216 in 2014, for a raise of $268 or 1.7 percent over 37 years. The top one percent lived in a different economy: Their average pre-tax income in 2014 dollars jumped from $424,631 in 1977 to $1,305,301 in 2014, a raise of $880,670 or more than 207 percent.

To see what the government did about all this, we shift the analysis to the two groups’ income shares and average incomes on a post-tax basis. The data show, first, that the government took some steps to soften the blow for the bottom 50 percent of the country and were modestly effective. After taking account of changing tax and spending policies since 1977, the share of all post-tax income going to the bottom half of the country fell from 25.6 percent in 1977 to 19.4 percent in 2014. So, their income share dropped 24.2 percent on a post-tax basis, compared to 37.5 percent on a pre-tax basis.

The difference tells us what the government actually accomplished: Washington managed to offset a little over one-third of the adverse impact of globalization and new technologies for the bottom 50 percent of Americans [1 – (24.2 / 37.5) = 0.355]. Their relief came mainly from government steps to expand the earned income tax credit, broaden access to Medicaid, and provide subsidies for health insurance under Obamacare. Other tax changes made the federal income tax moot for most of this group, but increases in payroll tax rates offset those gains.

Turning to actual incomes, we find that the average post-tax income of the bottom half of the country increased over this period, in 2014 dollars, from $20,390 in 1977 to $24,925 in 2014. That signifies a raise of $4,535 or 22 percent over 37 years – not much, but better than the 1.7 percent gains in average pre-tax income.

Washington has been more solicitous of the top one percent of the country. After taking account of changes in tax and spending policies, their share of all post-tax income jumped from 8.6 percent in 1977 to 15.6 percent in 2014. So, the income share going to the top one percent of Americans increased 81.4 percent on a post-tax basis, compared to 87.8 percent on a pre-tax basis.

Once again, the difference tells us what Washington did: 37 years of tax changes and spending offset about 7 percent of the fast-rising income gains claimed by the top one percent [1 - (81.4 / 87.8) = 0.073]. In more concrete terms, the average post-tax income of the top one percent of Americans increased, in 2014 dollars, from $342,328 in 1977 to $1,012,429 in 2014. That’s a sweet raise of $670,101 or 196 percent over 37 years.

Over nearly four decades, then, Washington demonstrated moderate concern about the declining position of the bottom half of the country while affirming the rising position of those already at the top.

This record tells us it is time to address the real drivers of widening inequality: Shift our focus from half-hearted redistribution to serious economic reforms – aggressive anti-trust for all concentrated industries, for example, and universal access to free retraining at community colleges – that can put average Americans in a better positions to capture the rewards of globalization and technological change. 

NDN in the News: Stories About Present/Future of the Democratic Party

NDN President Simon Rosenberg has recently been quoted in several pieces about the current state and future of the Democratic Party.  While they cover a lot of ground, Simon's argument throughout is the same - we are in the early stages of a new post-Clinton/Obama Democratic Party that will be different from the one we've known for the last generation of American politics.  

Simon has also weighed in quite a bit on this topic in his own writings.  You can a collection of those articles here

Interviews

The state of the Democratic party - it's not all bleak - with NDN's Simon Rosenberg, Nathaniel Pearlman, October 20th, 2017, The Great Battlefield podcast.

The Articles

In 2020, Julián Castro could be one of 30 or more Democratic presidential candidates, Bill Lamrecht, November 11th, 2017, San Antonio Express-News.

Democrats rising? Early statehouse wins test new faces, Letitia Stein, October 12th, 2017, Reuters.

The Democrats' Pipeline Problem, Ronald Brownstein, October 12th, 2017, The Atlantic.

Democrats Tiptoe Around Universal Basic Income, Haley Byrd, October 2nd, 2017, Independent Journal Review.

What Do Centrist Democrats Even Stand For? Graham Vyse, September 18th, 2017, The New Republic.

With anti-'Dreamer' base outraged, Trump keeps adding to the confusion, Joe Garofoli and Hamed Aleaziz, September 14th, 2017, San Francisco Chronicle.

Democrats Must Take a Shot at Texas, Francis Wilkinson, September 12th, 2017, Bloomberg.

Democratic infighting between establishment, progressives sweeping the country, John Wildermuth, September 2nd, 2017, San Francisco Chronicle.

Could Arizona Be An Important Presidential Battleground in 2020, Mark Brodie, August 25th, 2017, KJZZ 91.5.

Veterans lining up for the Democrats in congressional races, Bill Lambrecht, July 17th, 2017, San Antonio Express-News.

If you would like to read additional articles on the topic, be sure to check out our backgrounder, "Future of the Democratic Party."

The Three Choices for Tax Reform

This essay was posted originally at The Point, www.sonecon.com

Trump administration officials and GOP leaders in Congress are still putting together their tax plan. Nevertheless, the early signs point to decisions that could sink the project or produce changes that would jeopardize economic growth.

Congress can approach changing the corporate tax in one of three ways. It can try to simplify the code, it can reform it, or it can cut it back. The GOP’s current approach appears to start with simplification. Simplifying the corporate tax normally means phasing out a package of tax preferences for particular industries or business activities, and using the revenues to bring down the current 35 percent tax rate to 28, 25 or even 20 percent. This model shifts the burden of the tax among industries but not among income groups, since shareholders continue to bear most of the burden. Such simplification can also attract bipartisan support and produce real economic benefits. At a minimum, it lowers tax compliance costs for most businesses; and if it’s done thoughtfully, it can increase economic efficiency. To be sure, any efficiency benefits will be marginal unless the simplifications are fairly broad and sweeping.

