Deep in Trump Country, a Big Stake in Health Care – Part One

Mountain Home, a small town in Arkansas, a state that overwhelmingly voted for Donald Trump in the last election, finds itself in the uncomfortable situation of being heavily dependent on the Affordable Care Act both for its health care services and for local employment. If the President’s current proposals were  carried out, half the town would be out of work and many would lose their health insurance.

Because of the article’s length, we are presenting it in three parts.

health-effect-slide-US1K-jumboBaxter Regional Medical Center is the largest employer in Baxter County, with a payroll of roughly 1,600.

MOUNTAIN HOME, Ark. — Marjorie Swanson was the first in the family to get a job at Baxter Regional Medical Center after moving to this rural Ozark town from Chicago’s South Side in 1995.

A year later, her husband was hired by the maintenance department. Six months ago, their daughter snagged a job as a pharmacy technician and shares the night shift with her fiancé, who works in housekeeping. Their son started in 2013 as a biomedical technician, repairing medical equipment. He was introduced to his wife by two nurses there: one who is now his mother-in-law and Beverly Green, an aunt through marriage.

“Without our hospital, I’d probably be working at McDonald’s,” said Ms. Green, who was born at the medical center 47 years ago and has worked there for the past 27, first as a nursing assistant, and now as a manager. “Almost everyone has someone related here.”

Samuel Bradley, 7, on the white River near his family’s property in Arkansas. His father, Dr Lucas Bradley, a neurosurgeon, took a job in the area because he and his wife wished to raise their family in a small town.

That’s not surprising in Baxter County, in a part of northern Arkansas known for two dragon-shaped fishing lakes filled with largemouth bass, walleye and bream. The hospital is the single largest employer, with 1,600 people paid to mop floors and code insurance forms, stitch wounds and perform open-heart surgery.

“We are the economic anchor of the community,” said Ron Peterson, Baxter Regional’s president and chief executive. “When we downsize, the whole community downsizes.”

So for residents of the nearly all-white county, who overwhelmingly voted for President Trump, the fight over the Affordable Care Act is about both lives and livelihoods, access to care and to jobs. And the cloud that remains over the law’s future is unsettling.

Even after the latest Senate effort to overturn the bill collapsed last month, Republicans insisted that the failure was not the final word on the matter for this Congress. “At some point there will be a repeal and replace,” Mr. Trump declared. In the meantime, he has moved to scrap subsidies to insurance companies that help cover low-income people and signed an executive order permitting policies exempt from some of the act’s coverage rules — actions that supporters of the law say will gut it.

Whatever happens, the economy of every state will be affected. Across the country, the health care industry has become a ceaseless job producer — for doctors, nurses, paramedics, medical technicians, administrators and health care aides. Funding that began flowing in 2012 as a result of the Affordable Care Act created at least a half-million jobs, according to an analysis by Goldman Sachs.

In many rural areas, where economies are smaller and less diversified, the impact is magnified. Health care has long been an economic bedrock in Baxter County, with a population of 41,000. But its significance has grown since the Affordable Care Act passed. The hospital alone has added 221 employees, a 16 percent increase, since 2011. The health sector accounts for one in nine jobs nationwide, but one in four here — roughly equal to the share employed by the county’s manufacturers and retailers combined.

“I’m optimistic about the economy, but I’m not optimistic about this health care reform,” Marjorie Swanson said. Like many of her co-workers and neighbors, she dislikes parts of the law that President Barack Obama championed. But she also knows that undoing it now would reduce both the number of insured patients and the government payments that keep the hospital afloat.

One of 31 states (plus the District of Columbia) that chose to extend Medicaid coverage, Arkansas got extra money to cover more low-income residents. Its adult uninsured rate dropped 12.3 percentage points, more than nearly every other state.

Losing that Medicaid money now might not put Baxter Regional out of business, but it could compel the independent, nonprofit hospital to merge with a larger system and cut back its services and work force. And that could be as devastating as slashing jobs at a steel plant in a factory town.

Gathered in a conference room at the hospital between shifts, many in the extended Swanson clan, dressed in a rainbow of blue, red and maroon scrubs, said the law needed to be fixed, not scrapped. And they primarily blamed a corrupt Washington establishment — not Mr. Trump — for failing to do so.

“It’d be like getting a new job as a manager here and every single person is against you,” Ms. Green said of Mr. Trump. She grew up in a family that leaned Democratic, and she supported Bill Clinton, then the state’s governor, for president in 1992, but said she didn’t trust Hillary Clinton.

Still, she is anxious about how Republican-led changes in health care could affect her job. “Probably we’d have to move,” said Ms. Green, whose husband is a firefighter. “But where to go? My whole family’s here. There’s no one who comes for a holiday from somewhere else.”

Ms. Swanson, 52, nodded. “We’d have difficulty getting a job with insurance,” she said. “And where would we get our care?”

Hospitals in rural areas have long struggled financially, but over the past decade the rate of closings has grown steadily. As young people gravitate to urban centers for college and employment, populations have dwindled, and those left behind are often poorer, sicker and less apt to have health insurance.

A patient being wheeled to a medical evacuation helicopter at Baxter Regional Medical Center in Mountain Home, Ark. The center offers an uncommon range of services for a rural acute-care hospital.

Baxter Regional, serving a county seat that is a retirement destination, is in a stronger position than most of the nation’s 2,500 rural acute-care hospitals. It offers neurosurgery and an emergency cardiac catheterization lab, the state’s first 3-D mammograms and magnetic resonance imaging. Still, it exists on a financial knife edge even as it helps prop up the local economy. The average operating margin began dipping below the break-even point in 2006 and has hovered near there since.

