Category Archives: Public Policy and Governance

Be Careful What You Wish For

There’s an old saying to the effect that karma is a bitch. A decade or more after Citizens United and Mitt Romney’s pious declaration that “corporations are people too,” we may be seeing an example.

My friend Mike Leppert has a weekly blog, and last week he considered the current state of corporate-GOP relations.He pointed to emerging policy differences between some of America’s largest corporations and the Republican Party that has for many years reflexively relied on their money and support.

Leppert–and a significant number of other pundits–focused on a statement made by Mitch McConnell in the wake of corporate criticisms of GOP efforts at vote suppression.  McConnell warned corporate America  “to stay out of politics.” He hastily added that he wasn’t  talking about political contributions. Those, evidently, should keep coming.

As Leppert noted,  it was tantamount to telling the business community to pay up and shut up.

On Wednesday, McConnell admitted he had not spoken “artfully” the day before, but continued to warn against “economic blackmail,” which is his description for the corporate responses in Georgia to its recently enacted voter suppression law.

It wasn’t all that long ago that local Chambers of Commerce were functionally an arm of the GOP.  Their interests were the same; as Leppert says,  both loved low taxes, small government, little to no regulation–“money-making stuff.” But demographics really can be destiny. Those white male Country Club Republicans can no longer count on running things.

There is less and less money in alienating black and brown people. Women and LGBT people generally don’t think much of voter suppression either. And all of these groups of Americans represent customers, talent, and yes, even investors in companies of which the GOP used to rely. The country club members just aren’t as enamored with where the Republican Party has been heading lately, and since I brought it up, country clubs aren’t as desirable as they used to be either.

Add to that observation the fact that the GOP has changed rather dramatically since the heyday of country-club Republicanism. It’s no longer a business-friendly interest group; it has devolved into a White Supremicist cult waging culture war. Whatever one’s differences with those bygone country club Republicans, a significant portion of them described themselves as “fiscally conservative but socially liberal,” and they have been horrified by the current iteration of the GOP. Tax cuts can only go so far in insuring partisan fidelity.

The disenchantment of Corporate America with the GOP may have been exacerbated by efforts in Georgia and Texas to suppress minority votes, but it has been building over time. In January, following the insurrection at the Capitol, the New York Times reported on a survey of corporate executives.

To better understand this moment it is worth considering the results of an informal poll of 40 top executives conducted by Jeffrey Sonnenfeld of the Yale School of Management. Mr. Sonnenfeld regularly gathers C.E.O.s to gauge their views on the most important issues facing their companies, and he did so virtually this week amid increasing alarm in the business community at what they witnessed in Washington. The results are revealing. Here’s a selection:

Did President Trump help incite last week’s violent attack on Congress?

Yes: 100 percent
No: 0 percent

Should President Trump be impeached and removed from office?

Yes: 96 percent
No: 4 percent

Was it right for the social network tech firms to block President Trump from their platforms?

Yes: 85 percent
No: 15 percent

Should business PACs and trade associations cut off donations to legislators who aided sedition?

Yes: 100 percent
No: 0 percent

Should business halt all political donations?

Yes: 42 percent
No: 58 percent

There was more, but these responses and several others should have served as a warning to McConnell and his ilk not to take the relationship between Republicans and Corporate America for granted.

The short-sighted folks who cheered the decision in Citizens United said they wanted free speech for business. Evidently, it didn’t occur to them that the interests of the business community and the Republican Party might diverge, and that those free speech rights might be exercised to express disapproval of the GOP.

Karma is a bitch.

Excuse me while I experience a bit of schadenfreude.

 

Regulating Facebook et al

Over the past few years, as my concerns about the media environment we inhabit have grown, I have found Tom Wheeler’s columns and interviews invaluable. Wheeler–for those of you unfamiliar with him– chaired the Federal Communications Commission from 2013 to 2017, and is currently both a senior fellow at Harvard’s Kennedy School Shorenstein Center and a visiting fellow at the Brookings Institution.

He’s also a clear writer and thinker.

