Macro Roundup

“…She’s the candidate with a plan for everything: That’s Elizabeth Warren’s brand. But even that sells her ambitions short, as we discovered after a tour of her 60-some policy papers. Ms. Warren is proposing a transformation of American government, business and life that exceeds what the socialist dreamers of a century ago imagined. Her standing in the polls has fallen after missteps over Medicare, but she is still in the top candidate tier. Her ideas deserve to be taken seriously because they show where the American left wants to go…”

Editorial Board, "Elizabeth Warren Has a Plan, Oh My," Wall Street Journal, December 27, 2019, https://www.wsj.com/articles/elizabeth-warren-has-a-plan-oh-my-11577404548

Elizabeth Warren Has a Plan, Oh My

She’s the candidate with a plan for everything: That’s Elizabeth Warren’s brand. But even that sells her ambitions short, as we discovered after a tour of her 60-some policy papers. Ms. Warren is proposing a transformation of American government, business and life that exceeds what the socialist dreamers of a century ago imagined.

Her standing in the polls has fallen after missteps over Medicare, but she is still in the top candidate tier. Her ideas deserve to be taken seriously because they show where the American left wants to go:

***

• Wealth tax: Tax net worth over $50 million at 2% a year, and 6% above $1 billion. To prevent the rich from yachting off, add a 40% “exit tax” on assets over $50 million upon renouncing U.S. citizenship. Estimated revenue: $3.75 trillion over a decade from 75,000 households. Most economists, including many Democrats, call that number a fantasy. Courts might also find the tax unconstitutional.

• Medicare for All tax: Charge companies with at least 50 workers an “Employer Medicare Contribution,” equal to 98% of their recent outlays on health care, while adjusting for inflation and changes in staff size. These varying fees “would be gradually shifted to converge at the average health care cost-per-employee nationally.” Estimated revenue: $8.8 trillion over a decade. If receipts fall short, add a “supplemental” tax on “big companies with extremely high executive compensation and stock buyback rates.”

• Global corporate tax: Raise the top business rate to 35%. Apply this as a world-wide minimum on overseas earnings by U.S. companies. Businesses would “pay the difference between the minimum tax and the rate in the countries where they book their profits.” Apply a similar minimum tax to foreign companies, prorated by the share of their sales made in the U.S. Estimated revenue: $1.65 trillion over a decade.

• Corporate surtax: Tax profit over $100 million at a new 7% rate, without exemptions. This would go atop the regular corporate rate. Estimated revenue: $1 trillion over a decade from 1,200 public companies.

• Slower expensing: “Our current tax system lets companies deduct the cost of certain investments they make in assets faster than those assets actually lose value.” Closing this “loophole,” she says, would raise $1.25 trillion over a decade.

• Higher capital gains taxes: Tax the investment gains of the wealthiest 1% as ordinary income, meaning rates near 40% instead of today’s 23.8%. Apply the tax annually on gains via a “mark to market” system, even if the asset hasn’t been sold. Estimated revenue: $2 trillion over a decade.

• Finance taxes: Tax the sale of bonds, stocks and so forth at 0.1%. Estimated revenue: $800 billion over a decade. Charge big banks a systemic risk fee, raising $100 billion more.

• Individual tax increases: There’s no detailed proposal, but Ms. Warren’s clean-energy plan is “paid for by reversing Trump’s tax cuts for the wealthiest individuals and giant corporations.” She’s budgeted $1 trillion.

• Social Security: Increase benefits by $2,400 a year across the board. Raise them further “for lower-income families, women, people with disabilities, public-sector workers, and people of color” by changing “outdated” rules that Ms. Warren says disadvantage them.

Pay for this by lifting the 12.4% Social Security payroll tax, which today covers wages below $132,900, to 14.8% on wages above $250,000. Establish a matching 14.8% surcharge on net investment income, paid by those earning more than $250,000.

• Lobbying tax: Tax “excessive lobbying” over $500,000 a year at rates up to 75%. Ms. Warren says this would have raised $10 billion over the past decade, although it probably runs headlong into the First Amendment’s right to petition the government. Use the revenue for “a surge of resources to Congress and federal agencies.”

***

• Medicare for All: Mandate government coverage for everyone, including for illegal immigrants, with no copays or deductibles. Phase out the private plans of 170 million Americans. She says this would cost $20.5 trillion over a decade, which most economists say is $10 trillion short of reality. Keep the growth of health spending below 4% a year with tools like “population-based budgets” and “automatic rate reductions.” Pay doctors at “Medicare rates” and hospitals at 110% of that.

This means cutting payments 25% or more relative to private insurance, per the Mercatus Center’s Charles Blahous. Trim rates further on “overpaid specialties.” To save 70% on branded prescriptions, “negotiate” with drug makers by threatening excise taxes and “public manufacturing” after “overriding the patent.”