To be continued

Leaving a Life in the Coal Mines – Part Four

This posting completes the blog on the retraining of coal workers in West Virginia and Wyoming for useful new occupations in a surprising way—as bee-keepers!

Sean Phelps in beekeeping gear at Camp Lightfoot in Hinton, W.Va. A nonprofit group is converting the former summer camp to honey production to help displaced coal workers. Credit George Etheredge for The New York Times.

By DIANE CALDWELL, Oct. 1, 2017 for The New York Times

 ‘This Is Bee Paradise’

HINTON, W.Va. — “Solar’s not going to be everything, and one of the big challenges for the state is how do we diversify and get lots of cool stuff going,” Mr. Conant, the Solar Holler founder, was saying as he drove from a solar installation at a hilltop farmhouse toward a 1940s summer camp that the local coal company provided for the children of its employees until 1984. “When you’ve been a one-industry town for a really long time, that’s an issue. The last thing we would want to do is pin our hopes on doing that again, just with some other technology.”

After winding down a road canopied by emerald-green trees, he passed the opening of the Great Bend Tunnel, during whose construction in the 1870s, as one legend tells it, the African-American folk hero John Henry beat a steam drill in opening a hole in the rock, only to die from his efforts. Minutes later, Mr. Conant came to Camp Lightfoot, which a nonprofit organization, Appalachian Headwaters, is turning into an apiary with an eye toward helping displaced coal workers and military veterans get into the honey business. Early next year, Mr. Conant plans to install solar panels on an old gymnasium, which now holds racks of wood frames for the hives.

Deborah Delaney, an assistant professor of entomology and wildlife ecology who oversees the apiary and bee program at the University of Delaware, said the area was well suited for a honey enterprise. It is largely forest, unsullied by the pesticides that threaten the insects in industrial farm areas, and it has plant species like black locust and sourwood whose honey can fetch a high price.

“This is bee paradise,” she said, sitting on the porch of the cafeteria building where a Patriot Coal banner hung askew on one wall. For now, Ms. Delaney and the program’s staff are getting the colony established on a hillside in 86 hives that buzz away behind electrified wire fencing to protect them from bears. Next spring, they plan to distribute about 150 hives to 35 beekeepers either free or through a low- or no-interest loan. Come harvest time, the beekeepers would bring their honey-laden frames to the camp for extraction and processing; organizers would pay them for their yield and then sell the honey to support the program.

“For some people it might be a side hustle, but for other people it could really turn into, over time, a true income that could sustain a family,” said Kate Asquith, program director at Appalachian Headwaters.

Economists say this kind of diversification is important, especially in a region where coal is unlikely to make a major comeback, even if Trump administration policies are able to foster a revival elsewhere. Demand is strongest for the low-sulfur coal from the Powder River Basin straddling Wyoming and Montana, rather than what Appalachia produces. The new-energy industries cannot replicate what coal once did, economists say. Long-term jobs at the Wyoming wind farm would number in the hundreds at best, while the solar program thus far trains only 10 workers each year.

Even a coal boom wouldn’t create jobs the way it used to: like the steam drill that ultimately took John Henry’s place, new equipment and technologies have replaced workers in heavy industries. Production of coal, for instance, increased over all from the 1920s until 2010, while the number of jobs dropped to 110,000 from 870,000.

So interest in the bees has been high here. “Thought it was weird at first — bugs in a box in the backyard,” said Sean Phelps, 27, who left a secure job as a school janitor to work with the bee program. Exposure to his father-in-law’s hives changed his perspective. Now he sees them as a way to help the area, as well as fun. “This is what I want to do,” he said. “Whenever you’re out in them, it reduces a lot of stress.”

This concludes this article on retraining coal miners.

Leaving a Life in the Coal Mines Behind – Part Three

We continue the series from The New York Times on the retraining of former coalminers from Wyoming for jobs in alternative-energy.

By DIANE CALDWELL, Oct. 1, 2017 for The New York Times

A View Most Never See

SHAWMUT, Mont.— “You get a view that most people will never see,” as Lukas Nelson, 27, a site manager in Ohio, put it in one of the company’s promotional videos. Only a few towers have elevators, and at Goldwind’s power plant here, the access is by a series of 90-degree aluminum ladders and steel mesh platforms, straight to the top.

It was Saturday morning after the three seminars, and Goldwind safety managers had delivered a brief lecture in a trailer that served as the farm office, warning of perils like rattlesnakes in the tall grasses outside and electrocution from throwing switches in the towers.

The organizers separated the crowd of about 20 into two groups. One would take a tour of the wind farm and substation while the other climbed towers whose blades sat idle. After lunch, they would switch.

In front of the trailer, Chancey Coffelt, 33, Goldwind’s regional safety manager, was showing the climbing group how to put on harnesses — a network of heavy metal clips and rings attached to straps that thread over the shoulders, across the chest and around each thigh. They would latch onto a rope pulley system as they climbed each of four ladders and then hook into a bracket as they reached each platform before freeing themselves from the pulley.

Mr. Davila, the 20-year mine veteran, was standing with members of the second group, chatting about Wyoming’s wobbly energy economy and how wind might — and might not — steady it. “A lot of coal miners don’t like wind or solar, but you need them all,” Mr. Davila said. “It’s like a puzzle you have to solve: just think about how many things we plug in.”

