Wednesday, November 5, 2014

THE END OF WEST VIRGINIA'S "DEPUBLICANS"

Yesterday's election may have destroyed West Virginia's Democratic party as we know it.

At the federal level Democrats lost their only remaining senate seat as well as their only remaining house seat. And at the state level Democrats lost their decades-long majorities in both the house and senate.

It's the culmination of a decline that began nearly a decade ago and which, not coincidentally, gained momentum during Joe Manchin's rise to the governorship.

For decades West Virginia Democrats have been reliable defenders of coal, although with a tilt toward labor. But, during Joe Manchin's term as governor, labor interests came to be equated with those of the industry. At the same time, the governor and Democratic politicians generally became enthusiastic supporters of conservative, supply-side economic policies that emphasize corporate tax cuts and reduced regulation, especially for the coal industry.

At first, this shift looked like a Clintonian exercise in "triangulation" -- claiming the center of the electorate by co-opting your opponent's positions and making them your own. But, in West Virginia, the co-opting of opposition positions became so extreme that the newly acquired positions seemed to co-opt the Democratic party more than the other way around. As a result, Democrats ended up nearly as far to the right as Republicans on issues of the economy, the environment, and, of course, coal.

In that way, the progressive narrative pretty much vanished from public discourse in West Virginia and the state's Democratic party more or less lost its identity and, frankly, its reason for being. Yesterday the chickens came home to roost.

Across the board, Democratic candidates for congress and the US senate ran on strong pro-coal, anti-Obama, anti-EPA platforms and they were roundly defeated. Losing by double-digit margins were a sitting member of congress (how often does that happen?), a well-known and well-liked former chairman of the Democratic party who lost to a newbie from Maryland, and the sitting Secretary of State who lost her race for the senate by an almost 2-1 margin despite the fact that her opponent had never before appeared on a state-wide ballot.

It was in every way a rout. Exit polling from NBC News for the senate race between Secretary of State Natalie Tennant and Congresswoman Shelley Moore Capito provides insight into why Tennant and other Democrats lost and how badly their efforts to co-opt Republican positions hot button issues failed.

Whether the issue was the economy, healthcare, coal, or the EPA, -- all issues on which Tennant either partially or wholly adopted Republican positions -- people who were "dissatisfied" voted against her by a 3-1 margin. I and many others have criticized Tennant's positions on these issues as a matter of policy, but it's clear that they may have been even worse as a matter of politics.

By adopting the pro-coal, anti-Obama, anti-EPA narrative, Tennant and other West Virginia Democrats not only failed to persuade voters who shared those positions to support them, they unilaterally surrendered their ability to take advantage of issues that should have been galvanizing and helpful to Democrats in this election.

• The success of Obama administration policies in reversing the economy’s plunge toward depression, giving us five years of recovery, and reducing the unemployment rate to its lowest point since before George W. Bush left office.
• The immense benefits to West Virginia of Obamacare, which has insured more than a hundred thousand West Virginians and is injecting hundreds of millions of dollars into the state’s economy without inducing any of the catastrophes predicted by Republicans
• The water disaster in the Kanawha valley that afflicted a sixth of West Virginians and laid bare the price the state pays for its slavish devotion to an industry that extracts huge amounts of wealth and leaves little behind.
• The false and self-serving claims by Republicans and the coal industry that the EPA is responsible for the demise of West Virginia’s coal industry and that, if the EPA were reined in or abolished, jobs would come back

On each of these issues that should have been riveting West Virginia Democrats gagged themselves. Instead, they tried to convince voters that they would be as tough on the hated Obama administration as their Republican opponents – a claim that was transparently false.

In the wake of the disaster, there are two questions to be answered. First, who will emerge as leaders of what remains of the state's Democratic party?

Joe Manchin, the principle author of the catastrophe, remains the party's leader until he is displaced (or abandons the post by defecting to the Republican party -- a rumor his office is furiously denying today). And, purely as a matter of political calculus, he would be foolish to leave, at least so soon. He's not up for re-election for another four years and, under the circumstances, he can continue to style himself as a "centrist", contemplate the notion of running for president, and avoid the condemnation that would come with a switch of parties.

