Category Archives: Politics

Lawyers vs. legislators

By Steve Brawner
© 2017 by Steve Brawner Communications, Inc.

It could be argued that two of the three most important votes this year in Arkansas state politics occurred Feb. 16 and Feb. 27, and the third will occur this Friday.

The first two votes are when the Arkansas Senate and Arkansas House advanced a proposed constitutional amendment limiting lawsuit awards. We voters will decide its fate in the November 2018 elections.

The third will be in Hot Springs June 16, when the Arkansas Bar Association’s House of Delegates votes on whether to pursue a dueling proposal barring such lawsuit limits that also would appear on the November 2018 ballot.

The one proposed by legislators would limit punitive damages in civil lawsuits to the greater of $500,000 or three times the compensatory damages awarded in the case, except when the harm was caused intentionally. Noneconomic damages, sort of a vague term, would be limited to $500,000. The Legislature would be empowered to increase both of those amounts with a two-thirds vote. Lawyers’ contingency fees would be limited to one-third the judgment.

The amendment is supported by powerful groups, including the Arkansas State Chamber of Commerce and those representing health care providers. They want to reduce the risk of jackpot jury verdicts that produce a climate of uncertainty, raise insurance rates, and require costly cover-your-rear actions ultimately paid by consumers and resulting in lost jobs. If your local hospital no longer delivers babies, it’s because the insurance is too high and the fear of a lawsuit is too great.

Opponents, including the Arkansas Bar Association, which represents attorneys, of course don’t see it that way. They say juries should be trusted, not limited, and that the awards prescribed by the amendment are so low that big, bad actors won’t be deterred from harmful activities. They say the upfront costs of lawsuits can be daunting with no guarantee of a payout, so capping attorneys’ fees will make it harder for Arkansans to find a lawyer willing to represent their case.

This already was going to be a heavyweight brawl between two groups with access to money and reasons to spend it. Aside from the legitimate philosophical differences, we’re talking about rich people’s livelihoods – those of business executives and medical providers who say enough is enough, and those of attorneys whose bottom lines would be significantly shortened. So Arkansas voters next year presumably will see plenty of 30-second ads defining the bad guys (evil corporations or unscrupulous lawyers, depending on who is funding the spot) and the heroes/victims (average Arkansans, either way).

But then the Arkansas Bar Association came up with another idea – pass its own, equally far-reaching amendment. It would do away with all the caps included in the Legislature’s measure while also taking more than a few shots at the legislators themselves – increasing transparency for campaign contributions, prohibiting legislators from directing how state funds are spent locally, reducing their authority over state agency decisions, and increasing the number of votes needed to override a governor’s veto from the current simple majority to two-thirds.

An added twist occurred last week, when the State Chamber’s President and CEO, Randy Zook, sent a letter to its members asking them to encourage their hired law firms to vote against the measure.

On Friday, the ABA’s House of Delegates will vote on whether to pursue the amendment, which its Legislation Committee unanimously endorsed.

The pluses? As a political strategy, the amendment would enable the ABA to play offense rather than just defense. Also, instead of the campaign being mostly lawyers vs. business owners and doctors, it also would be a more winnable lawyers vs. legislators.

But unlike the Legislature’s amendment, getting the proposal on the ballot would require supporters to collect 84,859 signatures, which would cost millions of dollars and inevitably lead to a lawsuit by opponents hoping to block the measure.

Things will get really interesting if they’re both on the ballot. One limits jury awards. The other says jury awards can’t be limited. One or the other could pass. If they both pass, the one with the most votes wins. If neither passes, things stay the same – meaning no lawsuit limits.

That means the Bar Association would have more paths to victory than the Chamber-supported amendment. Not necessarily better, but more.

Math beats myth, this time

By Steve Brawner
© 2017 by Steve Brawner Communications, Inc.

Wednesday saw the triumph of math over myth, in one state.

That would be Kansas, where the Legislature overrode Gov. Sam Brownback’s veto of tax increases made necessary by his previous tax cuts. We’ll see how this applies to Arkansas later in the column.

What happened in Kansas was in 2012, Brownback pushed through the Legislature huge tax cuts that weren’t accompanied by sufficient spending decreases. He said the tax cuts would spur big economic growth. They didn’t.

The state ever since has been a fiscal mess, and a cautionary tale for other governors. This year it faced a $900 million budget deficit along with an order by its state Supreme Court to increase funding for public schools.