Still, many of the men expressed concern over what the jobs would pay, saying the salaries paled in comparison to what they could earn on an oil rig, for instance.

“It’s so easy to get a six-figure job in the oil industry,” Jesse Morgan, a baby-faced 31-year-old city councilman and back-office worker at a drilling services company, had said over beers at a bar in Casper where he was asked to show ID. “You get addicted to that money.”

But it could be worth taking a pay cut to get out from under the stress of constantly planning for the next layoff, and being able to return home at night rather than working 30- to 40-day stints offshore. The oil field never stops, Mr. Morgan said of his time on the rigs. “It’s 24/7 — you miss birthdays, every holiday.”

As with the other men, Mr. Morgan’s work experience made him an attractive candidate for Goldwind. Accustomed to the industrial behemoths of fossil fuel production, he is familiar with the environment, equipment and procedures of working safely while surrounded by danger — like remembering to fasten the chin strap on a hard hat so it won’t slip off and injure a colleague laboring hundreds of feet below. . .




Interrupted by a Storm

It was after lunch, and Mr. Davila and Mr. Morgan were at the base of one of the wind towers, wearing heavy harnesses and waiting for the first group to finish so they could start the climb. Suddenly, Jason Willbanks, 39, who lost a job as an electrician with a coal company and now drives crews to and from their shifts on coal trains, emerged from within. Walking heavily into the blazing sunlight, he clattered onto the metal platform and stairs. Asked how he was, he shot back: “Sweating like a fat guy at an all-day dance.”

As he pulled off the harness, dropped to his knees in a patch of shade on the grass and rolled onto his back, Mr. Davila offered him a bottle of water from a cooler. “You’ve earned it,” he said.

Not long after, word came from the Goldwind crew: A thunderstorm was heading toward the farm, so the second group could not climb.

“I feel like I’m all dressed up with nowhere to go,” Mr. Davila said, disappointed, gesturing toward the harness. “I wanted to see if I could get up.”

“You’ve just witnessed what it’s like to be a wind-turbine technician,” Mr. Coffelt, the safety manager, said, cocking an ear over one shoulder and suggesting that the group move away from the rattlesnake he had heard. “Imagine if you’re one or two stacks up when you get that alert: right back down we come.” After weighing options, the Goldwind organizers called it a day, offering repeated apologies and promises to get the men back to the site which, over the following months, they did.

Mr. Morgan, who posted a beaming selfie from atop the turbine on Facebook, did not apply for the training program. But Mr. Davila did, and was accepted.

He is torn over whether to enroll, he said. He is desperate for the work but hesitant to leave his wife and home in Gillette, where he has lived since he was 6, for one of the jobs immediately available outside the state. Still, he added with a chuckle, it might be good to move: “Maybe there’s more to the world than Gillette.”

To be continued

Leaving a Life in the Coal Mines Behind – Part Two

This is the second part of a four-part article on alternative-energy jobs for out-of-work coal miners in Wyoming and West Virginia.

By DIANE CARDWELL, Oct. 1, 2017 for The New York Times

Hands-On Practice

HUNTINGTON, W.Va. — Coal mining was already dead in Crum, a town of less than 200 just this side of the Kentucky border, by the time Ethan Spaulding, 26, graduated from high school, he said. That dashed his hopes of becoming a roof bolter, helping stabilize the ceilings of mine tunnels. “You don’t even have to have a high school diploma to go to the coal industry,” he said, “and you can start making $150,000 a year.” Or perhaps you once could.

Mr. Spaulding was standing near the railroad tracks at the edge of town where trains move coal out of the region, behind a dilapidated brick building that once housed a high-end suit factory. It is becoming a hub for the family of social enterprises that Coalfield Development leads, which include rehabilitating buildings, installing solar panels, and an agriculture program that grows produce and is turning an old mine site into a solar-powered fish farm.

Corey Adkins, 32, in the greenhouse at Coalfield Development’s West Edge Factory in Huntington, W.Va. The greenhouse is part of an agriculture program that is to include a solar-powered fish farm. Credit George Etheridge for The New York Times

Wanting to stay in Crum, Mr. Spaulding went through the solar program Coalfield runs with Solar Holler, which offers its participants a two-and-a-half-year apprenticeship. He is now a crew chief at the training center, overseeing the renovation of a larger classroom inside the building. Though he is optimistic that he can eventually reach his target income in the solar industry, the installation jobs for which the trainees will ultimately qualify generally pay far less — $26 an hour, on average, nationally.

And yet there is keen interest. For David Ward, 40, managing installations at Solar Holler helps repay the student loans he ran up pursuing a degree in counseling — a growth industry in a state reeling from opioid addiction. An electrician, he said he was “interested in the idea of making your own power and the environmental impact.”

The program is the brainchild of Brandon Dennison and Dan Conant, two West Virginians who wanted to help develop a sustainable economy in the state. Mr. Dennison, 31, started Coalfield Development in 2010; it grew out of a volunteer effort to build low-income green housing. Mr. Conant, 32, had worked on political campaigns, including Barack Obama’s first presidential contest. After becoming involved in the solar industry, he concluded that rooftop solar development, with its individual, decentralized nature, could combine the door-to-door approach of political campaigning with a technology to fight climate change.

He completed the first Solar Holler project — putting panels on the Presbyterian church in his hometown, Shepherdstown, on the Potomac River — and, quickly overwhelmed with demand for similar installations, realized the state didn’t have a work force to handle it. So he formed a partnership with Mr. Dennison’s organization to develop one. At Coalfield’s facility here, participants learn how the arrays create electricity and connect to the power system, but they also get practice installing panels on a shed behind the main building. That helps them clear one of the basic industry hurdles: becoming comfortable working on a roof.