The record also shows that serious tax simplification is very hard to achieve. Support from President Obama and congressional GOP leaders wasn’t enough to advance it in 2014, for the simple reason that most companies prefer their tax preferences to a lower tax rate. They’re not wrong economically: The Treasury calculated in 2016 that tax preferences lower the average effective corporate tax rate to 22 percent, and companies in many industries pay substantially less. Why give up those preferences for a 28 or 25 percent rate? A 20 percent rate could solve the problem for most industries, if anyone had a plausible way to pay for it. Of course, financing a deep rate cut was the border adjustment tax promoted by Speaker Paul Ryan, and which the White House and big importers and retailers quickly squashed.

The second option is genuine reform, where Congress changes the structure of the corporate tax. Economically, the most promising reform would give U.S. companies a choice of tax treatments when they invest in equipment. They could deduct the full cost of those investments in the year they make them (“expensing”) while giving up the current deduction for interest on funds borrowed to finance the investments. Or they could stick with the current depreciation system for their investments, including the deduction for interest costs. If enough companies choose the first route, as they likely would, this reform would spur investment and sharply reduce the tax code’s nonsensical bias towards financing business growth with debt rather than equity. Such a structural reform would make sound economic sense. It also seems as unlikely as serious simplification, because it foregoes the pixie dust of marginal tax rate cuts that GOP supply-siders demand.

That leaves the Trump administration and Republican leaders with option three: Cut the corporate tax rate without paying for it. The President seems to favor this approach. He has called repeatedly for slashing the corporate rate to 15 percent, a multi-trillion dollar change, and paying for a small piece of it by limiting a few personal tax deductions for higher-income people. It’s also catnip for GOP supply-siders who continue to proclaim that a deep rate cut will boost economic growth enough to pay for itself. We’ve tried this t several times already, so we now have hard evidence to evaluate those claims. The actual record shows, beyond question, that such turbo-charged dynamic effects do not occur. The most recent example is George W. Bush’s 2001 personal income tax cuts. His “success” enacting them produced huge deficits and ultimately contributed to the financial collapse that closed down his presidency.

A largely-unfunded cut in the corporate tax rate in 2018 would boost corporate profits as well as budget deficits, but it won’t increase business investment, productivity or employment. Prime interest rates in this period have been lower than at any time since the 1950s, so companies have had easy and cheap access to funds for investment for years. At a minimum, this tells us that there’s no real economic basis to expect businesses to use their windfall profits from a big tax cut to expand investment.

Instead, they’re likely to use some of their additional profits to fund stock buy-backs. The rest will flow through as dividends and capital gains, mainly for the top one percent of Americans who hold 49.8 percent of stock in public companies, and the next nine percent who own another 41.2 percent of all shares. Those lucky shareholders will use much of their windfall gains to buy more stock; and coupled with the corporate stock buy-backs, the boost in demand for stocks will pump up the markets. To be sure, those shareholders will also spend some of their unexpected gains, which will modestly stimulate growth. Once that stimulus dissipates, as it will fairly quickly, the ballooning budget deficits will drive up interest rates and slow the economy for everyone else.

The worst scenario is that large, deficit-be-damned cuts in the corporate tax rate could produce a stock market bubble that could take down the economy when it bursts. The good news is that the current Congress would never enact it. The odds of Democrats supporting Donald Trump on a tax plan to make shareholders richer are roughly the same as winning the Powerball; and the certainty of soaring budget deficits should scare off enough conservative Republicans to sink the enterprise.

A Primer on Social Media Bots And Their Malicious Use In U.S. Politics

This full paper is in PDF format, and can be found through the links in the text below or at the bottom of the page. 

Tens of millions of malicious bots – automated accounts programmed to tweet or post in a manner masquerading as humans – infest our social media platforms, and many are being used deceptively for political purposes. These “computational propaganda” accounts fake petition signatures, skew poll results, sow discord and spread falsehoods. In doing so, they pose a serious danger to democracy.

They’ve been deployed by Russia and others to influence the 2016 U.S. presidential election, the Brexit vote, the 2017 French election and more. As America approaches the 2018 and 2020 election seasons, the threat will only grow – weaponized social bots will become more convincing and harder to detect.

To help those in the political arena better understand this new phenomenon, NDN is proud to release a new paper, "A Primer on Social Media Bots and Their Malicious Use in US Politics." Written by our long time collaborator Tim Chambers, this paper lays out in plain, simple English what bots are, how they are being used, and some ways we can together combat their impact in the days ahead.

Especially as we approach the 2018 and 2020 elections, it is critical that we understand and counteract this threat now, or we will lose this new form of information war. We must develop more and better technological defenses. We must demand that our social networks build for the good of the countries they act in, not just for their own profits. And we must adopt laws and policies that protect our democracy while safeguarding social media’s enormous potential to enhance the democratic process. This compelling new paper offers some early thinking on how we may want to approach taking on the bots. Please let us know what you think of it, and feel free to share with others you think might be interested.

Update: Since publication of the paper, Simon and Tim were quoted in this Yahoo Finance piece, "Maybe Facebook and Twitter should be regulated like TV".

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