Meanwhile, Governor Earl Ray Tomblin who, fortunately for him, was not up for re-election yesterday, is unlikely to lead a revolution. Tomblin is a thoroughly uninspiring and uninspired adopter of conservative policies and a reflexive defender of the coal industry, all of which should thoroughly undercut any claim he might make to ideological leadership of the party.

One possible candidate is state senator Jeff Kessler of Marshall County. Although Kessler has never shown an inclination to take on Manchin and represents a county that's heavily reliant on coal and natural gas, he seems a moderate who may be able to recognize and adapt to the new reality. And, if Manchin chooses to focus his efforts on national politics -- perhaps the presidency -- the door may be opened for Kessler or someone else.

But, more important than the question of who will lead a reconstituted Democratic party is what guiding principles and platform will the party adopt? If there is any lesson Democrats should take from yesterday's election, it's that theirs must either be a party that articulates and champions progressive policies or it will be nothing.

If they weren't doing so already, those who care about West Virginia's Democratic party and the need for a progressive alternative to the antediluvian economic and environmental policies of Republicans, should have started work at about 7:01PM last night on a new party platform that emphasizes people over industry, incomes over profits, and the quality of life in West Virginia over the exploitation of the state's resources.




Sunday, November 2, 2014

RICH STATE, POOR STATE . . . POVERTY STATES

There aren't many states less alike than Washington and West Virginia -- the Great Northwest vs. Appalachia; the Pacific Rim vs. the rustbelt; grunge vs. bluegrass; progressive vs. conservative; racial and cultural diversity vs. homogeneity; the "new economy" home of Amazon, Starbucks, and Microsoft vs. a nearly colonial economy dominated by extractive industries and out-of-state ownership; a young, healthy, and highly educated population vs. an older, sicker, and poorly educated one.

Yet, for all those differences, there's one characteristic and one challenge that Washington and West Virginia share -- the failure of economic growth to put a dent in the problem of poverty.

THE RISING TIDE
A few weeks ago I criticized West Virginia MetroNews talk show host Hoppy Kercheval for a commentary in which he wrote, "The left wants to solve poverty through more spending on social programs, but that only goes so far. The best way out is by way of a thriving economy." Kercheval then quoted Nobel Prize winning economist Milton Friedman who said, “There has never in history been a more effective machine for eliminating poverty than the free enterprise system and the free market.”

This is the classic "a rising tide lifts all ships" argument and, in response, I pointed out that, if economic growth were a reliable engine for shared prosperity and poverty reduction, then West Virginia should be in great shape. The state was, after all, far less damaged by the recent recession than most other states and since 2009, at the dawn of the recovery, West Virginia has generated GDP growth nearly double that of the nation as a whole.

WEST VIRGINIA A NON-SWIMMER
Yet, in that same period, West Virginia has seen virtually no growth in jobs and last year, a year in which the state ranked third behind only North Dakota and Wyoming for GDP growth, West Virginia was dead last in the nation in income growth.


Meanwhile, between 2011 and 2013 when West Virginia's GDP growth was most robust, the state's poverty rate, now at 18.5% of residents, was statistically unchanged. In fact, after dropping slightly between 2011 and 2012, the rate bounced back up in 2013 while GDP shot up by more than 5%.

So plainly, economic growth doesn't always lift all ships, at least not in West Virginia. But, West Virginia as we well know is often an outlier in measures of economic performance and wellbeing. And the state's economy, dependent as it is on extractive industries whose proceeds evaporate into corporate coffers and the pockets of shareholders who by and large live elsewhere, is unlike that of most other places. So, might Hoppy Kercheval's point about economic growth being a reliable and perhaps the only real remedy for poverty be true in other less peculiar places and specifically places such as Washington, which seems to embody nearly all the virtues of the "new economy" including a gaudy ranking of 6th in the Tax Foundation's current Business Tax Climate Index of the states?


