The rich are different from you and me, and ungrateful too

Senator Mitch McConnell had a valid point when he recently berated some the nation’s largest corporations for their opposition to the Republican-backed changes in Georgia’s voting laws.

McConnell accused the companies of “dabbling in behavior like a woke parallel government,” and said that they “will invite serious consequences if they become vehicles for far-left mobs to hijack our country from outside the constitutional order.”

The GOP leader in the Senate didn’t say so directly, but he implied some of America’s wealthiest corporations and individuals lacked gratitude for the yeoman work Republicans and the Trump administration did to lower their taxes and clear regulatory hurdles that hindered their ability to maximize profits.

Take, for example, two of the loudest opponents to the Republican-passed law in Georgia: Coca-Cola and Delta Air Lines. The CEO of Coke, James Quincey, saved a lot of money on the $18 million he was paid last year thanks to some of the most regressive tax cuts every passed in this country in 2017. Then there’s Delta, which received $5.4 billion of Trump’s airline bailout. Talk about ungrateful.

America’s major corporations saw their tax rate reduced from 35% to 21% under the Trump tax cuts. We were told at the time the money saved would be invested in new plants and equipment, creating more good paying jobs. Most of the money went to dividend increases and stock buybacks.

When the corporate tax rate was cut to 21%, few people mentioned at the time that the effective tax rate of most corporations was 17%. You can bet it’s a lot lower now. In fact, at least 55 of America’s largest firms paid no taxes last year, according to research by the Institute on Taxation and Economic Policy.

Those that dodged the tax man included Salesforce, ADM and Consolidated Edison. FedEx and Nike managed to avoid taxes for the last three years, thanks to a range of legal deductions and exemptions along with some who were able to defer taxes to the future. If they ever actually pay those taxes, it will be with dollars worth less than they are now.

The CEOs of those companies shared in the wealth. Last year may have been a time of historic business upheaval and a wrenching labor market for many workers, but that didn’t prevent the median income of chief executives at over 300 of America’s largest corporations from increasing to $13.7 million from $12.8 million, according to an analysis by The Wall Street Journal.

Many of those executives made a show of taking pay cuts when they were laying off workers. None of them mentioned changes in performance targets or modified pay structures that cushioned the blow when the economy tanked last year. Take, for example, Frank Del Rio, CEO of Norwegian Cruise Line. In a year when the company recorded a loss of $4 billion on an 80% drop in revenue, Del Rio’s pay doubled to $36.4 million.

The pandemic that created financial chaos for so many Americans was a financial windfall for the very rich, as the latest Forbes list of American billionaires shows. Forbes reports that a record 2,755 Americans were worth at least that much last year, with 493 newcomers joining the lists. Their combined worth increased from $8 trillion to $13 trillion.

But if you think they’re paying a big chunk of their wealth to the tax man, guess again. A new report from the Bureau of Economic Research estimates that the top 1% of the highest earners–$1.7 million a year or more—are hiding 21%  of their income from the IRS, a loss of $175 billion in taxes.

They are employing increasingly sophisticated tax dodges, including offshore accounts. That helps explain that while the number of millionaires is up, those reporting more $1 million in annual income fell from 50,000 in 2012 to 11,000 last year.

IRS Commissioner Charles Rettig says the agency is ”outgunned” thanks to a 20% cut in its budget and the loss of 21,000 employees since 2010. He estimates that the tax gap for corporations and the wealthy is as much as $1 trillion a year.

Many of those tax avoidance strategies are created by employees and consultants of so-called family offices, setup by the truly wealthy to manage their money. They can also be the source of financial mischief from the likes of Archegos Capital Management, the family office of billionaire Bill Hwang.

Hwang got rich—an estimated $10 billion—operating hedge fund Tiger Asia Management until the fund pleaded guilty to wire-fraud charges in 2012 and Hwang was barred by U.S. regulators from managing client money. That’s when he setup his family office.

But Hwang wasn’t apparently content to just conserve his $10 billion. Employing an exotic form of leverage known as a total return swap and investment bankers who didn’t pay a lot of attention to Hwang’s exposure, he managed to leverage his $10 billion to an estimated $30 billion in securities before one of the stocks collapsed.

That’s when the investment bankers started to bail out. In the fire sale that followed, Morgan Stanley took a $900 million loss on securities, and Credit Suisse lost $4.7 billion, a year’s earnings for the Swiss bank.