• Green New Deal: Spend $3 trillion, including $1.5 trillion on industrial mobilization, $400 billion on research, and $100 billion on a Marshall Plan. By 2030 hit 100% carbon-neutral power and 100% zero-emission new cars. Retrofit “4% of houses and buildings every year.” For “environmental justice,” put a third of the funds into “the most vulnerable communities.”

• An end to fossil fuels: Ban fracking. Halt new drilling leases on federal land. “Prohibit future fossil fuel exports.” Kill the Keystone XL and Dakota Access pipelines. “Subject each new infrastructure project to a climate test.” Give “workers transitioning into new industries” a “guaranteed wage and benefit parity” and “promised pensions and early retirement benefits.”

• K-12 education: Add $450 billion to Title I, $200 billion for students with disabilities, $100 billion for “excellence grants,” and $50 billion for school upgrades. “End federal funding for the expansion of charter schools.”

• A “right” to child care: Build a federal network of local providers, subject to national standards. Give free care to the “millions of children” whose households are under 200% of poverty, or $51,500 for a family of four. For everyone else, cap child-care spending at 7% of income. Estimated cost: $700 billion.

• Free college: “Give every American the opportunity to attend a two-year or four-year public college without paying a dime in tuition or fees.” Add $100 billion to Pell Grants and $50 billion for historically black colleges, tribal schools and more. Estimated cost: $610 billion.

• Student-debt forgiveness: Write off $50,000 for households with incomes under $100,000. This would phase out as income rises toward $250,000. Estimated cost: $640 billion.

• Housing: Spend $500 billion “to build, preserve, and rehab” millions of affordable-housing units. Condition such funding “on repealing state laws that prohibit local rent control.” Paid for by lowering the death-tax exemption to $7 million from $22 million per couple. At the same time, “raise the tax rates above that threshold.”

***

• Unions: Overturn “so-called ‘right to work’ laws” in 27 states. Guarantee public employees an ability to “bargain collectively in every state.” Amend labor law to aid “sectoral bargaining.” Give the National Labor Relations Board “much stronger” powers, such as “to impose compensatory and punitive damages.”

• Corporate governance: Make companies with revenue over $1 billion obtain a new federal charter—separate from the current state charter system—that requires them to “consider the interests of all corporate stakeholders.” Give workers 40% of board seats, and put CEOs under “a new criminal negligence standard.”

• Industrial policy: Manage the dollar’s value “more actively” to “promote exports and domestic manufacturing.” Create a Department of Economic Development, and have it write a National Jobs Strategy. Expand the Export-Import Bank. Impose a “border carbon adjustment” fee—that is, new tariffs—on imports from countries that don’t align with U.S. climate policies.

• Antitrust: Break up Amazon, Facebook and Google. “Unwind” their mergers with Whole Foods, Instagram, DoubleClick and more. Regulate as a “platform utility” any online marketplace with global revenue of $25 billion. Reverse agriculture consolidation, “including the recent Bayer-Monsanto merger,” and create a “supply management program” to “guarantee farmers a price at their cost of production.”

• Banking: Pass “a 21st Century Glass-Steagall Act that breaks up the big banks.” Let the U.S. Postal Service “partner with local community banks” to provide “basic banking services like checking and savings accounts.”

***

• Gun control: Create a “federal licensing system for the purchase of any type of firearm or ammunition.” Raise taxes to 30% on guns and 50% on ammo. Ban sales of “assault weapons,” and make current owners “register them under the National Firearms Act.” Pass a law to let shooting victims “hold the manufacturer of the weapon that harmed them strictly liable.”

• Centralized elections: Use federal money to “replace every voting machine in the country.” For federal elections, mandate early voting and same-day registration. If state elections follow the same rules, they can be “fully funded by the federal government,” with “a bonus for achieving high voter turnout.” Estimated cost: $20 billion, paid by “closing loopholes” in the death tax.

• Miscellaneous: Spend $100 billion “to end the opioid crisis,” $85 billion “to massively expand broadband access,” $25 billion on “health professional shortage areas,” and $7 billion “to close the gap in startup capital for entrepreneurs of color.” Double the foreign service and the Peace Corps.

Give congressional staff “competitive salaries.” Recruit 10,000 people to “a 21st Century Civilian Conservation Corps.” End entry fees at national parks. Buy flood-prone houses “for low-income homeowners at a value that will allow them to relocate.” Plus much more.

***

All of this adds up to such an expansion of government that the temptation is to dismiss it as fanciful. But Ms. Warren is a shrewd and disciplined politician who isn’t supporting these ideas on an ideological whim. She believes they have enough political support to help her win the Democratic nomination and then the White House against a vulnerable Donald Trump.

Her only real policy difference with Bernie Sanders is that she has the courage to offer more details. As for getting it all enacted, she has a plan for that, too: Kill the legislative filibuster, so she can pass her agenda with a simple Senate majority.

The question for Democrats: Is this the agenda they want to put forward in 2020? Or will Ms. Warren’s radical plans scare voters into resorting to Mr. Trump again?

