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Dysfunction Junction

Econ Lite: GOP's Fact Free Diet

“You have to admire one thing about the Republican perspective on taxes: their unflagging insistence, despite a mountain of evidence to the contrary, that the best and perhaps only way to affect the economy is by adjusting the tax rate paid by wealthy people.

Here's a quick history review of the last two decades: In 1993, Bill Clinton signed a budget that included tax increases. Republicans unanimously said it would bring a "job-killing recession." It didn't; in fact, almost 23 million jobs were created during Clinton's two terms.

Then George W. Bush got elected and signed two rounds of enormous tax cuts. Republicans promised these cuts would super-charge the economy. They didn't; job growth was weak throughout Bush's term.

Then at the end of 2012, the deal ending the "fiscal cliff" allowed
the top income tax rate to revert back to what it had been during the Clinton years. Republicans grumbled that this increase would hamper job growth. That didn't happen either; in the two years since, the economy has created 5 million jobs.

In other words, the Republicans' essential theory about upper income taxes—increasing them destroys jobs and smothers growth, while cutting them explodes growth and creates huge numbers of jobs—is not just wrong, but demonstrably, obviously, spectacularly wrong.

Yet they keep saying it.”


---Paul Waldman, The American Prospect  March 14, 2015

FUDGING THE NUMBERS

These days, it’s hard enough for elected officials to make rational, fact-based, public policy choices without the institutions on which they rely peddling questionable data. Case in point: the Massachusetts Department of Revenue’s Annual Film Tax Credit Report. Every year since the inception of the current film tax credit in 2007, DOR has issued a report detailing the number of tax credits issued and the number of new jobs created by the credit in Massachusetts.

Since 2010, those reports have featured an eye-popping, headline grabbing (and consequently much quoted) “cost-per-job” number. In their most recent report, DOR pegged the cost per job at a hair-raising $118,873. Predictably—as they have every year since 2010--critics of the credit have seized upon that number as proof positive that the benefit of the film tax credit to the state’s private economy is simply not worth the cost to the state’s taxpayers.

In order to see why DOR's cost per job figure is wrong, you must first understand what they got right. In their latest report, DOR documented the fact that the film tax credit (since it was enacted) has created nearly 10,000 jobs in Massachusetts (9,616 to be exact), which sounds pretty good—especially since most of that job creation took place during a crippling recession. In fact, film jobs were pouring into the state so quickly that there weren’t enough qualified residents to fill all of them. Even so, DOR themselves concede that more than two-thirds of the jobs created were indeed filled by Massachusetts residents. 

So far, so good.

Now, how much did those film industry-related jobs actually cost Massachusetts taxpayers? Let’s take a closer look.

During the period covered in their latest report, DOR said the film industry spent $1.66 billion in Massachusetts on which $55 million in taxes were collected and $411 million in tax credits were issued. So the cost to taxpayers for bringing $1.66 billion of new private sector spending to the state was $356 million ($411 million in tax credits, minus $55 million in taxes collected).

Put another way, taxpayers laid out a little over 20 cents from the state coffers for every dollar of direct spending that the credit brought into the state’s private economy—not including all the indirect and ancillary benefits.

In order to calculate the true “cost-per-job”, you simply have to take the net cost of the credit ($356 million) and divide it by the 9,616 jobs created---which gives you a cost per job of $37,011. Even if you only divide by the number of jobs filled by Massachusetts residents (6,523), the cost per job is still only $54,561--which is less than half of the headline-grabbing numbers that DOR has been pushing since 2010.

What the heck happened in 2010?

In order to answer that question, you have to go back to DOR’s first two film tax credit reports (2008 and 2009) in which they accurately reported the number of new film industry-related jobs created. Simple. Straightforward. No sleight of hand.

THIS IS HOW DOR REPORTED NEW FILM JOBS IN 2009
(Pg 17, Table 7):

By 2010 something very weird happened to these reports. DOR started claiming that “State Spending Cuts”--which they directly attributed to the film tax credit--resulted in state "Jobs Lost” that must be accounted for by reducing the actual number of new film industry-related jobs created, by a manufactured number of “jobs lost” due to "state spending cuts."