Installing a solar panel on the roof of a house in Lewisburg, W.Va. Credit George Etheredge for The New York Times

To be continued

Leaving a Life in the Coal Mine Behind – Part One

Coal Mining081

Our readers will be happy to learn that there  are people interested in the retraining of out-of-work coal miners. It restores one’s faith in the American spirit to read that  jobs that suit them may be available to these unemployed workers. As the state sheds coal jobs, local businesses and nonprofit groups are trying to create work in fields like alternative energy. Miners may have just the skills for scaling wind towers and putting solar panels on roofs. And that’s no small thing in Wyoming and West Virginia.

Since this article from The New York Times is almost 3000 words long, we will present it in four separate postings.

By DIANE CARDWELL, Oct. 1, 2017 for The New York Times

From the mountain hollows of Appalachia to the vast open plains of Wyoming, the coal industry long offered the promise of a six-figure income without a four-year college degree, transforming sleepy farm towns into thriving commercial centers.

01retrain3-superJumboStudents playing soccer near a coal-fired power plant in West Virginia. Credit George Etheredge for The New York Times 

But today, as King Coal is being dethroned — by cheap natural gas, declining demand for electricity, and even green energy — what’s a former miner to do?

Nowhere has that question had more urgency than in Wyoming and West Virginia, two very different states whose economies lean heavily on fuel extraction. With energy prices falling or stagnant, both have lost population and had middling economic growth in recent years. In national rankings of economic vitality, you can find them near the bottom of the pile.

Their fortunes have declined as coal has fallen from providing more than half of the nation’s electricity in 2000 to about one-third last year. Thousands of workers have lost their jobs and moved on — leaving idled mines, abandoned homes and shuttered stores downtown.

Now, though, new businesses are emerging. They are as varied as the layers of rock that surround a coal seam, but in a twist, a considerable number involve renewable energy. And past jobs in fossil fuels are proving to make for good training.

In Wyoming, home to the nation’s most productive coal region by far, the American subsidiary of a Chinese maker of wind turbines is putting together a training program for technicians in anticipation of a large power plant it expects to supply. And in West Virginia, a nonprofit outfit called Solar Holler — “Mine the Sun,” reads the tagline on its website — is working with another group, Coalfield Development, to train solar panel installers and seed an entire industry.

Taken together, along with programs aimed at teaching computer coding or beekeeping, they show ways to ease the transition from fossil fuels to a more diverse energy mix — as well as the challenges.

Absolutely No Catch

GILLETTE, Wyo. — John Davila, 61, worked for 20 years at Arch Coal’s Black Thunder Mine in Eastern Wyoming, a battered titan from an industry whose importance to the region is easy to see — whether in the sign in the visitors’ center window proclaiming, “Wyoming Coal: Proud to Provide America’s Energy,” or in the brimming train cars that rumble out of the Eagle Butte mine on the outskirts of town.

But in April last year, at a regular crew meeting in the break room, he was among those whose envelope held a termination notice rather than a work assignment. “They called it a ‘work force reduction,’” said Mr. Davila, whose straight, dark ponytail hangs down his back. “Nice way to put it, but it still means you’re out of a job.”

So a summertime Thursday morning found him, along with a couple of dozen other men and women, in a nondescript lecture room at a community college, learning how a different source of energy, wind, might make them proud, too.

The seminar was the last of three that week organized by Goldwind Americas, which is ready to provide as many as 850 giant wind turbines for a power plant planned in the state. The company was looking for candidates, particularly unemployed coal miners like Mr. Davila, to become technicians to maintain and operate the turbines.

Watching a video at a Goldwind America seminar in Gillette, Wyo. The company recruits potential technicians to maintain and operate turbines at a power plant planned in the state. Credit George Etheredge for The New York Times

The program, which is to teach the basics of wind farm operation, maintenance and safety over two weeks in October, would cost the participants nothing but their time, organizers said. Those who wanted to test their potential would have a chance to climb a 250-foot tower that Saturday at a farm Goldwind owns in Montana. And if they completed the full program, they would have certifications that could open the door with any employer they chose.

“There’s absolutely no catch – you don’t like me, you don’t like Goldwind, that’s O.K.,” David Halligan, the company’s chief executive, told an even larger crowd in Casper the day before. “There’s going to be opportunity across the country.”

It is a message of hope that has been in short supply, especially after the loss of more than 1,000 jobs in the region and the bankruptcies last year of three major producers. But while coal’s prospects have been dying down, wind development is poised to explode in the state, which has some of the world’s strongest and most consistent winds. And while coal mining jobs have fallen to historic lows nationally in recent years, the Bureau of Labor Statistics predicts that wind-energy technician will be the fastest-growing occupation, more than doubling over the next seven years.


Though most of the coal jobs lost last year have since returned as companies have emerged from bankruptcy, the insecurity surrounding the industry remains. “It’s been a little scary when you’ve got people all around you getting laid off,” Brandon Sims, 37, an Air Force veteran who works for an explosives company that serves the mines, said outside the lecture room. “You never really know when your day to get the pink slip is.”

To be continued

Why Corporate Tax Cuts Won’t Create Jobs

In today’s New York Times we discovered this opinion piece by a young American entrepreneur that exactly mirrors our own, so we are posting it. Thomas Picketty in his definitive work on economic inequality,  Capital in the Twenty-First Century, has said essentially the same thing, and we have quoted him on it several times. But we thought you might like to hear it from an American who has been in the trenches of American business.