Kansas’ previous policies were based on a commonly believed myth – that if you cut taxes, the economy will grow and the tax cuts will pay for themselves. Thus, you don’t really have to cut spending.

The math is quite different, as proven time and again. Tax cuts can spur economic growth, but not enough to make up for the lost revenue. A minus sign doesn’t become a plus sign just because a politician says it’s so. To make the equation work, it’s very simple – just cut spending too. If you don’t have the courage to do that, don’t cut taxes.

The easy decision is to cut taxes without cutting spending. That makes everyone happy until the bills come due, which can take a while. The easy decisions of the Kansas Legislature of 2012 left the Kansas Legislature of 2017 with hard choices – more taxes, less spending, more debt, and/or violating a court order. So after the 2012 Legislature played Santa Claus, today’s legislators had to be Scrooge.

The result was the Legislature passed a $1.2 billion tax increase that Brownback, still determined to be Santa Claus, vetoed. On Wednesday, legislators overrode that veto knowing they’ll have to tell their primary voters that they voted for a tax increase.

It’s ironic this all happened in Kansas, the state that produced President Eisenhower, under whose administration the federal budget was balanced three times in eight years and almost balanced every other year.

If you’re wondering why this is relevant to Arkansas, it’s because your elected officials at the state and national levels will be spending a lot of time talking about taxes and tax cuts.

At the state level, taxes were cut in 2015 and 2017, and now Gov. Asa Hutchinson and other elected officials want to further reduce rates and simplify the tax code to make the state more competitive with its neighbors. A task force is meeting to craft legislation for 2019. For the math to work, the state must eliminate deductions, but each one will have its own constituency that will fight to protect it. On Wednesday, the task force hired a consultant to determine exactly what deductions are littered throughout the code.

Arkansas has a history of being fiscally responsible and has mechanisms in place through the Revenue Stabilization Act to produce a balanced budget. But mechanisms can be overridden or worked around. The Legislature is going to cut taxes. Hopefully, it will offset all of them by closing deductions and with spending cuts, lest Arkansas look like Kansas without the “Ar.”

More concerning is what’s happening at the federal level, where President Trump wants spending increases for the military and the border wall and has proposed spending cuts that largely won’t happen. He wants to leave untouched the government’s biggest programs, Social Security and Medicare.

Meanwhile, he and other Republican leaders have been promising tax cuts that they really, really want. Speaker of the House Paul Ryan was Brownback’s legislative director in the 1990s when Brownback was in Congress.

For a long time, Washington has behaved like Kansas, with much more disastrous results. Taxes have been cut under the theory that they would pay for themselves, spending has been increased, and the national debt has reached $20 trillion, or $62,000 for every American.

Arkansas’ six members of Congress could, as has happened so often, act like the 2012 Kansas Legislature and play Santa Claus, letting a future Congress somewhere down the line be Scrooge.

Let’s hope they instead base their decisions on math, not a myth. Santa Claus isn’t real, but the bills that come due after Christmas are.

Related: $23.33 less debt

Could Paul Spencer give Arkansas Democrats a shot?

By Steve Brawner
© 2017 by Steve Brawner Communications, Inc.

Arkansas’ 2nd Congressional District just got more interesting, perhaps even almost competitive, and it might point the way for Arkansas Democrats in other parts of the state.

Paul Spencer is forming an exploratory committee to run for that congressional seat as a Democrat. It’s currently occupied by Rep. French Hill, a Republican.

Spencer was a founder of the group Regnat Populus, which tried in 2012 to get an ethics reform measure on the ballot that would limit campaign contributions. The effort failed to collect enough signatures, but legislators did respond by placing on the 2014 ballot a wide-ranging “ethics” amendment passed by voters. It did limit campaign contributions as well as gifts by lobbyists to legislators, but it also snuck in a provision weakening term limits, a measure Spencer later criticized.

Spencer has continued to stay active in politics, his primary focus being campaign finance and ethics reform. He’s also pro-life, which is kind of interesting considering the chairman of the Democratic National Committee, Tom Perez, recently said all Democrats must support abortion rights. In his day job, Spencer is a history and government teacher at Little Rock Catholic High School for Boys.

It’s just an exploratory committee, but Spencer sounds like he’s running. In a statement, he said that “only the needs of special interests are being represented in the 2nd District.” He said recent Republican health care policy “demonstrates reckless disregard for the people of Arkansas.”

