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Thursday, November 17, 2016

Clinton's lead now more than a million votes UPDATED

As I explained last week, Donald Trump was elected to the Presidency despite having fewer votes than Hillary Clinton. She has already set a record for the biggest popular vote victory despite losing the Electoral College; according to CNN, she now (11/17/16 5:00am EST) leads by about 1,045,000 votes, roughly twice the margin of Al Gore's victory over George W. Bush in 2000. This equates to 0.8% of the popular vote.

Moreover, Clinton's lead will only increase in the coming days. The CNN infographic cited above shows that only 78% of California's votes (where Clinton leads by roughly 3 million votes) have so far been counted. Her raw vote margin will continue to climb there until the votes are all counted.

People have raised two primary arguments against my position that having the Electoral Vote trump the popular vote is undemocratic. The first takes the view that Trump won under the rules as they are: If the popular vote were determinative, he would have campaigned more in California, New York, Texas, and other population centers, and, in his mind at least, he would have recorded an even bigger victory. The problem for this claim, as Josh Marshall has pointed out, is that Clinton would have also campaigned more in those states. Increasing voter turnout usually improves Democratic electoral fortunes, so electing the President by popular vote means that Democratic margins would increase, not decrease.

The second argument claims that focusing on the Electoral College as the reason for Clinton's loss lets her off the hook for her weaknesses as a candidate and a campaigner. And there is no doubt that she had her weaknesses. The problem with this view is that the existence of the Electoral College is a necessary condition for her to have lost. None of her campaign's other problems would have led her to lose the election if the Electoral College did not overweight the Wyomings of this country relative to the Californias. This structural disadvantage that populous states face is one of the biggest threats to democracy in America. And we've got to do something about it, soon.

Update: It's now over 1.5 million, according to CNN.  California still only has 83% tallied. Some sources have Clinton's lead over 2 million now. Something is seriously wrong with this picture.

Cross-posted at Angry Bear.

Wednesday, November 9, 2016

Need Readers' Advice

Yesterday, a non-plurality of the voters chose a new President. Just like in 2000, the Electoral College is not going to the candidate with the most votes. As this new President has also shown himself to not share our democratic ideals, I find it difficult to have much respect for him. Indeed, I am considering not calling him by his name, ever. But perhaps I am just reacting out of the immediate shock.

Therefore, I am asking you to respond to the poll at the top of the page regarding what I should call him. The choices are: He Who Shall Note Be Named (assuming I get J.K. Rowling's permission); Reality Show Host; his actual name; and Other (please specify). I need a reality check here.

Thanks for taking the time to give your advice.

Election of popular vote loser proves necessity of abolishing Electoral College

For the second time in just 16 years, the new President is actually the loser of the national popular vote (click on "Popular Vote"). This is the fifth time this has happened in U.S. history; the last time it happened prior to 2000 was in 1888. As children, we were all taught to believe in democracy and majority (or as we later learned, sometimes just plurality) rule. But with the way that rural and low-population states are overrepresented in the Senate and, hence, the Electoral College, the United States has persistent problems in achieving democratic outcomes in presidential elections and in passing legislation (the overrepresentation of small states in the Senate is amplified by the use of the filibuster).

As I write this (Nov. 9 at 3:53 EST), Hillary Clinton presently has a 219,000 vote lead, according to CNN (see link above). Yet she has lost the Presidency because low-population states are overrepresented in the Electoral College. How do we avoid such affronts to democracy in the future?

The best, and most straightforward way to do this would be to abolish the Electoral College entirely. This would make it impossible to repeat this travesty again.However, the Amendment process is a difficult one, requiring 2/3 majorities in the Senate and House of Representatives, and approval by 3/4 of the states.

There is an alternative, though it might not be permanent. This is called the National Popular Vote bill, which would take the form of an interstate compact that would come into effect when it was ratified by states wielding at least 270 electoral votes. The concept behind the bill is simple: The states which are members of the compact pledge to award all their electoral votes to the winner of the national popular vote (50 states plus the District of Columbia), rather than the winner of the popular vote in their own state. This would ensure that the popular vote winner also won the Electoral College. However, this solution might not be permanent, if one or more of the signees passed legislation withdrawing from the compact.

