What Does Minnesota Teach Us About Running a State?

Minnesota has been on fire lately.  With a low unemployment rate and state-level surplus, it would be easy to point at the Governor’s increase in both the income tax rates and minimum wage as “proof” that high taxes solve all problems.  The Daily KOS did just this in a post this past February, but be warned Daily KOS readers: even the Governor that enacted these measures notes that it isn’t because of them that the state is in its current position.

It is Minnesota’s economic successes, not tax increases, that have produced our present budget surplus

– Governor Mark Dayton

What can other states and, for that matter, the country do to emulate what Governor Dayton already knows?  Well for starters, all states can recognize that state taxes on businesses do far more harm than good.  Dayton’s administration has pushed tax breaks and subsidies for businesses to attract them to (or keep them from leaving) Minnesota.  Businesses can then expand through capital investments and hiring.

The sweet spot – right where Minnesota is – comes from a state that invests in education and infrastructure while keeping taxes and regulations on business low / manageable.  Minnesota’s higher state income tax rate allows the state Government to benefit from the increased economic output of the business community and the people of Minnesota, in turn, benefit from the increase in funding to education and infrastructure, both which are rated highly in Minnesota.

For states like Rhode Island, languishing at 48th place in the same CNBC review, the Minnesota model offers a playbook of what could be done to improve the state’s positioning.  Implementing this type of program needs to be done with care, though, as a blanket copy will likely result in a high tax state bleeding wealthy residents.  Further, the allure of higher tax revenues consistently causes some states to hire bodies into non-value add Government bureaucrat positions.  No State in the union is currently hurting because of a lack of Administrative roles.

The key points that States should target include:

1. Cut business taxes and remove regulations that prevent business formation and / or expansion (for example, cutting costs on business licenses for business that do not deal with food or dangerous materials).

2. Create “Economic Improvement” zones in a similar manner to New York State to attract businesses to the state or to encourage expansion of existing businesses within the State.  The rationale here is simple, no / low income taxes on a business that hires 100 employees at livable wages is an easy trade to make when the alternative is those same 100 households on welfare.

3. Invest in infrastructure projects.  A UK-study noted that there are links between strong, modern infrastructure and economic growth.  A State investing in infrastructure projects not only gets the short-term positive impact of the capital investment on employment and tax revenue, but also gets the long-term ability to remain competitive and flexible in the face of changing economic conditions.

4. Investments in public education and training.  Drawn from increasing tax revenues (fueled by points 1-3), state-level education programs should invest directly into Pre-k to 12th grade, community college, vocational, public college, and rapid re-training programs.  Well-educated workers are a key component to attracting new businesses to a state and there have been countless examples of businesses placing new facilities near education hubs (Recently several businesses opened new facilities in Pittsburgh, PA because of the robotics work being done by Carnegie Mellon).

These aren’t hard ideas for a state to tackle, so why do many states fall down?  First, many states continue to languish in debates about exactly “what” policies to enact.  This inaction never accidentally produces the desired outcomes so politicians need to learn how to compromise.  Second, many states that want to raise taxes attempt to do so with a fire and brimstone campaign against the state’s wealthy.

Well-educated, wealthy citizens have the ability to leave the state if the message becomes too toxic (see California), but many wont if there is a clear plan in place for what these tax increases are for.  Maybe that is the clearest point that Minnesota makes: don’t demonize the business and wealthy communities as a way to popularize support for new taxes.  Instead create a win-win and let them come to you.

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The Romney Effect (aka When Nothing Happens)

When former GOP Nominee / Next Guy Up Mitt Romney came out guns blazing against Donald Trump’s candidacy last week, many saw it as a sign that the Republican establishment was moving to block the future Republican nominee from his chance at the Oval Office.  The speech, delivered as the text format of paint drying, did little to accomplish the GOP’s grand plans.  In fact, a poll conducted by Morning Consult found that nearly half of Republican voters (48%) wouldn’t let Romney’s warnings impact their vote.

Perhaps Mitt put it best in his Netflix Documentary “Mitt” (Side note: this is worth a watch regardless of your general feelings toward Mitt) when he declared “when you lose the election, you are forever a loser.”  Trump’s campaign has been all about how much of a “winner” he is and how all that stand in front of him are “losers, dummies, jokes.”  With that in mind, is it really that shocking that Mitt’s speech didn’t sway Trump’s supporters?