Hwang’s now reportedly worth a mere $2 billion, but he deserves no sympathy, nor do the executives at Credit Suisse who walked the plank—their reputations and egos may be bruised, but I’m guessing they still have plenty in the bank.

Reserve your sympathy for the mom-and-pop investors who had money in stocks like ViacomCBS, which lost half of its value in two days after the banks sold off Hwang’s holdings. These are always the people who get hurt in these implosions.

Given all this, you would think the wealthy would be generous contributors to the party that is the traditional defender of free markets, but that hasn’t been the case recently. The latest fund raising reports from the National Republican Congressional Committee and its senate counterpart show a precipitous drop in corporate PAC donations. The bulk of the money is coming from small, individual contributions.

But there’s a way the GOP can send a message to the ungrateful. Congressional Republicans have said they won’t support an increase in corporate taxes to pay for Biden’s infrastructure program. Maybe the GOP should compromise on that position to get the attention of the benefactors of their largesse.

Observations from the center stripe: High ranking edition

NEVADA COUNTY ranked 10th in the nation at 19% when it comes to the increase in the value of a home from February 2020 to February 2021, according to statistics compiled by The Wall Street Journal…GIVEN THE county’s historically low vaccination rate, don’t expect us to escape the clutches of COVID-19 or its variants anytime soon…OPPONENTS OF a vaccination passport aren’t getting vaccinated and don’t want to be punished for it…HUNTER BIDEN is the Billy Carter of the Biden administration. He’s writing a confessional now because he can make a lot of money doing it…ON THE other hand, Rep. Matt Gaetz is everything Republicans hoped Hunter Biden would be…ALABAMA WASN’T the best place to try to unionize Amazon workers. In a state where the minimum wage is $7.25, $15 an hour is a lot of money…

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LaMalfa’s hope to have it both ways is wishful thinking

It’s the nature of politics to rally ‘round the flag when it comes to a party’s position on the major issues of the day. This is particularly true of Republicans who aspire to reelection or higher office and fear the wrath of you-know-who.

One way to stay on the good side of Donald Trump is an iron-fisted approach to illegal aliens, portrayed by the Grand Old Party as disreputable people—possibly criminals—who want to take jobs no Americans want. Rep. Doug LaMalfa can be counted among the believers.

He backed Trump’s call for the “big, beautiful” border wall that would be paid for by Mexico, and cheered brass knuckles handling of those who dared cross the border. LaMalfa reaffirmed his position last month when he voted against HR 6, the Biden administration’s attempt to reform part of our broken immigration laws.

Portraying the Biden effort as a bill to grant mass amnesty to millions of illegal immigrants while doing nothing to improve border security, LaMalfa zeroed in on minors dumped are our border. “We must stop sending signals to the rest of the world that we will give amnesty protection followed by a shortcut to citizenship for those who cross the border if they are minors.”

LaMalfa issued the statement March 19, a day after he voted for the Farm Workforce Modernization Act of 2021, a bill that offers a path to legal status—either five-year visas or citizenship—for longtime U.S. agriculture workers with clean records who are in the country illegally.

If that sounds like amnesty, you stand in solidarity with the majority of Republicans in Congress. But you won’t be standing with LaMalfa, who has backed the measure since it was first introduced in the House in 2019.

In fact, LaMalfa consorted with known Democrats to help develop a bipartisan measure that was ultimately co-sponsored by Representatives Zoe Lofgren, D-San Jose, and Don Newhouse, R-Washington State. “Agriculture’s been in desperate need of a stable, solid labor force for a long time” LaMalfa said then. “A formal system of documentation will be better for the workers, it’ll be better for the farmers, it will be better for the nation’s security.”

If this makes LaMalfa sound like a hypocrite, he’s hardly alone. This carve out is a classic example of former Speaker Thomas P. “Tip” O’Neill’s observation that “All politics is local,” and members of both parties will ignore their stated position on an issue when it benefits their constituents.

LaMalfa represents thousands of farmers in the first congressional district, many of whom rely on America’s 2.4 million farm workers to work the farms and harvest the crops. The prospect of a stable work force resonates in California’s $50 billion agriculture industry, the source of over 400 commodity crops that supply much of America’s fruits and vegetables.

Those crops are worked and harvested by an estimated 500,000 to 800,000 farm workers, most of whom are undocumented. If the immigration hard liners in the Republican Party get their way, much of America’s agriculture industry—and one of California’s biggest industries—will rot in the fields.