At present, states comprising 61% of the needed 270 electoral votes have signed on to the agreement. This is made up of ten states plus the District of Columbia, with 165 electoral votes. A quick glance at the list shows the biggest potential problem: Every one of them voted for Secretary Clinton last night (although it should be noted that the Republican-majority New York State Senate voted in favor of the bill 57-4). Although there is some bipartisan support for the bill, Republicans in other states could decide that keeping the Electoral College is a partisan advantage, making it impossible to get enough states to sign on.

And yet, one of these (or something with equivalent effect) solutions is needed. American democracy is being degraded by our inability to elect as President the candidate with the most votes. It has now happened in two of the last five Presidential elections, and continues to be a threat for the foreseeable future.

Cross-posted at Angry Bear.

Wednesday, October 12, 2016

New study casts more doubt on data center subsidies

A new report by Good Jobs First confirms what has been long-suspected: Data center megadeals of over $50 million in subsidies create very few jobs at a cost per job that easily exceeds $1 million. Indeed, the average for 11 megadeals going to tech giants like Google, Apple, Facebook, and Microsoft came to $1.8 million ($2.1 billion/1174) nominal cost per job.

As I have discussed before, such a figure far exceeds what a typical automobile assembly plant will receive, even though the latter creates far more, and better-paying, jobs than server farms do. An auto facility will receive something around $150-200,000 per job, and it will bring along suppliers to boot (though, unfortunately, sometimes the suppliers will also receive incentives).

The new study finds that by far the most important site location consideration is the cost of electricity and, increasingly, whether the electricity is generated by renewable sources like wind or solar. Thus, many of the biggest data centers are located in states like North Carolina (cheap coal-fired plants), Oregon and Washington (cheap hydropower). States with cheap electricity do not need massive subsidies, but they provide them, anyway.

At least, they usually do. As I have related before, American Express in 2010 announced a $400 million data center in North Carolina, without incentives. But fear not, Amex had not forgotten about using the site selection process as a rent-seeking opportunity. The reason it did not seek incentives, as far as anyone can tell (don't forget about the inherent information asymmetry here), is that the company knew it was going to close a 1900-job call center in Greensboro, which would trigger clawbacks on the data center if it received subsidies for it. So in that case North Carolina gave no incentives for the server farm.

Not only that, Google knows how to build and expand data centers without incentives. Of course, that's in Europe. The Netherlands Foreign Investment Agency confirmed for me that it gave no subsidies to Google for a $773 million, 150-job center opening in Groningen province next year. I was unable to get affirmative confirmation on projects in Ireland, Finland, and Belgium, but none of them show up in the EU's Competition Directorate case database, so presumably they did not receive incentives either.

 The study concludes with sensible recommendations: Transparency where it doesn't exist, capping incentives at $50,000 per job, and knowing when to get out of subsidy auctions for these projects. Maybe simpler still, I would suggest that economic development officials just say no.

Friday, September 16, 2016

That's what I'm talkin' about! (Ireland)

I have argued many times (most directly here) that, contrary to the claims of nearly all Irish policymakers, low taxes are not what makes the Irish economy tick. The country experienced 30 years of low taxes with no gain on average European income; it was only after 1987 that other policy changes (education, EU-funded infrastructure, and Social Partnership) led to gains on the EU average. Thanks to a Tax Justice Network blog post, I now have a great illustration to show this in living color.

The graph below plots Irish income per capita as a percentage of the EU average from about 1955 to 2012, with important dates noted as vertical lines. Notice that Ireland doesn't get above 60-65% until after 1990. In addition, the Commission-enforced increase in the corporate income tax rate from 10% to 12.5%, which took effect in the early 2000s, had no impact on the Celtic Tiger's spectacular rise in income per capita relative to the EU average. This means Ireland had higher growth when the tax rate was 12.5% than when it was 0%!

Q.E.D.



ireland-gnp-graph


Source: Tax Justice Network, link above
Cross-posted at Angry Bear

Tuesday, August 30, 2016

European Commission orders Apple to repay Ireland $14.5 billion in illegal tax benefits

Today the European Commission slapped down tax avoiding Apple and low-road economic developer Ireland with a $14.5 billion state aid repayment order. Yes, you read that right: Apple has to pay Ireland €13 billion in back taxes, plus interest, covering the years 2003-2014. According to the Commission's order, Apple's effective tax rate in Ireland ranged from 1% in 2003 to 0.005% in 2014, far below Ireland's statutory 12.5% corporate income tax rate.