In the coming weeks we will hear the opposite position expressed again and again by politicians and the Administration as a major reason for their proposed tax cuts. Don’t believe them.


By MARCUS RYU, Oct. 9, 2017 for The New York Times

The tax cut framework recently put forward by President Trump relies on a central claim: that reducing taxes on corporations and wealthy individuals will open the wellsprings of entrepreneurship and investment, turbocharging job growth and the American economy. Were this premise true, reasonable people might countenance giving a vast majority of benefits to the very rich, as Mr. Trump’s plan does, in exchange for greater prosperity for all. But it’s not.

I am what certain politicians call a “job creator.” Two recessions ago, in 2001, five partners and I founded a software company in Silicon Valley. After great difficulty and great good fortune, that company grew to serve customers in over 30 countries, generating over $500 million in annual revenue and employing more than 2,000 professionals in high-skilled, high-paying jobs — a large majority of them in the United States. Today I am the chief executive of that company, Guidewire Software, valued on the New York Stock Exchange at over $5 billion.

As an entrepreneur myself and a friend to many others, I know that lower tax rates will not motivate more people to start companies. People start companies for many reasons: a compelling idea, ambition for fame and fortune, a desire to be one’s own boss, frustration with one’s employer. I have never heard someone say, “I would have started a company, but tax rates were too high” or “I wouldn’t have started this company, but then George W. Bush cut tax rates, so I did.”

While I can imagine tax regimes that would create disincentives for entrepreneurship, we don’t have that situation today in America, where tax rates on capital gains (the primary way that founders of successful start-ups make money) are already far lower than rates on ordinary income. Indeed, some of the most admired entrepreneurs — Bill Gates, Steve Jobs, Jeff Bezos — started their companies under significantly higher tax regimes. This is consistent with empirical research; the economists Robert Moffitt and Mark Wilhelm, for example, found that the large cuts in marginal tax rates in 1986 did not induce high-income men to work longer hours.*

The job-creation reasoning is equally specious when applied to the behavior of existing companies. As Warren Buffett notes, “I have yet to see” anyone “shy away from a sensible investment because of the tax rate on the potential gain.” My team and I are already intensely motivated to expand the company we manage, and lowering the corporate tax rate isn’t going to make us create jobs any faster.

What a tax cut would do is increase our post-tax profitability, which effectively transfers money from the federal government to our shareholders. One consequence of this would likely be a one-time increase in our stock price, but with no impact on our operations or employment plans. In theory, this could have the benefit of making it easier to raise cash by issuing more stock to the public, but with interest rates at historical lows for years, American corporations have had no trouble getting capital.

In other words, if we are serious about growth, competitiveness and job creation, we should look elsewhere besides the tax code for answers. We can remain open to immigrants in search of better economic opportunities. We can invest in our public schools and universities. We can upgrade vital business infrastructure such as airports, land transportation systems, the internet backbone and our power grid. We can heighten our vigilance about anti-competitive behavior and regulatory capture by very large corporations that make it difficult to start new businesses.

There have been two recurring themes in my conversations about the tax-cut proposal with my Silicon Valley business peers, both Republican and Democrat. The first is derision about the shoddy business reasoning: Well-run companies don’t just spend recklessly with no plan or intention to stop if revenues don’t come in as hoped. But this is exactly what the tax-cut proposal does by wishing away huge tax-revenue shortfalls with stupendous growth projections. The second theme is shoulder-shrugging — after all, didn’t voters effectively ratify an agenda of tax cuts favoring the very wealthy?

I’m not sure, but I choose to believe not. By 2027, when they are fully phased in, four out of every five dollars in proposed tax cuts will flow to the top 1 percent, an egregious wealth transfer to those who least need it.

I am an entrepreneur and a businessman, but I am also a citizen. I believe tax cuts that deepen our already severe inequality in income and wealth are not in the long-term interests of any citizens, not even the very wealthy. Extreme inequality is corroding our civil society, poisoning our politics, and undermining our effectiveness as a nation. This is an extremely hard problem to solve, but when you’re in a deep ditch, the first thing to do is stop digging.

Marcus Ryu is a co-founder and the chief executive of Guidewire Software, a maker of software for the insurance industry.

*Quoted from  Robert Moffitt and Mark Wilhelm,  Does Atlas Shrug? The Economic Consequences of Taxing the Rich ( published 2000):

“A long standing issue in the effects of taxation concerns whether labor supply, most commonly measured by hours of work, responds to taxation. We have examined whether high-income men—the rich—so respond. High-income taxpayers are often thought to have more opportunities to respond to tax law changes and have greater incentive to do so because of their high marginal tax rates. Our analysis of changes in the hours of work of such men between 1983 and 1989, in response to the marginal tax rate reductions legislated in the 1986 Tax Reform Act**, find essentially no evidence of any such response. We speculate that this is partly a result of the fact that these men are already working such long hours (often more that three thousand per year) that there is little remaining opportunity for response.”

**1986 Tax Reform Act: under President Reagan, the top tax rate for individuals for tax year 1987 was lowered from 50% to 38.5%


Tax Cuts Don’t Produce Growth—They Widen The Gap Between Rich and Poor

With regard to the proposed Republican tax cuts, which economist do you believe? Read the article below from today’s New York Times and take your choice.  Our money is on Piketty. He’s the only solid non-partisan, whose perspective on economic history extends to the pre Revolutionary France. The other economists referenced here appear to be simply adjusting their findings to whomever they are serving.