THIS IS HOW DOR REPORTED NEW FILM JOBS IN 2011
(Pg 19, Table 6):

To this day, the practice continues. The true number of new film tax credit related jobs is being arbitrarily reduced in these reports---which in turn makes the true cost-per-job appear to be much higher than it really is. No satisfactory rationale was ever given for why DOR's method of reporting new film job creation was quietly and inexplicably changed four years into the program.

THIS IS HOW DOR REPORTED NEW FILM JOBS IN 2014
(Pg. 18, Table 6):

But here’s the crazy part. Between 2007 and 2012—contrary to DOR’s assertion---state spending was not cut at all. It actually increased every year. See for yourself:

No jobs were lost. In fact, according to the US Census Bureau, during the time the film tax credit was bringing nearly 10,000 new private-sector jobs to Massachusetts, the number of full time state employees also increased from 84,603 in 2007 to 86,528 in 2012. And the most recent figures available from the federal government (2013) place the number of Massachusetts state employees even higher--at 88,761.

So why does DOR keep talking about "Jobs Lost” when in fact no jobs were actually lost? The answer goes something like this: If the state eliminated the film tax credit, it would have spent the savings on programs that would have created other jobs in the state.

But we know that isn’t true.

Governor Baker proposes to eliminate the film tax credit and he has no intention of spending that money on new jobs. Instead, he proposes to use the savings to double the earned income tax credit for people who already have jobs. That, at least, is an honest choice between two successful tax policies: the film tax credit which has already created about 10,000 new jobs; and the earned income tax credit which would increase the spending power of thousands of Massachusetts citizens who are already working.

He could have also proposed putting the savings into the state's rainy day fund, or reducing the state's long term debt, or increasing state aid to cities & towns, or any number of other worthy public policy choices---none of which would necessarily create new jobs. 

That is why the real number of film jobs originally certified and reported to the public by DOR should never have been retroactively reduced in 2010, and every year since. Because no plausible justification for this change has ever been offered.

So, let the debate continue. 

But a word to the wise: part of the reason why the film tax credit enjoys such widespread public support is because so many people, or their friends and families, have experienced first hand the benefits of a growing local film industry. 

Critics of the film tax credit (including our friends over at the Department of Revenue) would do their own credibility a big favor by dialing back those phantom cost-per-job numbers for one important reason. They are demonstrably false. 

There may be legitimate philosophical reasons to oppose the film tax credit, or any other tax credit for that matter. If so, critics should state those objections honestly and shouldn’t have to fudge the numbers to bolster their argument.

Millions of US Citizens Who Can't Vote

Ayatollah's New Pen Pals--The GOP 47

If you're a GOP senator and New York City's conservative tabloid calls you out, you stepped in it--BIG TIME.

Republican Idiocy on Iran

NEW YORK TIMES EDITORIAL

MARCH 11, 2015

After helping to ignite a firestorm over a possible nuclear agreement with Iran, Senator John McCain, a former Republican presidential candidate, is now sort of acknowledging his error. “Maybe that wasn’t exactly the best way to do that,” he said on Fox News on Tuesday.

He was referring to the disgraceful and irresponsible letter that he and 46 Senate colleagues sent to Iran’s leaders this week that generated outrage from Democrats and even some conservatives.

The letter was an attempt to scare the Iranians from making a deal that would limit their nuclear program for at least a decade by issuing a warning that the next president could simply reverse any agreement. It was a blatant, dangerous effort to undercut the president on a grave national security issue by communicating directly with a foreign government.

Maybe Mr. McCain, who is chairman of the Senate Armed Services Committee, should have thought about the consequences before he signed the letter, which was drafted by Tom Cotton, a Republican of Arkansas, a junior senator with no foreign policy credentials. Instead of trying to be leaders and statesmen, the Republicans in Congress seem to think their role is outside the American government, divorced from constitutional principles, tradition and the security interests of the American people.

The letter was the latest shot to blow up the negotiations with Iran. Earlier this month, House Republicans invited Prime Minister Benjamin Netanyahu of Israel to denounce a pact in a speech to Congress, and a group of senators is pushing legislation that could set new conditions on a deal and force a congressional vote.