The measure passed in the House the first time in December 2019 with a bipartisan vote of 260-165 after Speaker Nancy Pelosi appeared on the floor to make a rare personal appeal to colleagues to support the bill, calling the measure “a historic victory for farm workers and for growers, which will ensure that America will continue to feed the world.”

LaMalfa’s fellow House Republicans were less than enthusiastic. Just 34 Republicans voted for the House measure, and only five of the 21 Republicans on the House Agriculture Committee backed the bill.

Conservatives who opposed the bill portrayed it as amnesty for people in the country illegally. The Heritage Foundation said that it would “bless the actions of aliens and agriculture employees who have ignored the law.” Others portrayed the bill as an open door to criminals.

The White House was silent on the measure and it never came to a vote in the Republican-controlled Senate. Majority Leader Mitch McConnell made it clear that no bill would face a vote if Trump wouldn’t sign it.

Democrats now have a narrow majority in the Senate and a smaller majority in the House, which showed in the more narrow victory this time around, 247-174. LaMalfa was one of just 30 Republicans who voted for the measure in March, down from 34 in 2019.

Several farm groups that typically support Republicans are behind the bill, as is the United Farmworkers Union. But if the measure is going to pass the Senate, backers will have to round-up at least 10 Republican votes to avoid a filibuster. Senators Mike Crapo, R-Idaho, and Michael Bennet, D-Colorado, are sponsoring the measure in a bipartisan effort to find enough votes.

There are more than 10 Republican senators from farm states who should be in favor of the measure, but they may not want to face the wrath of Trump or conservative voters who aren’t willing to compromise on the issue.

Congressional Republicans are wasting no time slamming the Biden administration for the recent surge of immigrants on our southern border, eagerly promoting inspection tours while pretending to be concerned for women and children trapped at the border. Even Senator Ted Cruz was spotted on the American side of the line.

The hope that Republicans are willing to carve out an exception for long-time farm workers is a fanciful one, a subtle distinction that is unlikely to sway conservative voters and the people who represent them. President Joe Biden said he supports the bill, but his highest priority will be passage of a big piece of his infrastructure proposal before the mid-term elections.

LaMalfa has expressed hope for an exception, emphasizing the bill’s narrow scope and noting it only applies to the ag sector. He said in 2019 that he hopes the bill can be kept “in its own protective little bubble,” away from the fight over broader immigration policy.

This time around? LaMalfa has yet to issue a statement on the second attempt to get the bill passed. Maybe he thinks silence will enable him to have it both ways.

Observations from the center stripe: Chaos edition

GIVEN THE track record of the Newsom administration, expect chaos when California opens vaccinations to everybody over 16…WHEN I see somebody driving alone with his mask on, I assume he wears a belt and suspenders…POLLS CLAIM people want tougher gun restrictions, but they don’t want them bad enough to punish Republicans who stand in the way of reforms…A PICTURE that I’m sure will be all over conservative media shows migrants at the border wearing T-shirts that say, “Biden Please Let Us In!” Has anybody seen Roger Stone recently?…SIDNEY POWELL, one of the Trump attorneys who tried to overturn the election results, now claims that “no reasonable person” would believe her outlandish claims were “statements of fact.” I can think of several million who did…LADY GAGA’S $500,000 reward for the return of her two stolen French bull dogs will only encourage the bad guys to target the expensive pets of prominent people…

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Exercising your right to be wrong in Nevada County

What exactly does “Nevada County Strong” mean, especially when county officials stand accused of strong-arming private citizens for exercising their constitutional right to organize and object to government mandates?

Attorneys for the Nevada County Restaurant Coalition and other aggrieved parties may get a chance to ask the author of the phrase, Supervisor Heidi Hall, if a $1.5 million suit against the county ever goes to trial.

Hall coined the term to describe the county’s reaction to the COVID-19 pandemic during the year she chaired the county Board of Supervisors. But if claims alleged in the suit are true, some of the county’s actions were hardly exemplary of the “Nevada County way.”

The suit, which the county is trying to get dismissed, is seeking damages for losses allegedly caused by county and state pandemic mandates that closed or throttled local businesses.

When the mandates were imposed by the state last spring, Nevada County officials urged residents to embrace the “Nevada County way”; Play nice with each other and follow the rules. But as it has become clear to anybody who is paying attention, restaurants, bars, gyms and other venues are operating in open defiance of the mandates.

Even worse in the minds of the supervisors, people were challenging county officials to do something about it. Take Ken Paige, co-owner of Friar Tuck’s, an organizer of the coalition, and a party to the current suit. Paige told the supervisors in public that he would continue to operate regardless of restrictions.