In a recent article for Time Magazine, Wheeler proposes the establishment of a new federal agency that would be empowered to regulate Internet giants like Facebook. He began the article by noting Mark Zuckerberg’s apparent willingness to be regulated–a willingness expressed in advertisements and testimony to Congress. As he notes, however,

A tried-and-true lobbying strategy is to loudly proclaim support for lofty principles while quietly working to hollow out the implementation of such principles. The key is to move beyond embracing generic concepts to deal with regulatory specifics. The headline on Politico’s report of the March 25 House of Representatives hearing, “D.C.’s Silicon Valley crackdown enters the haggling phase,” suggests that such an effort has begun. Being an optimist, I want to take Facebook at its word that it supports updated internet regulations. Being a pragmatist and former regulator, though, I believe we need to know exactly what such regulations would provide.

Wheeler proceeds to explain why he favors the creation of a separate agency that would be charged with regulating “big Tech.” As he notes, most proposals in Congress would give that job to the Federal Trade Commission (FTC). Wheeler has nothing negative to say about the FTC but points out that the agency is already “overburdened with an immense jurisdiction.” (Companies have even been known to seek transfer of their oversight to the agency, believing that such a transfer would allow its issues to get lost among the extensive and pressing other matters for which the agency is responsible.) Furthermore,  oversight of digital platforms “should not be a bolt-on to an existing agency but requires full-time specialized focus.”

So how should a new agency approach its mission?

Digital companies complain (not without some merit) that current regulation with its rigid rules is incompatible with rapid technology developments. To build agile policies capable of evolving with technology, the new agency should take a page from the process used in developing the technology standards that created the digital revolution. In that effort, the companies came together to agree on exactly how things would work. This time, instead of technical standards, there would be behavioral standards.

The subject matter of these new standards should be identified by the agency, which would convene industry and public stakeholders to propose a code, much like electric codes and fire codes. Ultimately, the agency would approve or modify the code and enforce it. While there is no doubt that such a new approach is ambitious, the new challenges of the digital giants require new tools.

Wheeler proceeds to outline how the proposed agency would approach issues such as misinformation and privacy, and to describe how it might promote and protect competition in the digital marketplace.

It’s a truism among policy wonks that government’s efforts to engage with rapidly changing social realities lag the development of those realities. The Internet has changed dramatically from the first days of the World Wide Web; the social media sites that are so ubiquitous now didn’t exist before 1997, and blogs like the one you are reading first emerged in 1999–a blink of the eye in historical terms. In the next twenty years, there will undoubtedly be digital innovations we can’t yet imagine or foresee. A specialized agency to oversee our digital new world makes a lot of sense.

I’m usually leery of creating new agencies of government, given the fact that once they appear on the scene, they tend to outlive their usefulness. But Wheeler makes a persuasive case.

And the need for thoughtful, informed regulation gets more apparent every day.

It Isn’t Just Tax Rates

A new study has found that at least 55 of America’s largest companies paid zero taxes last year, despite making billions of dollars in profits. It’s infuriating.

As the New York Times reports, that 2017 tax bill eagerly passed by Republicans in Congress and signed with great fanfare by the former guy, reduced the corporate tax rate to 21 percent from 35 percent. On top of that gift,

dozens of Fortune 500 companies were able to further shrink their tax bill — sometimes to zero — thanks to a range of legal deductions and exemptions that have become staples of the tax code, according to the analysis…

Twenty-six of the companies listed, including FedEx, Duke Energy and Nike, were able to avoid paying any federal income tax for the last three years even though they reported a combined income of $77 billion. Many also received millions of dollars in tax rebates.

As Bernie Sanders has reportedly noted, if you paid 135 for a pair of Nike shoes, you paid more for them than Nike paid in taxes.

The Times article has a list of the most profitable companies that paid no taxes last year.

Publicly traded corporations have to file financial reports, and those reports include the amounts they’ve paid in federal income taxes. When challenged about their ability to avoid paying taxes, most respond that they “fully comply” with the laws. Which is undoubtedly true. (Okay, maybe not for those with accounts in offshore tax havens…Although that tactic is more common among filthy rich individuals than corporations…)

It’s relatively simply to “fully comply” with tax provisions (aka “loopholes”) that are  intended to encourage socially useful behaviors like investing in clean energy or modernizing aging equipment.

The $2.2 trillion CARES Act, passed last year to help businesses and families survive the economic devastation wrought by the pandemic, included a provision that temporarily allowed businesses to use losses in 2020 to offset profits earned in previous years, according to the institute.

Several of these deductions and credits are justifiable. Others, much less so.