Arkansas Democrats have been beaten up pretty badly in recent years. In 2008, the party controlled five of the state’s six congressional offices, all seven statewide constitutional offices, and 102 of the 135 seats in the Legislature. Now Republicans control everything at the state and national levels, although Democrats still control the majority of local offices for now.

In 2016, the Democrats only managed to field one congressional candidate, and not a strong one. That was in the 2nd Congressional District, the one Democrats have the best shot of winning because it includes Little Rock and Pulaski County along with outlying counties that are much more Republican. Hill lost Pulaski County, while Hillary Clinton beat President Trump there by 19 points.

Spencer – who, let’s be clear, would be a long shot – truly believes in what he’s saying and can articulate why he’s running. His candidacy would give the party what it often lacks: a passionate, recognizable candidate who can offer a contrast with the Republican incumbent. Hill, a successful banker, is more of an establishment Bush Republican trying to navigate the party’s waters now that it’s led by President Trump, who is not Hill’s kind of candidate. His policies are conservative, particularly when it comes to business-related issues, but he has a moderate, measured style. So Hill the banker versus Spencer the crusader could be interesting.

One challenge for Spencer would be how to fund his campaign. After dedicating himself to limiting campaign donations, how would he collect enough money to run a credible race? On the other hand, as the 2016 presidential race showed, maybe money and the things it buys – an avalanche of 30-second ads and an army of consultants – isn’t as important as it used to be.

Spencer’s type of candidacy may point the way forward for Democrats in other parts of the state. The party’s traditional message –“We’re Arkansas Democrats, not national Democrats” – isn’t working anymore. Moving forward, the party can’t merely bash Trump and promise more government goodies like more pre-K classes, and it certainly won’t win in Arkansas embracing Hollywood-style cultural liberalism. You can call Spencer a liberal, but his message is bigger than that: It’s that the system is rigged against the little guy and needs to be fixed. For Democrats to make any gains in Arkansas, that’s the message that might work – less about providing more stuff, more about providing a fair shake.

The system’s rigged. Hmm. Come to think of it, that’s the same message that helped Trump take over the Republican Party.

Related: What matters: Voters’ view of the world

Tax cuts and rosy scenarios

By Steve Brawner
© 2017 by Steve Brawner Communications, Inc.

Let’s say you’re planning next year’s family budget.

Should you (A) be honest about what you’ll probably spend and as realistic as possible about your likely income, taking into account there could be an unexpected downturn? Or (B) assure yourself you’ll get a big raise, tell yourself prices will fall, increase your spending, and obligate yourself based on a rosy scenario?

I hope you answered (A). Otherwise, I didn’t do a very good job writing that first paragraph. If you’re the architects of President Trump’s first budget outline, you instead chose (B).

The budget, released tellingly while Trump is out of the country, promises to transform the annual budget deficit that will be $559 billion this year into a $16 billion surplus by 2027. We’d still have the national debt – currently $20 trillion and growing – but at least we wouldn’t be adding to it.

Unfortunately, the budget relies on that aforementioned rosy scenario to get there.

On the spending side, it increasing money for defense while proposing cuts to spending programs, including popular ones such as Meals on Wheels, that are so deep that even conservative Republicans in Congress won’t support them. Meanwhile, it leaves untouched the primary drivers of the increasing national debt, Social Security and Medicare.

Meanwhile, Trump is promising tax cuts he says will spur so much growth they’ll pay for themselves – a promise that won’t come true, according to the nonpartisan Committee for a Responsible Federal Budget. Moreover, Trump’s budget relies on projections of 3 percent economic growth per year – an unrealistic number, considering the Congressional Budget Office expects the economy instead to grow 1.8 percent annually over the next decade.

I said “unrealistic,” not “impossible.” According to the Committee for a Responsible Federal Budget, the economy has averaged 3.2 percent growth since 1950, and there have been times when it grew even faster – 4.3 percent in the 1960s and 3.5 percent in the 1990s.

The difference between now and then is us, says the Committee. We’re now an older country, and certain to grow older. The baby boomers are now retiring, and retired people produce less than working people. Meanwhile, as the number of older Americans increases, so does the number of people accessing Medicare and Social Security, which, you’ll recall, President Trump’s budget doesn’t touch.

Given the fact that 70-year-olds don’t usually have children, the fastest way to reduce the age of the workforce is to import workers from the outside. But even that would be only a partial solution causing other problems. Besides, as you may have noticed, increasing immigration is not exactly a priority of the president’s, or of Arkansas’ Sen. Tom Cotton, for that matter, who argues that immigrants compete with Americans for lower-wage jobs.