 “You can point to me as probably the instigator of all the issues you’re facing, and I had no idea all of this would happen,” Paige said. “But we’ve rallied. We have 300 to 400 people now, we have a war room of people.”

Paige added he urged other business owners to reopen despite the COVID-19 mandates. “It’s going to take a bulldozer to take us down and we are going to continue to do what’s necessary, safely, responsibly,” he said. “We’re going to reopen all of our businesses, all of our cities, we’re not going to close.”

“I’m not going to cooperate with my own destruction,” Sergio Martignago of Sergio’s Caffe told the supervisors. Friar Tucks and Old Towne Café were cited by county officials for refusing to follow the mandates, and accumulated fines of about $5,000 each when they sat down with county representatives to resolve the matter.

That’s when, according to the suit, “…defendant (County Counsel Katherine) Elliott stated that as a condition to reinstating the operating permits of, and reducing the fines on Friar Tuck’s, Old Town Café and Coalition members, plaintiffs were to ‘behave’ and stop asking people to write letters to county and local officials.”

The suit also claims “Elliott stated that plaintiffs’ establishment of the coalition would be considered as grounds to refuse to negotiate a lowering of the fines…” In other words, punishment for organizing opposition.

In comments when the county moved to dismiss the suit, Elliott said the request for the group to “behave” was part of normal negotiations. Or maybe, as the suit alleges, the efforts to silence opponents of the mandates “were undertaken on behalf of” the supervisors and was official policy of the county.

After all, allowing opponents to publicly defy the county might lead citizens to believe the supervisors were impotent or have little appetite for enforcement of the state’s pandemic mandates. The record suggests the latter is the case.

When county public health officials requested an enforcement tool in the form of an urgency ordinance that would have made state and local mandates enforceable by hefty fines, it was rejected by Supervisors Ed Scofield and Sue Hoek. (An urgency ordinance requires votes from four of the five supervisors to pass.) Scofield said there was no real urgency because most businesses were in compliance.

The county has since instituted a complaint driven process, where citizens are invited to file complaints against businesses not complying with COVID-19 regulations. Mali LaGoe, acting county development agency director, said every complaint is followed up by a letter to the business and is shared with the appropriate jurisdiction.

After that? In the words of Amy Irani, county environmental health director: “Failure to comply unfortunately results in enforcement action, which is the last thing we want to do.” So they don’t.

Current supervisors chair Dan Miller and Hoek decided to float a “Reopen Nevada County” resolution that would encourage the state to pay attention to the concerns of small counties while providing clearer guidance on what’s permissible.

The resolution was based on a template developed by Assemblyman Kevin Kiley and embraced by other elected Republican officials in the north state, and has already been passed by 11 other counties. Miller conceded the other attempts got no traction from the state (several of the resolutions were just ignored), but that didn’t stop him from spending four hours on the matter before the resolution was tabled.

It would be unfair to put the entire onus on the county. Nevada City turned down $100,000 from the county to hire an additional officer to enforce COVID-19 mandates. Police Chief Chad Ellis said extra staffing wasn’t needed in part because only one business wasn’t in compliance at that time.

Grass Valley took the money for overtime and other enforcement expenses related to the pandemic. Have you seen either jurisdiction crack down on any of our scofflaws? Maybe Mill Street and historic Nevada City aren’t patrolled on a regular basis.

Then there’s the public rallies where nobody is wearing a mask and the recent closing celebration of a popular Grass Valley restaurant, crowded all day with diners not wearing masks. It’s no wonder the state had to lower the bar before Nevada County could move from the purple tier to the red tier.

Meanwhile, businesses that are trying to play by the rules—businesses like the Move! Fitness Studio in Nevada City—are beginning to look like suckers. They are trying to get by for now by holding morning walking sessions and keeping in contact with their clients over the phone, but that doesn’t come close to covering the rent.

“It’s frustrating and it’s confusing when we are very aware that we are one of the few gyms that are actually closed,” co-owner Wendy Riley told The Union when the county was still in the purple tier.

“We don’t want to be the gym cops,” said co-owner Marilyn Rohrbacher. “We just hope and pray that everybody does the right thing but from what we understand that’s not happening, so it just leaves us very frustrated.”

Since their elected leaders are showing little inclination to enforce the state mandates, Riley and Rohrbacher might as well join the other scofflaws. 