I agree with Elizabeth Warren, who has been quoted as saying that giant corporations with billions of dollars of profit shouldn’t be able to pay $0 in federal taxes. According to the Times, today’s tax avoidance strategies include a mix of old standards and what the report calls “new innovations”. It’s hard to argue, for example, for the social benefit of allowing companies to save billions of dollars by characterizing the purchase of discounted stock options by their top executives as a loss, which they then deduct.

The Biden administration announced this week that it planned to increase the corporate tax rate to 28 percent, and establish a kind of minimum tax that would limit the number of zero-payers. The White House estimated that the revisions would raise $2 trillion over 15 years, which will be used to fund the president’s ambitious infrastructure plan.

Supporters say that in addition to yielding revenue, the rewrite would help make the tax code more equitable, requiring individuals and companies at the top of the income ladder to pay more. But Republicans have signaled that the tax increases in the Biden proposal — which Senator Mitch McConnell of Kentucky, the minority leader, called “massive” — will preclude bipartisan support.

Individual taxpayers have long had to contend with the Alternative Minimum Tax. That provision was created in the 1960s, with the goal of preventing high-income taxpayers from using various deductions and credits to avoid the individual income tax. There’s no reason why a similar mechanism shouldn’t apply to corporate giants using provisions of the tax code to avoid paying any taxes on massive profits.

Meanwhile, It would be illuminating if a Congressional committee were to examine the credits and deductions allowed by the current tax code, and eliminate those that no longer make much sense. (Some never did.)

If nothing else, it would be interesting to see how the Republican supporters of these provisions would defend them.

 

 

 

An Inside Assessment

Those of us who are Democrats, ex-Republicans and/or Never Trumpers often encounter allegations of bias. The charge is that our criticisms are unfair to the GOP members of Congress–that we are exaggerating their flaws for political reasons.

John Boehner’s new book rebuts that accusation.

No one can accuse Boehner of being a “lib.” He was–for those who may have forgotten–the Speaker of the House when the Republicans controlled that legislative body, and his scathing description of its members rings true.

In the 2010 midterm election, voters from all over the place gave President Obama what he himself called “a shellacking.” And oh boy, was it ever. You could be a total moron and get elected just by having an R next to your name—and that year, by the way, we did pick up a fair number in that category.

Retaking control of the House of Representatives put me in line to be the next Speaker of the House over the largest freshman Republican class in history: 87 newly elected members of the GOP. Since I was presiding over a large group of people who’d never sat in Congress, I felt I owed them a little tutorial on governing. I had to explain how to actually get things done. A lot of that went straight through the ears of most of them, especially the ones who didn’t have brains that got in the way. Incrementalism? Compromise? That wasn’t their thing. A lot of them wanted to blow up Washington. That’s why they thought they were elected.

 Boehner quotes Ronald Reagan for the sentiment that getting 80 or 90 percent of what he wanted was a win, while the “new guys” wanted 100 percent every time. “In fact, I don’t think that would satisfy them, because they didn’t really want legislative victories. They wanted wedge issues and conspiracies and crusades.” When Boehner tried to get legislation passed, they considered him a sellout, a dupe of the Democrats, a traitor–a “liberal collaborator.”

Boehner pulls no punches when it comes to the hatred House Republicans felt for Obama.

What I also had not anticipated was the extent to which this new crowd hated—and I mean hated—Barack Obama.

By 2011, the right-wing propaganda nuts had managed to turn Obama into a toxic brand for conservatives. When I was first elected to Congress, we didn’t have any propaganda organization for conservatives, except maybe a magazine or two like National Review. The only people who used the internet were some geeks in Palo Alto. There was no Drudge Report. No Breitbart. No kooks on YouTube spreading dangerous nonsense like they did every day about Obama.

He’s a secret Muslim!”

“He hates America!”

“He’s a communist!”

And of course the truly nutty business about his birth certificate. People really had been brainwashed into believing Barack Obama was some Manchurian candidate planning to betray America.

Most of us saw that hatred, and understood the racism that motivated it. What was truly eye-opening, however, was Boehner’s description of Roger Ailes’ metamorphosis from a politically conservative media person to something else entirely.

At some point after the 2008 election, something changed with my friend Roger Ailes. I once met him in New York during the Obama years to plead with him to put a leash on some of the crazies he was putting on the air. It was making my job trying to accomplish anything conservative that much harder. I didn’t expect this meeting to change anything, but I still thought it was bullshit, and I wanted Roger to know it.