This could not have happened to two more deserving parties. Apple, of course, constantly whines about taxes and is a pioneer in creating the most arcane tax avoidance strategies imaginable, such as the establishment of subsidiaries it claims are taxable *nowhere*.

Ireland has for over 50 years followed a low-road economic development strategy based on low taxes and high investment subsidies. When I interviewed numerous government officials there in 2009, almost all of them (literally, just one exception) were convinced that the country's economic success in the "Celtic Tiger" era (approximately 1990-2007) was due to its low-tax strategy. This argument overlooked the fact that the first 30 years of the strategy's use saw no gain whatsoever on EU average income, i.e., Ireland grew no faster than the average of the first 15 EU Member States (or EU-15, for short). It was only when Ireland used "higher road" strategies -- free high school, building new technological universities, social partnership, and a large infusion of EU-funded infrastructure -- that the country really began to take off.

While it is no surprise that Ireland and Apple reacted angrily to today's decision and will appeal the case to the Court of Justice of the European Union, the reaction of the U.S. Treasury is more puzzling. Basically, as John Judis explains at Talking Points Memo, the United States is defending Apple as a national champion that the Europeans shouldn't be charging additional taxes. Instead, Judis argues, the United States should be cheering on the EU pressure on tax avoidance and apply more of its own.

Critics of the decision argue that the Commission's Directorate-General of Competition has no expertise in tax cases. However, as one of the commenters there pointed out, this is properly a state aid (subsidy) case. Indeed, DG-Competition has been tackling fiscal aid cases such as this for 20 years. It was a previous DG-Competition investigation that in 1998 ruled Ireland's 10% tax rate to be not just a subsidy, but an operating subsidy, i.e., not based on investment but ongoing operations. The Commission really does know what it's doing here.

As a result, Ireland is now under pressure to abandon its well-known tolerance of murky tax arrangements, and Apple is finding itself at risk for aggressively creating tax avoidance gambits. It's a great day for honest taxpayers.

Mike Pence subsidizes offshorers

The Indianapolis Star reports (h/t Greg LeRoy) that the Indiana Economic Development Corporation (IEDC), which is headed by Governor/Vice-Presidential nominee Mike Pence, has given millions of dollars in incentives to companies that have subsequently offshored jobs to countries including China, Mexico, Taiwan, and Japan.

Not only that, but the 10 companies that outsourced the jobs sent more jobs abroad from Indiana, 3800, than their agreements with the IEDC required them to create, 1087. For this, the companies were initially awarded $24 million. Moreover, four of the 10 companies failed to reach their job commitments and were subject to clawbacks and termination of future payments under their agreements.

This is a startling mix of good practices and terrible practices. On the good side of the ledger, the state uses both performance-based incentives and clawbacks. Not only that, the cost per job is quite reasonable compared to most states, a mere 24,000,000/1087 = $22,079 per job.

The fly in the ointment is that Indiana does not measure job creation goals against a company's pre-existing state workforce, but against its workforce at the project site location only. Thus, Vera Bradley added about 30 jobs at its headquarters in the Fort Wayne area while laying off 250 at another Fort Wayne-area facility, and is considered to be in good standing on its incentives. How can I put this charitably? This is idiotic. As we can see, the ten companies ran rings around the IEDC and got $24 million for creating -2713 jobs.

It's not like other states aren't aware of this problem, so why isn't Indiana paying attention? According to one source quoted by the Star, among the states that prohibit what Indiana has allowed are immediate neighbors Ohio and Michigan, near neighbor Missouri, and also North and South Carolina.

To top it all off, IEDC does not make companies' job performance numbers public. (Banging my head on the table...) Thus, it is impossible to independently monitor the performance of subsidy awards. If not for the existence of federal trade adjustment assistance application data, the Star could not have done this study at all. Fortunately, the data were there, and we are treated to one more instance of the widespread underperformance of subsidy recipients.

And remember: Pence is the guy that Donald Trump chose as his running mate.