Besides being willing to sabotage any deal with Iran (before they know the final details), these Republicans are perfectly willing to diminish America’s standing as a global power capable of crafting international commitments and adhering to them.

Vice President Joseph Biden Jr. was blistering in his condemnation, saying, “This letter sends a highly misleading signal to friend and foe alike that our commander in chief cannot deliver on America’s commitments — a message that is as false as it is dangerous.” But perhaps President Obama described this bizarre reality best. “It’s somewhat ironic to see some members of Congress wanting to make common cause with the hard-liners in Iran,” he said. “It’s an unusual coalition.”

So far, the Iranians have largely dismissed the bumbling threat, with their foreign minister, Mohammad Javad Zarif, describing the letter as “propaganda.” But there are fears it could embolden hard-liners in Iran who, like the Republicans and some of the Democrats in Congress, oppose any nuclear agreement between Iran, the United States and its major allies.

The Republican efforts have so infuriated Democrats that even those who might have supported legislation that would have given Congress leverage over an Iranian pact are having second thoughts. Before this, the thinking was that the two bills most in play — one that would increase sanctions on Iran and another that would force the administration to bring any agreement to Congress for a review — might draw enough Democratic support to override a veto by President Obama. Both measures would surely scuttle a deal, but the Republicans’ actions may have set back their senseless cause.

The best and only practical way to restrain Iran from developing a bomb is through negotiating a strict agreement with tough monitoring. In rejecting diplomacy, the Republicans make an Iranian bomb and military conflict more likely.

Boehner's Boo Hoo Boo Boos

Wag The Dog

By Nick Paleologos

In commenting on the power of his office, a former Speaker of the Massachusetts House of Representatives once quipped, “Powerful? Let me explain something to you. At the end of the day, I preside over two hundred and forty people that I didn’t hire, and I can’t fire.” Yet David Bartley was, by most accounts, an enormously effective leader of the House. Not so, John Boehner.

You know you’re having a bad day as Speaker when your own bill to fund the Homeland Security Department is voted down because a mini-mob of your party’s members leave you in the lurch:

Washington Post: “a major defeat for Speaker John Boehner who has struggled to govern even as Republicans hold unified control of congress.”

Politico: “Boehner Fails Again”

New York Times: “a stunning and humiliating setback for Speaker John Boehner…”

Since this weepy and woebegone “leader” of the House Republicans in congress was elected Speaker, events like this have become routine occurrences. The current hapless and hopeless fight over putting the country at risk because a few of your colleagues labeled as “illegal” the president’s recent executive order on immigration is just the latest in a long line of Boehner boo-boos.

Still it’s amazing how much slack the chatter class is willing to cut him. Poor John, we’re told. He doesn’t believe any of what he’s saying. He’d much prefer to get something done. He’s only doing what he has to do. Blah. Blah. Blah. Seriously? A real leader would face down the fools on his far flank and force them to actually read the document they so eagerly wave in everybody else's face—the United States Constitution.

The last time I checked, the Supreme Court gets to say what’s constitutional and what isn’t. And if you don’t like their decisions (Obamacare, Citizens United, Immigration, etc), you have three options: change the law, change the court, or change the constitution. It’s up to the Speaker of the House to give a stern reminder to guys like Alabama Congressman Mo Brooks that, no matter how many years he spent in the Tuscaloosa District Attorney’s office, shutting down the US government because he can’t get his way is not an option. Period.

That’s what Tip O’Neill would have done. That’s what Sam Rayburn would have done. How much longer must we wait for John Boehner to transform himself from a leader in name to a leader in fact? Suffice it to say that they won’t be naming a federal building after him any time soon.

It’s too bad that the aforementioned David Bartley—who went on to become President of Holyoke Community College—didn’t teach a course on how to be a great Speaker. For starters, he might have advised John Boehner to take a look at his job title in the Constitution: Speaker of the House, not Speaker of the Majority Party Within the House. As that title should tell him, the job description is to find a working majority of all the members in support of public policy choices that most closely mirror his own political philosophy. Plain and simple.

It has been less than two months since the GOP has taken full control of this congress and sadly two things are undeniably true:

1) The radical tail is still wagging the rational dog.

2) That dog won’t hunt.