WASHINGTON PROSPERITY UNSHARED
In many ways Washington is simply a more prosperous place than West Virginia. At $60,000 the median household income is fully 50% greater than in West Virginia. In the last three years, during which there has been almost no job growth in West Virginia, Washington has added 127,000 jobs, an average annual growth rate of 4%. And last year Washington's GDP grew at an annual rate of 2.7%, which, while only a little better than half of West Virginia's growth rate of 5.3%, is still above the national average.

In short, Washington should be a poster child for how economic growth alleviates poverty. But, what do we find?

Elena Hernandez of the Washington State Budget & Policy Center points out that the portion of families living below the federal poverty line rose from 13.5% in 2012 to 14.1% last year, making Washington one of only three states in which poverty is increasing (West Virginia is another). The number of children living in low income households -- those whose income is less than 200% of the federal poverty level -- has also risen during this period of economic recovery. Meanwhile, when adjusted for inflation, the median hourly wage for workers in Washington is slightly less now than it was in 2009.

Another way in which Washington's rising tide of recovery is not lifting all ships is in the area of the economy that triggered the 2008 financial meltdown in the first place. While the portion of Seattle mortgages that are underwater has receded to only about 11%, in some areas the share is between 20 and 30%. And, predictably, they are predominantly low-income neighborhoods.

DIFFERENT ROUTES TO THE SAME END
Two states with vastly different economies, both of which are growing at above-average rates, and yet neither is making a dent in the problem of poverty. That being the case, it's tempting to conclude that the underlying dynamics that produce poverty must transcend states and the ability of their leaders to address the challenge. But, that conclusion would be mistaken because, although both Washington and West Virginia labor under the same federal tax and fiscal policies that have done much in the past couple of decades to redistribute income away from low-income people and to the very wealthiest in our society, both states also adhere to economic policies that contribute to the intractability of poverty and, at least in West Virginia, also put a damper on economic growth.

BY BEING KINDER TO ITS RESIDENTS WEST VIRGINIA CAN HAVE BOTH GROWTH AND PROSPERITY
In West Virginia, unlike Washington, the absence of prosperity isn't limited to those with lower incomes. From top to bottom, the state is economically anemic, which is why those who are highly educated and blessed with options are more likely to abandon the state than those who are poor and poorly educated. In a way the fact that the misery is shared is a blessing because it means that the solution to West Virginia's problem doesn't pit wealthy residents who fear income redistribution against poor residents.

The fault line in West Virginia's economy doesn't run between classes. It runs between residents and out-of-state interests. Not only do out-of-state corporations and individuals own a majority of privately-held land in West Virginia, but nearly all of he state's major business employers are based out-of-state as well. Yet strangely, property taxes and corporate income taxes, which generate a large portion of their revenue from these out-of-state entities, are low compared to other states. In fact, in recent years the state has aggressively been cutting corporate taxes in an effort to become "more competitive". But, because the biggest beneficiaries of these cuts and low property taxes reside out-of-state, the tax savings are repatriated elsewhere and do little for West Virginia's economy.

As a result of these policies, the share of state government revenue generated by corporate taxes has declined by almost two-thirds in the last few years putting more of the funding burden on the personal income and sales taxes that are primarily paid by West Virginia residents. Consequently, hundreds of millions of dollars that would otherwise stay in the pockets of West Virginia residents and in West Virginia's economy are being exported to out-of-state corporations and shareholders without so far producing any measurable increase in corporate investment or job growth.

This of course is a problem that can be addressed legislatively. Tax laws can be rewritten to redistribute the burden to the out-of-state interests that prosper most from West Virginia's resources and labor. But, as has long been the case, finding political leaders who will buck those interests has so far been impossible.