Trump destroying Rubio in Florida last night despite it being Rubio’s home turf and having the backing of both Jeb! and Mitt Romney is nothing short of embarrassing for the GOP establishment.  Kasich was popular enough in Ohio to put him over the top there, but let’s not undersell what is happening:  In 2012, Mitt Romney lost a very winnable election to President Obama.  Top to bottom, voters saw how badly the establishment messed up the campaign. This failure caused an open revolt from the “next guy up” playbook that the Republicans have relied on for so long.

McCain failed.  Romney failed.  Jeb! failed.

Working class Americans are pissed and have taken a “guilty by association” view of the establishment.  The reality is this: Trump is going to be the Republican nominee for a lot of reasons good and bad.

Trump has run a very good campaign while spending very little money – something no one in the Political press would have predicted a year ago.  He has also tugged on the very heart strings that working class Republicans have been upset about for a long time: people who are working aren’t getting ahead and no one in the Federal government seems to care.  You can argue the merits of this point of view, but it is how they feel.

As it also looks more and more likely that the Democrats won’t have to use the power of their super-delegates and other backroom deals to put Hillary up as the blue candidate, we can begin to think about future debates between Donald Trump and Hillary Clinton.

Trump is a master at counter attacking and seems to hit back harder the more challengers press against him.  If you think these debates will be about policy or detailed plans, you are going to be very wrong.  This is going to be a gutter war and Hillary does not have the clean slate to win a gutter war.  Trump will attack – without hesitation – Hillary’s character and record with a relentlessness that will bother a lot of people.

Hillary should focus on policy and what she is going to do once in the White House, but her campaign staff seems inept so she is likely going to fall into Trump’s mousetrap.  This will be her downfall – she must avoid it at all costs.

For those, like this author, looking for sanity in our elections, one can only hope that it is this showdown that finally puts the status quo to bed.  We need better candidates, real discussions, and common sense in governing.

 

 

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Post-Caucus: How Close It Was!

The Iowa Caucus proved to be more of a thrill ride than anyone expected.  The Clinton-Sanders margin was almost negligible and the GOP had 3 candidates taking the majority of the Republican votes.  In yesterday’s prediction thread we stated that Ted Cruz and Bernie Sanders would be Monday night’s victors.

Ted Cruz did in fact win with Donald Trump taking second place (also predicted) and Marco Rubio taking third place.  Rubio’s strong showing was not expected in Iowa as the Evangelical population pointed more to a strong Ben Carson showing (who finished forth with around 10% of the vote and was our predicted 3rd place finisher).  Rubio’s win was bolstered further by a key endorsement from Tom Scott.  This result for Rubio will likely lead to a major jump in the national polls.

The most disappointing performances within the GOP had to come from Rand Paul and Jeb Bush.  Rand’s father Ron finished in third place during the 2012 Iowa Caucus and there was some thought that he would capture a bit of that magic.  At fifth place with only 4.5% of the vote, the Paul campaign has to be frustrated by their candidates inability to grab real traction within the party.

For all of the disappointment felt by the Paul campaign, the Jeb Bush camp must be in outright panic.  With millions of dollars spent and coming off his strongest debate performance yet, the early GOP favorite had to expect better than 2.8% of the vote.  We may be seeing the last days of the Jeb! experience.

In all, don’t expect the GOP candidates to throw in the towel before next week’s Primary in NH.  NH tends to be more friendly to establishment / moderate Republicans, many of whom were at the bottom of this poll.  After NH, though, we expect several campaigns to close up shop.

For the Democrats, the story got interesting in Iowa.  Martin O’Malley – debt strapped and with little support – suspended his campaign.  O’Malley is often rumored to be interested in a VP nomination, but that may be in doubt now that the Democrat Party has seen what he would actually bring to the table.  Staying in this race through the Iowa Caucus may have hurt O’Malley’s political career more than it helped.

Clinton narrowly defeated Bernie Sanders in a state that she had a decent lead in before the votes were cast.  While this is a technical win for Hillary, it was also a spiritual win for Sanders, though it was not without controversy.  No other candidate has come from the fringe to the mainstream like he has and with a monster lead in New Hampshire, he is going to force Clinton to play major defense over the coming weeks.

One additional point of note about the Democrat voters shown during the CNN broadcast was the difference in voter profiles between those who chose Clinton and those who chose Sanders.  The voters that valued “experience” overwhelmingly chose Clinton, while those that wanted “someone who shares my values” overwhelmingly chose Sanders.  Look for this information to be used by both campaigns going forward.

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When Do the Emails Become an Issue?

With the latest reports out of Washington, DC indicating that the FBI is running a far more thorough and rigid investigation than is being publicly reported, when does the DNC start to panic?  The Clinton’s are powerful and have survived a litany of scandals over the years, but formal charges against HRC may be insurmountable.  There has to be a backup plan.