It’s possible that some kind of private sector advance could spur the economy, much as the dot-com bubble helped make the 1990s boom possible. But remember, we call that a “bubble” for a reason. Anyway, we’re already in the middle of one of those advancements. Technological innovations have let the United States approach energy independence, and gasoline is cheap right now. Nevertheless, the economy’s been plodding along for years – not terrible, but not great.

Because of all these factors, the Committee for a Responsible Federal Budget says Trump’s plan will reduce revenues by $5.5 trillion. This would occur at a time when government expenditures for Social Security and Medicare are destined to increase, as will interest payments on the debt. And let’s face it, Congress isn’t going to cut spending drastically for Meals on Wheels.

Instead, the U.S. government should do what a prudent family does: Base its budgeting on what’s likely to happen – actually, worse than that – and on the basic math principle that subtracting from your income does not add to it. It doesn’t have to expect the worst-case scenario, but at least it shouldn’t depend on a rosy one.

Related: $23.33 less debt

State tax cuts: First answer ‘How?’ and then ‘How much?’

By Steve Brawner
© 2017 by Steve Brawner Communications, Inc.

Your state taxes were cut by $100 million in 2015 and about half that much this year. In 2019, Gov. Asa Hutchinson and state legislators intend to cut them again.

But with state budgets growing tighter, “How?” is a more important question than “How much?”

To answer both questions, and others, legislators during this past session created a task force that will study the state’s tax code before producing proposed legislation by September 2018, 16 months from now.

The Tax Reform and Relief Legislative Task Force met for the first time Monday and elected two level-headed and practical-minded co-chairmen, Rep. Lane Jean, R-Magnolia, and Sen. Jim Hendren, R-Gravette. Jean is co-chairman of the Joint Budget Committee, while Hendren, Hutchinson’s nephew, has co-chaired two other task forces, one for school employees’ health insurance and one for health care.

Hutchinson likes to use these task forces to form a consensus on tough issues, to create a forum for discussion, or, if nothing else, to buy time. So far, they’ve mostly resulted in the policies he wants or, in the case of highway funding, provided a convenient back burner on which to place subjects he’d rather address later. They tend to lead to considered, incremental change so that radical legislation doesn’t slip through during legislative sessions, when things happen fast and can get crazy. Looking back, he might wish he’d created one for guns on college campuses.

The tax cuts enacted so far have benefited mostly the middle class (in 2015) and lower-income Arkansans (in 2017), so some legislators believe it’s time to help out Arkansans earning $75,000 a year or more in taxable income.

But simply cutting taxes will be difficult in an era of tight budgets. Hutchinson in April cut spending by more than $100 million over the next two years because sales and corporate income taxes aren’t meeting projections. These were not devastating cuts because they occurred in the so-called “category B” funding, which is the kind agencies know beforehand may not be available. But the timing, occurring after the latest tax cuts, was a little concerning.

There’s fat in any government budget, of course, and state government is no exception, but certain expenses are hard if not impossible to cut. Health care costs rise regardless of what the state does. The state is locked into always providing at least a token increase in public school funding lest it be sued again for failing to follow its own Constitution. Those highways don’t fix or build themselves.

So while legislators certainly will want to cut taxes, they’ll be spending a lot of time on tax reform – making the tax code simpler and more competitive with neighboring states such as Texas, which doesn’t have an income tax.

The only way to cut taxes much without blowing a hole in the budget is by ending some of the deductions that litter the tax code, but those politics will be challenging. Sitting in those committee meetings will be lobbyists whose clients benefit from those deductions. They will make persuasive cases through logical arguments and through past and future campaign donations. And when their clients’ members are mobilized and vocal – for example, all the farmers in a legislator’s district – they can be hard to vote against.

Meanwhile, legislators will seek to avoid the experiences of Kansas. Five years ago, Gov. Sam Brownback slashed taxes but not enough spending, saying that the resulting economic growth would create sufficient new revenues, because money grows on trees. Those revenues didn’t materialize, the state has been a mess ever since, and now legislators there are arguing about what to do about a huge budget deficit.

Brownback called his tax cut plan in Kansas an “experiment.” Arkansas’ tax task force has 16 months to apply the lessons learned – hopefully, by answering first “how” before considering “how much.”

Steve Brawner is an independent journalist in Arkansas. Email him at brawnersteve@mac.com. Follow him on Twitter at @stevebrawner.