By EDUARDO PORTER, Oct. 4, 2017 for The New York Times

It is a little unsettling that the intellectual underpinning of tax policy in the United States today was jotted down on a napkin at the Two Continents Restaurant in Washington in December 1974.

That was when, legend has it, Arthur Laffer, a young economist at the University of Chicago, deployed the sketch over dinner to convince Dick Cheney and Donald H. Rumsfeld, aides to President Gerald R. Ford, that raising tax rates would reduce tax revenue by hampering growth.

It was another economy. The top marginal income tax rate was 70 percent then. For three decades, just over 10 percent of the nation’s income had gone to the 1 percent earning the most. Economists believed Simon Kuznets’ proposition that though market forces would widen inequality at early stages of growth, further economic development would ultimately lead it to narrow. The paramount policy challenge of the day was how to raise productivity.


Simon Kuznetsk and his famous but faulty curve

To many economists, Mr. Laffer’s basic argument that high taxes would at some point discourage effort and reduce growth made sense: Why work or invest more if the government will keep almost all the fruits of your troubles? Even Arthur M. Okun, who had been President Lyndon B. Johnson’s chief economic adviser, was writing about leaky buckets to illustrate a trade-off between efficiency and equity: Taxing the rich to pay for programs for the poor could slow growth down, in part by reducing the incentive of the rich to earn more.

Arthur Okun

It is unclear whether reality ever followed Mr. Laffer’s prescription. “In 1986 we dropped the top income tax rate from 50 to 28 percent and the corporate tax rate from 46 to 34 percent,” said Bruce Bartlett, a policy adviser in the administration of President Ronald Reagan. “It’s hard to imagine a bigger increase in incentives than that, and I can’t remember any big boost to growth.”

 Nonetheless, tax policy today is still being driven by his decades-old argument, devised in an economy that looks nothing like today’s.

Today, 1 percent of the population is taking in more than 20 percent of the nation’s income, twice as much as when the fateful dinner took place. Today’s top marginal tax rate, 39.6 percent, is a little over half what it was then.

Critically, how the pie is sliced has become as important as how to raise productivity further. Indeed, the questions are intertwined. Compelling new economic research suggests that in the economy in which we live, cutting taxes on the rich further won’t just fail to foster growth, it could even make the economic pie smaller.

The direct case against lower taxes on the rich was made most clearly a few years ago by the French economist Thomas Piketty — noted for his analysis of inequality trends over the centuries — and colleagues from the University of California, Berkeley, and Harvard University.


Thomas Piketty

Looking at a set of industrialized countries from the 1970s until the years preceding the financial crisis, the economists found no meaningful correlation between cuts in top tax rates and economic growth. Big tax cutters like the United States did not grow faster than countries like Denmark, which kept taxes high. What did respond to lower taxes was inequality: The income share of the top 1 percent grew much more sharply among big tax cutters like the United States than in countries like France or Germany, where top tax rates changed little.

 The findings contradicted the basic proposition on Mr. Laffer’s napkin. Indeed, they suggested an entirely different dynamic: Lower taxes did encourage executives and other top earners to raise their incomes, but not in ways that benefited the entire economy, like working and investing more. Instead, they were encouraged to manipulate the system in ways that, in fact, reduced the pie for everybody else, putting every decision at the service of increasing their pay.

Think about tax avoidance or outright evasion — which simply hides money from the Treasury, reducing the government’s ability to fund often critical programs, at no gain to the economy. But executives have been known to use other tricks — say, options backdating or earnings manipulation, or simply lobbying the compensation committee of their company’s board, or putting corporate strategy at the service of the current quarter’s earnings to give the share price a bump.

Taking into account all the ways top earners respond to taxation, Mr. Piketty and colleagues suggested that the optimal top tax rate on the Americans with the highest incomes — the rate raising the most money for the government — could exceed 80 percent with no harm to growth. Loopholes would have to be closed to prevent avoidance, but only the mega-rich would lose out. From an economic perspective, soaking the rich would, in fact, do good.


Douglas W. Elmndorf

Douglas W. Elmendorf, former head of the Congressional Budget Office and now dean of the Kennedy School of Government at Harvard, once said that to assess the macroeconomic impact of cutting taxes and spending, it is indispensable to assess which taxes are cut and what spending is affected. “Major changes to benefits for lower-income people could have notable effects on the economy by altering labor supply, and those effects could be an important criterion in evaluating such changes,” he argued.

In more unequal societies, the rich have more power to distort policy making to channel more of the fruits of growth in their direction by, say, cutting taxes and government spending that might improve productivity and growth. Politics becomes more polarized. And it becomes more difficult to recover from economic shocks: Citizens in unequal societies are less likely to buy government promises that sacrifice today will lead to gains tomorrow.

“We have not paid enough attention to macro distributional linkages,” said Jonathan D. Ostry, deputy head of research at the International Monetary Fund, [a Canadian] who has published groundbreaking research linking inequality and growth. “Even if you are only interested in the aggregate gains, you are forced to think about equity, because equity matters for the aggregate. The distribution might come back to bite you.”

Mr. Laffer may still be calling to cut tax rates, to provide an incentive for executives to earn even more. But tax policy today calls for a new napkin, one with a place for equity.


Trial Puts Focus on Payday Lending


By REBECCA DAVIS O’BRIEN, Oct. 4, 2017 for The Wall Street Journal

A federal racketeering trial under way in New York is shedding light on the controversial business of payday lending, a multibillion-dollar industry that some describe as predatory and others defend as a vital service.