WASHINGTON'S PROGRESSIVE IMAGE BELIED BY DEEPLY REGRESSIVE ECONOMIC POLICIES
Washington on the other hand, a bastion of progressive social and environmental policy, turns out to have what by some measures is the most regressive state tax system in the country -- one which truly pits rich against poor. So, while there's enough money to go around in this wealthy state, some people -- the less well off -- see far more of it taken by the state than do the many famously wealthy residents of Washington.


These immense disparities in the amount of income the state takes from different cohorts is driven by the state's lack of a personal income tax and heavy reliance on the sales tax for the bulk of its revenue. The result is that the poorest fifth of Washington residents who must spend more or less all the income they bring in to get by, end up sending an astounding one-sixth of everything they make to the state.

When you combine that with the aforementioned stagnation in wages and major declines in state aid to needy families, the rise in poverty during a period of economic recovery and growth isn't so hard to understand . . . or, frankly, to reverse if there existed the political will to do so.

But, it does not. In 2010 voters in Washington rejected a proposed state income tax by not quite a 2 to 1 margin despite the fact that the initiative campaign was well-funded and led by Bill Gates Sr, father of Bill Gates Jr., the founder of Microsoft who also supported the initiative.

The arguments against were predictable focusing on the question of whether state legislators could be trusted to restrict their newly won taxing power to wealthier Washingtonians and also on the question of whether the tax would inhibit job growth by scaring away entrepreneurs and talented candidates that were much in demand at booming companies such as Amazon and Microsoft whose CEO at the time, Steve Ballmer, actively opposed the measure.

So, in Washington, the growing gap that we see nationally between the rich and poor . . . or more precisely the very rich and just about everyone else . . . is exacerbated.

That two states so different in character should find the problem of rising poverty intractable even in times of economic growth should be an unequivocal message to even the most fiercely market-oriented politicians that blind faith in the power of markets to create shared prosperity is a fantasy and that wise and just policy is and always will be just as vital.



Friday, October 31, 2014

JOE MANCHIN: SO WRONG FOR SO LONG

The latest inflation figures are out and they serve as a reminder that there may be no politician in Washington today who has been so wrong for so long on matters of economics than Joe Manchin.

As has been the case since the economy crashed six years ago, prices are stable. In fact, this represents the 29th consecutive month that inflation has come in below the Federal Reserve's target of 2%. Interest rates have been similarly quiescent.

These facts seem astonishing when you consider that, in congressional testimony from March 2011, former Sen. Alan Simpson, R-Wyo., and Erskine Bowles, the White House chief of staff under President Bill Clinton, were warning that the growing federal debt would soon induce an economic crash replete with soaring inflation and interest rates.

"The markets will absolutely devastate us if we don’t step up to this problem. The problem is real. The solutions are painful, and we have to act.” said Bowles. “I think it will come before two years.” said Simpson.

And the biggest congressional cheerleader for this message of economic armageddon was West Virginia Senator Joe Manchin who used the warnings to campaign for what came to be known as the Bowles-Simpson budget plan, which sought to reduce and ultimately balance the federal budget by slashing spending, particularly for entitlements and most particularly for Social Security and Medicaid. He even invited Simpson and Bowles to Charleston in 2012 to stump for the plan.

But, Bowles-Simpson was never adopted and, as today's data reminds us, there was no catastrophe. In fact, with the perspective of three years, we can look back now and recognize that had we cut federal spending in the ways the plan called for, the effect, if anything, would have been to plunge us back into recession and perhaps trigger deflation, a phenomenon that frequently accompanies all out depressions.

Still, as recently as this year Joe Manchin was telling Politico, "I still hold out hope that the president will dust off the Simpson-Bowles framework and put the force of presidential leadership behind it" . . . God help us.

But, long before he arrived in Washington, Manchin had proved himself a sucker for economic snake oil. During his term as West Virginia governor, Manchin championed and won implementation of a menu of corporate tax cuts on the theory that, by doing so West Virginia would become more attractive to business and more competitive. Yet, despite the fact that West Virginia emerged from the 2008 financial meltdown far less damaged than most states and despite the fact that West Virginia had an economic tailwind provided by the advent of fracking to tap the state's abundant natural gas supply, West Virginia's economy, rather than booming, has posted nearly worst-in-the-nation levels of job and income growth ever since.