Is it Bernie Sanders?  Is it Michael Bloomberg?  Al Gore?  Nothing would serve to put Donald Trump into the White House faster than NOT having a very legitimate backup plan.  And right now it seems the coronation that the DNC had planned out back in May could very well be blowing up in the organization’s face.

HRC and the DNC need both a strong showing this week and to they need to assure the base that all is well going forward.  If Trump is right about one thing (only) it is that America hates losers.

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Domestic or International? What type of President do we need?

The Republican debate was dominated by the Middle East, be it Iran or ISIS.  The national media has allocated significant time to Iran and the potential for nuclear war.  The Democrats have pointed towards Secretary Kerry’s work in the Middle East as a symbol of their party’s superior diplomacy skills.

Should American voters care?

Fear, war, and extremism sell papers (or produce clicks) so there is a natural tendency to focus on these issues as opposed to the always thrilling topics like: capital controls in banking or tax code.  The argument being that issues over there could result in issues over here, but is that the right argument?  Should the gravitational pull of the middle east have such dominance over the national priorities?

What is more likely is that the strengthening economy has removed some of the domestic fear of joblessness off the agendas for a large number of individual voters.  Without the stress of job issues, these voters are able to focus on a wider range of topics: typically social issues and foreign policy concerns.  The shift in focus from what we saw in 2009-2012 to now may have been premature.

There remains a great number of domestic issues with the economy that have yet to be addressed.  Many of these issues could have a significant impact on the economy over the next 3-10 years.  These include offshore cash holdings by corporations, healthcare, infrastructure, and education.  All four of these topics will play a much larger role on US policy than each is currently given credit for.

If the next President of the United States is penciled in for a stent leading the country for the next 4-8 years.  Should that individual set an agenda that reinforces the foundation of this country or continues to influence foreign policy?

All voters will need to internalize that question.

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Digging In: Gov. Christie can Debate, but is there a Story?

Gov. Christie was once touted as the next great Republican.  He had a way with words, was not afraid to challenge unions, and brought the center-right views that many potential voters were looking for.  2010 was a long, long time ago though and the Governor’s potential to be a GOP front-runner seems to be just a dream.  The Governor has posted dismal approval numbers in New Jersey and was wrapped up in a bridge closure controversy that deteriorated his value in the eyes of the Republican Party.

At Thursday night’s debate in Cleveland, Gov. Christie sparred with the other candidates and responded to the moderator’s questions with a level of clarity that is representative of a seasoned politician.  Though his track record in NJ was brought up, the Governor played off the facts by noting “you should have seen it when I got here.”  A truly political answer, but delivered with a believable confidence.

Gov. Christie’s debating with Sen. Paul proved to be one of the better back-and-forth exchanges of the night.  Christie invoked 9/11 to draw from the deep emotion of those attacks when defending his position on the NSA (Supporting expanded powers) vs. Sen. Paul’s position that the NSA ought to be defended and disbanded.  Gov. Christie took the point in this exchange when he called out Sen. Paul’s statement “that we should expand monitoring of terrorists, not every day people.”  The technical implementation of such a strategy likely would not be possible, so Gov. Christie’s challenge to that position was both warranted and deftly executed.

Unfortunately for the Governor, New Jersey is not a shining star to point to.  The state has been mired in in-fighting and stuck toward the bottom of many rankings.  He has been in a constant dogfight with the Democratic Legislature that has pitted him against the powerful NJ teacher’s unions.  While budget-hawk Republicans will appreciate his use of the line-item veto, those that see the cuts to education are less likely to be impressed.

Outside of the bridgegate scandal, Christie’s attempts to reform public pensions in the state have been the cause of many NJ residents outrage.  Since arriving in office, the Governor has attempted to build and implement a plan to address the state’s unfunded pension liabilities.  His administration’s attempts have enraged the teachers unions, put pressure on local governments, and attempted to raise property taxes on individual households.  None of these attempts have resulted in praise from the public or a pension program that could be declared “fixed.”

Without success in NJ to highlight, the Governor will be a bard without a song.  Democratic strategists will have a field day with the issues plaguing the Governor’s tenure in New Jersey much like the Republican Party is going to be able to draw from a deep pool of issues and scandal in Hillary Clinton’s past.  For that reason alone it is hard to see Gov. Christie as the Republican nominee for the Presidency.

Gov. Christie was once the rising star in the Republican Party.  A deeper look indicates that his window may have already been shut.

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