When I put it to him like that, he didn’t have much to say. But he did go on and on about the terrorist attack on the U.S. Embassy in Benghazi, which he thought was part of a grand conspiracy that led back to Hillary Clinton. Then he outlined elaborate plots by which George Soros and the Clintons and Obama (and whoever else came to mind) were trying to destroy him.

“They’re monitoring me,” he assured me about the Obama White House. He told me he had a “safe room” built so he couldn’t be spied on. His mansion was being protected by combat-ready security personnel, he said. There was a lot of conspiratorial talk. It was like he’d been reading whacked-out spy novels all weekend.

And it was clear that he believed all of this crazy stuff. I walked out of that meeting in a daze. I just didn’t believe the entire federal government was so terrified of Roger Ailes that they’d break about a dozen laws to bring him down. I thought I could get him to control the crazies, and instead I found myself talking to the president of the club. One of us was crazy. Maybe it was me.

The excerpt at the link also has juicy stories about Michele Bachmann and Ted Cruz, among others.

This excerpt from Boehner’s book demonstrates two things: (1) there were once sane Republicans who cared about governing (and knew how to spell it), and (2)the degree to which they have been replaced by members of the lunatic caucus.

 

It’s All Connected

Americans today face an unprecedented challenge. The Internet, which has brought us undeniable benefits and conveniences, also allows us to occupy “filter bubbles”—to inhabit different realities. One result has been a dramatic loss of trust, as people of good will, inundated with misinformation, spin, and propaganda, don’t know how to determine which sources are credible.

Fact-checking sites can be helpful, but only for those who seek them out. The average American scrolling through her Facebook feed during a lunch break is unlikely to stop and check the veracity of most of what her friends post.

There is general agreement that Americans need to develop media literacy. But before we can teach media literacy in the schools or consider policy interventions to address propaganda, we need clarity about our goals.

Think about that fictional person scrolling through her Facebook or Twitter feed. She comes across a post berating her Congressman for failing to block the zoning of a liquor store in her neighborhood. If our person is civically literate—if she understands federalism and separation of powers– she knows that her Congressman has no authority in such matters, and that the argument is bogus.

In other words, basic knowledge of government is a critical component of media literacy. It isn’t just civic knowledge, of course. People who lack a basic understanding of the difference between a scientific theory and the way we use the term “theory” in casual conversation are much more likely to dismiss evolution and climate change as “just theories,” and to be taken in by efforts to discredit both.

In other words, people fortified with basic civic and scientific knowledge are far more likely to recognize disinformation when they encounter it. That knowledge is just as important as information on how to detect “deep fakes” and similar counterfeits.

There are also policy steps we can take to diminish the power of propaganda without doing violence to the First Amendment. I’ve previously noted the Brookings Institution’s suggested establishment of a “public trust” to provide analysis and generate policy proposals that would defend democracy “against the constant stream of disinformation and the illiberal forces at work disseminating it.”

Of course, we don’t encounter disinformation only on line. Cable news has long been a culprit. (One study found that Americans who got their news exclusively from Fox knew less about current events that people who didn’t follow news at all.)  Fox is one of several channels that benefit significantly from “bundling” arrangements favored by cable companies. A regulatory change ending bundling would force cable channels to compete for the eyes, ears and pocketbooks of Americans who haven’t yet abandoned cable for streaming. There are other proposals that would address misinformation without implicating the First Amendment; many address the social media protections offered by Section 230 of the Communications Decency Act.

A couple of days ago, I blogged about Section 230, which says that “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” In other words, online platforms that host or republish speech are protected against a range of laws that might otherwise be used to hold them legally responsible for what others say and do.

Most observers believe that an outright repeal of Section 230 would destroy social networks as we know them, but there is a middle ground between total repeal and pinning our hopes on the willingness of millions of users to voluntarily leave platforms that fail to block misleading posts. Section 230 could be amended by adding a requirement that social media platforms establish an industry standard for detecting and mediating violence, fraud, and abuse. (Such a standard already exists for advertising fraud.) Regulation could also limit Section 230 protections to content that is unmonetized.

Bottom line: we can walk and chew gum at the same time.

America’s classrooms must be given the resources—curricular and financial—to teach civic, scientific and media literacy. And policymakers must devise regulations that will deter propaganda without eviscerating the First Amendment.