Prosecutors allege that Scott Tucker, a Kansas City businessman and race car driver, ran a $2 billion payday-lending enterprise that illegally charged as much as 700% interest on short-term loans to more than 4.5 million people. Government lawyers say Mr. Tucker’s company hid the terms of the loans in deceptive paperwork and used partnerships with Native American tribes to evade state laws.

Lawyers for Mr. Tucker have argued at trial that he formed legal business partnerships with tribes, relying on lawyers to help him navigate an unevenly regulated and unfairly maligned industry. They say the terms of the loans were spelled out in documents and emails to customers. Mr. Tucker’s co-defendant, Timothy Muir, is a lawyer who worked for Mr. Tucker’s company.

The case could go to the jury by the end of this week, according to a spokesman for the Manhattan U.S. Attorney’s office. The defense is presenting its case this week.

Much of the evidence presented at trial by the government focused on the particularities of Mr. Tucker’s business practice. But hanging above the trial looms a larger question about the value of payday lending—whether it largely offers critical financial help to the uncreditworthy, or preys on those who can least afford its lofty fees.

Lenders have pushed back against the proposed federal regulations, saying that an estimated 10 million to 12 million Americans who take out payday loans every year could lose access to credit.

This argument has been echoed in Mr. Tucker’s trial. “Payday lending is a lifeline for some people who don’t have access to other ordinary lines of credit,” for “millions of people who survive on paycheck to paycheck,” said James M. Roth, a lawyer for Mr. Tucker.

Prosecutors from the Manhattan U.S. Attorney’s Office have painted Mr. Tucker as a symbol of the industry’s worst excesses.

“It’s a case about how together both these men built an illegal payday lending empire that took billions of dollars from millions of people who were struggling to get by and how they hid that crime from the law for over a decade,” Assistant U.S. Attorney Hagan Scotten said in opening remarks on Sept. 12.

BN-VI747_2uAhL_OR_20170929111336Scott Tucker, whose company, AMG Services,  prosecutors say bilked customers of as much as 700% interest on short-term loans. 

Mr. Tucker then used the proceeds to support an extravagant lifestyle, including a successful side career in racing, prosecutors have argued. Mr. Tucker and Mr. Muir have each pleaded not guilty to 14 criminal counts, including violations of racketeering and lending laws.

Prosecutors allege that Mr. Tucker’s company, AMG Services Inc., and its affiliates tried to skirt state caps on interest rates by using business arrangements with Native American tribes, whose sovereign status means they aren’t subject to the same state laws.

Customers ended up on the hook for huge interest payments in part because the loans automatically renewed unless the customer opted out, prosecutors allege. The government says those terms were deliberately hidden in confusing language on loan documents.

The defense pointed to the language as proof that customers were, in fact, informed of the loans’ terms. “You’ll see that the customer was told, ‘This loan is going to be renewed,’ and if you didn’t want to renew the loan, you merely just sent an email,” Timothy Muir’s lawyer, Thomas J. Bath, said in opening arguments. “Many people didn’t do that, but it’s not like they didn’t have a choice.”

The competing arguments were crystallized in the testimony of Amy Weatherwax, a 42-year-old single mother from upstate New York. Ms. Weatherwax testified that she took out a $500 loan from an AMG portfolio, 500FastCash, in 2012. As with most payday loans, Ms. Weatherwax agreed to pay back the loan plus a flat fee all at once, and gave 500FastCash access to her bank account. The loan paperwork indicated it would cost her $650, in all, to pay it back.

Six months later, Ms. Weatherwax realized $1,850 had been withdrawn from her account—the loan had been renewed automatically, and she still owed money. Alarmed, she called 500FastCash. “They stated they were an Indian tribe and this was the way they did business,” Ms. Weatherwax told the jury.

On cross-examination, a lawyer for Mr. Tucker asked if she had received emails from the loan company. Ms. Weatherwax said she hadn’t been regularly checking her email.

Other evidence in the trial has focused on Mr. Tucker’s deals with several tribes in which he allegedly offered them a cut of the lending profits.

Lisa Adams, a former lawyer for the Yurok Tribe of northern California, told the jury that in 2004, Mr. Tucker flew Yurok representatives to Kansas on his LearJet for a meeting to discuss a possible partnership.

But in subsequent months, Ms. Adams testified, it became clear that “any decision, any decision making . . . would be carried out” in Kansas, not on tribal lands.

The Yurok never approved the deal—even after Mr. Tucker’s company made several “good-faith payments” of $12,500—but other tribes did, according to evidence presented at trial. Witnesses have said Mr. Tucker controlled the AMG subsidiaries, and that the tribes had no meaningful role in the businesses.

[We not only fleeced them of their native land but are now using them as stooges to fleece our own poor.]

—Yuka Hayashi contributed to this article.

Wells Fargo Chief Questioned over Arbitration Requirement

 Wells Fargo Chief Executive Timothy Sloan at Senate hearing Tuesday

By EMILY GLAZER and ANDREW ACKERMAN, Oct. 4, 2017 for The Wall Street Journal
[As a follow-up to yesterday’s blog on the Supreme Court’s current review of arbitration versus class actions, we post the following excerpt from an article in WSJ on the Senate’s review of the Wells Fargo scandal. Big business and the Court’s conservative justices seem to be using identical arguments to justify the perfidy of arbitration.]
Sen. Warren was the only senator to call for Mr. Sloan’s firing. Other Democratic senators asked if Wells Fargo would commit to no longer using forced arbitration clauses, which limit consumers to using arbitration to resolve disputes over financial services. Mr. Sloan did say he’d try to minimize the number of customer disputes that go to arbitration.