It's been Joe Manchin's great political fortune that he left the governor's office before the effects of his policies were felt. And every day he must thank his lucky stars as he watches the travails of Kansas Governor Sam Brownback, who is suffering a political meltdown due in large part to his applying the same economic prescriptions with nearly the same effects as they had in West Virginia. So, while Brownback is crucified, Manchin floats placidly along carefully nurturing his image as a moderate and a voice of reason.

The tragedy isn't just that the press generally treats Manchin so uncritically. Almost never is he confronted with hard questions about his economic policy preferences either now or when he was governor of West Virginia. The tragedy is also that, as his comments to Politico show, Manchin seems unwilling or unable to critically examine his own policies and when necessary change them. That makes him a problem for all of us both now and perhaps in the future as well.





Wednesday, October 29, 2014

AN OCCASION TO BE PROUD OF MY HOMETOWN



Please visit this report at the PBS web site and share the story with your friends. And, if you're really touched, help out.

SADLY, THE ATLANTIC "GOES NATIVE"

It's called "native advertising" -- advertising that's dressed up to look like editorial content.

Given The Atlantic magazine's generally pro-environment editorial position, is it really necessary or wise for so venerable a publication to use its brand and its social media pipeline to subscribers and followers to promote sponsored content, in this case from Chevron, that many of the magazine's subscribers will find offensive because of the anecdotal and generally false impression it conveys of the impact of the natural gas fracking boom on Appalachian economies?


As I've pointed out previously, the natural gas boom has had at best uneven economic effects in Appalachia -- from the merely disappointing results in Pennsylvania where the Chevron piece is focused to the nearly non-existent economic benefits in West Virginia where local economies have seen almost no net growth in jobs or commerce. And we haven't even discussed the long-term collateral damage caused by fracking, which includes noise, traffic, air, and water pollution that degrades the quality of life and creates an environment that discourages both families and businesses from wanting to locate nearby.

Sponsored content is not inherently evil as long as it is clearly and prominently identified as advertising, not editorial content. But, the Atlantic's decision to allow it's logo and its direct channels of communication to subscribers and followers to be used by the sponsor implicates the magazine in the message to the point that it feels like an endorsement. And that's a place no publication should go unless it wants to be identified with the sponsor of the content and, in this case, the misleading information that's being peddled.

Friday, October 24, 2014

THE GOVERNOR'S ENERGY SUMMIT: LOOKING BACKWARD

Reporter Sarah Tincher of the State Journal is helpfully tweeting key points being made by speakers at the Governor's Annual Energy Summit, which is currently taking place at the Stonewall Resort in Roanoke, WV. The speakers thus far have been from the energy industry (although none so far from the renewable wing), academe, and government. And, not surprisingly, they are as a group highly supportive of the energy industry and of increased development of natural gas and coal in West Virginia.

Of course, in homogeneous gatherings where there is little risk of being questioned or contradicted, people are apt to say silly things. And that seems to be what's happening at Stonewall where the prevailing beliefs that West Virginia's fracking boom is an economic godsend and the coal industry would be one as well if only the EPA would allow it are being supported by a variety of claims that range from the merely doubtful to the wholly imaginary.

Here are a few.

That's Congresswoman and Republican senate candidate Shelley Moore Capito delivering her variation on a theme enunciated a year ago by West Virginia University Business School Dean Zito Sartarelli who told a group gathered to discuss West Virginia's economic outlook that we're witnessing an "economic miracle" in the northern panhandle thanks to the natural gas fracking boom.

The problem is that there is no economic miracle in northern West Virginia -- in fact, not even an uptick -- if you judge economic prosperity by measures such as job creation and income and population growth. Since 2007 at the dawn of West Virginia's natural gas boom, the five northern counties responsible for more than 90% of all of the state's fracking activity -- Ohio, Marshall, Wetzel, Doddridge, and Harrison -- have seen a net gain of exactly 451 jobs, a number so small that it's statistically insignificant.