"...Baltimore is the more violent of the two. While Chicago’s violence level remains elevated, with 508 murders through Dec. 22, both homicides and shootings have declined since a 2016 spike. In Baltimore, however, elevated levels of violent crime have continued virtually unabated.As The Associated Press reported on Christmas Day, Charm City could end the year with an all-time high homicide rate, as it approaches the final weekend of the year just four homicides shy of its 2017 record of 342 killings.... The more likely culprits of elevated violence: (1) sharp cuts in incarceration, (2) prosecutorial retreat from low-level offenses and drug laws and (3) the alienation of each city’s most capable guardians: cops...."
Rafael A. Mangual, "The bloody toll from Baltimore, Chicago’s soft-on-crime mindset,"New York Post, December 27, 2019, https://nypost.com/2019/12/27/the-bloody-toll-from-baltimore-chicagos-soft-on-crime-mindset/

The bloody toll from Baltimore, Chicago’s soft-on-crime mindset

Too many families in two of America’s most dangerous cities — Baltimore and Chicago — will spend this holiday season in hospitals and funeral homes. Last weekend, the two cities saw more than 50 people shot and eight killed.

The violence included two “mass shootings,” defined as a single incident in which more than four people are shot. In Chicago, 13 people were wounded early Sunday morning at a party in the South Side neighborhood of Englewood. Soon after, seven were shot outside a downtown hookah lounge in Baltimore.

Blame the cities’ softness on crime.

Baltimore is the more violent of the two. While Chicago’s violence level remains elevated, with 508 murders through Dec. 22, both homicides and shootings have declined since a 2016 spike. In Baltimore, however, elevated levels of violent crime have continued virtually unabated.

As The Associated Press reported on Christmas Day, Charm City could end the year with an all-time high homicide rate, as it approaches the final weekend of the year just four homicides shy of its 2017 record of 342 killings.

Many in Baltimore’s political class have tried to blame this on socioeconomic “root causes.” But these explanations fall flat. According to the St. Louis Federal Reserve, between 2014 and 2017, the city’s poverty rate went down from 24.2% to 22.4%, and the unemployment rate during the same time period declined to 6.1% from 9.5%.

Similarly, after the 2016 homicide spike in Chicago, many pointed to joblessness and insufficient education spending. But between 2010 and 2015, the period just preceding the spike, the public-school system’s per-pupil spending jumped to $13,784, from $11,596. Black male unemployment, meanwhile, saw dramatic declines before the spike.

The more likely culprits of elevated violence: (1) sharp cuts in incarceration, (2) prosecutorial retreat from low-level offenses and drug laws and (3) the alienation of each city’s most capable guardians: cops.

Start with incarceration. Maryland cut its prison population, largely from Baltimore, by nearly 23% from 2007 to 2017. The state cut the prison population by a whopping 10% in just one year, 2016-17. Ditto for Illinois. Between 2015 and 2018, the number of state prisoners from Cook County (which includes Chicago) fell more than 18%, with much of the decline coming after 2016.

That kind of rapid, large-scale decarceration means more criminals on the street, where they will continue to settle their disputes violently, often with firearms they seem to have no fear of carrying in public. A third of Baltimore homicide suspects in 2017 committed their alleged offenses while on probation or parole, despite having an average of nearly 10 prior arrests. In Chicago, those arrested for shootings or homicides in 2015-16 had an average of 12 prior arrests.

The best way to describe crimes committed by high-volume, repeat offenders? Avoidable.

Then there is the prosecutorial retreat — particularly from drug enforcement. In Baltimore, 70% of 2017 homicide suspects also had prior drug arrests. In Chicago, meanwhile, drug arrests declined by 44% just before the 2016 spike in violent crime. And while correlation isn’t causation, there is clear overlap between supposedly “nonviolent” drug offenders and shooters. Progressive prosecutors take note.

As police internalize the message that “low-level” drug offenses won’t be aggressively pursued, street enforcement wanes, which means more open-air drug dealing and, in turn, more street brutality.

Which brings us to the third cause of elevated violence in both Baltimore and Chicago: rollbacks in proactive policing. According to USA Today, between 2014 and 2017, “suspected narcotics offenses” reported by Baltimore police “dropped 30%,” while “the number of people they reported seeing with outstanding warrants dropped by half. The number of... instances in which the police approached someone for questioning — dropped 70%.”

In Chicago, the number of monthly stops conducted by police dropped below 10,000, from a historic average of about 40,000 — a major cause of the 2016 violence spike.

As long as the political classes in these two once-great cities continue to undermine police, and as long as they fail to incapacitate the violent, repeat offenders driving so much of the violence, those living in Baltimore and Chicago’s more dangerous neighborhoods will continue to suffer the sort of carnage we saw last weekend.

Rafael A. Mangual is a fellow and deputy director of legal policy at the Manhattan Institute.