“Limiting the number of times is good, but give them their day in court,” Sen. Sherrod Brown (D, Ohio) said.

The debate around Wells Fargo’s arbitration policies [is] part of a Senate fight over a Consumer Financial Protection Bureau rule approved in July barring fine-print requirements over forced arbitration.

Democrats are fighting GOP-led efforts to use legislation to kill the rule, saying forced arbitration diminishes legal protections for everyday people and prevents them from joining together to bring class-action lawsuits.

Critics in the financial industry and Republicans in Congress say arbitration provides a faster and more cost-effective way to resolve disputes with consumers.

[It’s also cheaper and more efficient to hang a man than confine him to life imprisonment, but that recourse has little to do with justice.]

New Supreme Court Divided over Arbitration versus Class Action Suits

The Supreme Court opened Monday with a discussion of whether companies can require workers, in violation of standing National Labor Relations Board agreements dating back to the New Deal, to arbitrate disputes individually rather than join in class action suits. This is related to the same restrictions that you and I are subject to in our contracts with credit card companies and companies that have sold us our electronic devices, so we should pay attention.

 By DAVID G. SAVAGE, October 3, 2017 for The Los Angeles Times

The Supreme Court justices returned to the bench Monday ready to argue — and disagree sharply along usual ideological lines — on a basic question of workers’ rights in the 21st century.

Can employees join together to argue their company is violating the law by denying them overtime pay or minimum wages or by discriminating against women or minorities?

To the court’s four liberal justices, this looked like a case of back to the future. Early in the 20th century, companies often required workers to waive their rights to join a union or take collective action. Those agreements were referred to as “yellow dog contracts,” Justice Ruth Bader Ginsburg noted.

In 1935, under President Franklin D. Roosevelt, Congress adopted the National Labor Relations Act, which guaranteed workers a right to join a union and to take “other concerted activities” to protect their interests. The yellow dog contract became a thing of the past.

In the last decade, however, a growing number of companies have started to require employees to waive their rights to sue in court or join class action cases and agree instead to arbitrate disputes as individuals. Under these rules, employees are barred from joining co-workers to seek overtime pay or other benefits promised by law.

About 60 million non-unionized private sector workers are bound by arbitration clauses — that’s about half the private-sector labor force — and 25 million of them must bring their claims as individuals.

Companies say arbitration is more efficient and less costly than going to court, and that a worker retains the right to bring an individual claim.

Worker’s rights advocates say that as a practical matter, an employee will not contest the legality of a company policy if he or she must do so alone.

As a legal matter, the case involves a conflict between two major laws — the National Labor Relations Act and the Federal Arbitration Act, passed in 1925, which generally encourages the use of arbitration as a substitute for lawsuits.

In Monday’s case, a top Trump administration lawyer and a former Bush administration attorney, now representing private companies, made a joint appearance, urging the court to uphold the individual arbitration rule and bar workers from joining together to bring legal claims.

If the two laws conflict, the arbitration rules should be upheld, they said.

“The tie goes to arbitration,” said Paul Clement, former U.S. solicitor general under President George W. Bush.

Jeffrey B. Wall, the new deputy solicitor general, agreed, pointing to the Federal Arbitration Act. The arbitration law makes it “clear that these agreements ought to be enforced,” he said.

The liberal justices strongly disagreed. “What you are saying is overturning labor law that goes back to FDR at least, the entire heart of the New Deal,” said Justice Stephen G. Breyer.

Ginsburg said the 1925 arbitration law concerned merchants who were making commercial deals. By contrast, for employees today, “there is no true bargaining. It’s the employer who says that if you want to work here, you sign this,” she said.

“This is truly a situation where there is strength in numbers,” she added. “That was the core idea of the NLRA.”

Justices Sonia Sotomayor and Elena Kagan also insisted the 1930s-era laws make clear employers cannot require workers to waive their rights to bring joint claims.

But as soon as the general counsel for the National Labor Relations Board rose to the lectern to argue in favor of the labor law, the court’s conservative justices pounced. Richard Griffin Jr., an Obama appointee, said the labor board was right to reject employment contracts that forbid employees from bringing joint claims.

“I’m not sure I fully understand your position,” said Chief Justice John G. Roberts Jr. If arbitration is legal for employees, why should they be able to ignore the rule requiring disputes be resolved individually, he asked.

Justice Samuel A. Alito Jr. said the court had upheld arbitration agreements in a variety of contexts.

Justice Anthony M. Kennedy suggested a middle-ground solution. Disgruntled workers could hire the same lawyer, who could then file a series of individual arbitration claims on their behalf.

[Justice Elena Kagan, in a New York Times article of the same date, said that was not good enough.“The fact that there is one way to exercise a right left over does not make it O.K. if we’ve taken away another 25 ways of exercising the right,” she said. “You know, when we think about the First Amendment, we don’t say we can ban leafleting because you can always write an op-ed.”]

Justices Clarence Thomas and Neil M. Gorsuch sat silently, but their votes could create a conservative majority to uphold company rules that bar workers from joining together in legal claims.

The justices agreed to decide three separate cases, all of which involved claims for overtime pay. NLRB vs. Murphy Oil came from gas station workers in Alabama; Ernest & Young vs. Morris came from several accountants in northern California; and Epic Systems vs. Lewis came from technical writers in Wisconsin.