Aside from property tax receipts the only economic indicator to which the fracking boom has made a major contribution is the state's GDP which between 2012 and 2013 grew at the third highest rate in the nation. But, the disconnect between GDP growth and local economic prosperity in West Virginia is legendary and illustrated by the fact that for years, while far outpacing the nation in GDP growth, West Virginia has had no job growth and last-in-the-nation income growth.


But, facts are no barrier to speakers at the summit.

When Paul Schreffler says that natural gas has been the biggest contributor to job growth he is, by definition, wrong because, again, there hasn't been any job growth. But, the point is semantic. What Schreffler is right about is that the natural gas industry, looked at in isolation, has added a few thousand jobs. However, even that fact exposes more holes in the prevailing narrative that casts natural gas as an economic game-changer.

First, the growth in natural gas employment was achieved almost entirely in the years 2007-2011. Since then, direct employment in the industry has been generally flat and, between 2012 and 2013, it actually declined.

But, the statistics also undercut a second main pillar of the argument for fracking as an engine of local prosperity. Depending on which industry-funded study you prefer, for every new job created by the natural gas industry it was expected that between 1.5 and 2 "indirect" or "induced" jobs would also be created in the rest of West Virginia's economy.

However, given that there has been no net job growth, if Schreffler is correct about natural gas generating 3,200 new jobs, that means the rest of the economy has been hemorrhaging jobs just as quickly, which means that when Mike Koon says, "The jobs are there for WVians, they just have to have the skill sets", he is also wrong as is, at least in spirit, Holly Kauffman, FirstEnergy president of West Virginia operations.


Kauffman, however, doesn't confine herself to one myth.

This is a "twofer". The energy industry, led by Kauffman's employer, has long warned ominously of impending catastrophe as a result of EPA regulations, claiming that compliance with clean air rules is unattainable and the effort of trying to achieve unattainable goals will result in lost jobs, higher utility rates, and even the loss of electricity.

But, as Sarah Tincher pointed out in another story from a few days ago, since the advent of the EPA and clean air regulations and contrary to the predictions of the industry, consumer rates for electricity have actually climbed less than the overall rate of inflation and now consume less of our incomes than they did decades ago.

The sad part of all this is that the governor's Energy Summit could serve a useful purpose by exploring some of the issues pointed out above:
-- Why has the natural gas boom failed to generate local economic prosperity and what can be done to change it?
-- How can West Virginia can achieve compliance with new clean air regulations and what are the associated opportunities?

Instead, our leaders seem locked in a vortex in which they vacillate between fantasy and a pursuit yesterday's failed dreams.

Sunday, October 5, 2014

TENNANT PAYS THE PRICE FOR PANDERING

This cringe-inducing clip of West Virginia Democratic Senate candidate Natalie Tennant struggling to respond to a question from a laid-off Logan County coal miner illustrates what happens to ostensible progressives who, whether out of ignorance or political cowardice, parrot the widely held misconception that the coal industry is an engine for job creation in West Virginia and that the loss of coal mining jobs is largely attributable to actions by the EPA.

Constrained by her many repetitions of these myths, Tennant cannot give the miner the compassionate, honest, and politically more effective response that he and many West Virginians have been misled by the coal industry and by self-interested politicians about the causes of mining job losses. She can't explain that his plight has almost nothing to do with the EPA and almost everything to do with market forces -- declining productivity and correspondingly rising labor costs in southern West Virginia mines and the ferocious competition from cheap natural gas and low cost coal from the Powder River Basin and Australia. Consequently, even outright abolition of the EPA would do almost nothing to restore lost mining jobs.

Just that little bit of honesty would have allowed Tennant to then shift the conversation to an issue on which progressives have a decided advantage -- the question of what government should be doing to help miners, families, and communities successfully navigate the journey to new careers and opportunities.

 
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