Observations from the center stripe: Stimi edition

IF YOU don’t need that $1,400 stimulus check and have grand children, you should give them the money. They’re going to pay for it anyway…”STIMI” IS the slang term for your stimulus check. If it sounds like play money, maybe it’s because we’re financing it with more debt…THERE ARE reports that half of the Republicans in the House aren’t getting vaccinated. How do our two representatives stand on the matter?…CONSERVATIVES WERE furious over the bank and auto industry bailouts, even though the money was paid back. Why aren’t they complaining about the Trump airline bailout that will never be repaid?…THIS STUFF must be good: Trump Blanc De Noir won a “Sparkling Sweepstakes” award at the annual wine competition sponsored by the San Francisco Chronicle, which has never missed an opportunity to knock the former president…

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QUICK HITS: Expect chaos in California come April 15

–Given the track record of the Newsom administration, expect chaos when California opens vaccinations to everybody over 16 on April 15.

–Polls say people want tougher gun restrictions, but they don’t want them enough to punish Republicans who stand in the way of reforms.

–There have been a lot of complaints about how women are being treated in the men’s and women’s college basketball tournaments. We wouldn’t have this conversation if the women generated the same kind of revenue the men produce.

–Well, that’s a fine mess the Biden administration made of the illegal immigration issue. The Republicans already have an issue for the 2022 elections, and the ban on Border Agents talking to the media will just raise suspicions about what’s going on.

–The Wall Street Journal had a picture that I’m sure will be all over conservative media showing migrants at the border wearing T-shirts that say “Biden Please Let Us In!” Who do you suppose came up with that idea?

–Sidney Powell, one of the Trump attorneys trying to overturn the election results, now claims that “no reasonable person” would believe her outlandish claims were “statements of fact.” When you consider how many Trump supporters believed her, you have to wonder if there are any “reasonable people” left in the Republican Party.

–Lady Gaga’s $500,000 reward for the return of her two stolen French bull dogs will only encourage the bad guys to target the expensive pets of prominent people.

–Manufacturers of condoms expect sales to rise as bars, night clubs, and other entertainment venues reopen. Meanwhile, the Gap stores are expecting a peacock effect as people dress to impress.

–Here are two reasons why football players should hold out for every dollar they can get: Quarterback Alex Smith, the AP Comeback Player of the Year for enduring 17 operations and almost two years of rehab, has been cut by Washington. Linebacker Kyle Van Noy endured constant hip pain to start all 16 games for Miami. He was cut too.

–When it comes to the contracts of NFL players, the only number that matters is the amount of money that’s guaranteed. Nothing else in those contracts is guaranteed.

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Don’t expect the South to be responsible when reopening

Red states in particular seem to be hell bent on throwing off the shackles of the pandemic and reopening their economies because, you know, money is everything.

When announcing these decisions, the governors always include some sanctimonious statement about expecting people to act responsibly when it comes to wearing masks, social distancing, and other safety measures.

But some new statistics suggest people leading the charge are likely to be the least responsible when it comes to personal behavior. Ironically, some new economic studies suggest just throwing caution to the wind won’t solve your economic problems.

The statistics come from the National Center for Health Statistics, which calculated the longevity rates in the 50 states for 2018. Hawaii finished first in the latest rankings, with an average life span of 81 years, while West Virginia brought up the rear at 74.4 years.

California finished second at 80.8 years, and the 11 healthiest states were all in the blue column. Utah was the healthiest red state at 79.6 years, no doubt a reflection of the Mormon opposition to drinking and smoking.

The eight unhealthiest states were all red, seven of them in the deep South. All of them have high levels of gun ownership, maternal mortality, suicide, and drug addiction. They are also high on the charts when it comes to chronic diseases like obesity, diabetes, heart disease—most driven by poor personal choices.

Then there are the public health decisions leaders of these states make, which show a strong correlation with longevity. In particular, how did these states respond to Obamacare and the accompanying expansion of Medicaid for the poor?

“States that did not take (Obamacare) tended to be in the South,” said Dr. Eileen Crimmins, co-director of the USC/UCLA Center on Biodemography and Population Health. “Red states just didn’t take the money and so they have large uninsured populations, which has an effect because these people just don’t go to the doctor.”

States leading the charge to reopen include Florida (ranked 22nd) Texas (28th), Oklahoma (45th) and Mississippi (49th). Past experience suggests these people won’t act responsibly when their economies open up and they have to interact in public.

Ironically, it may not do their economies much good, according to recent studies by economists at the University of Chicago who examined what motivates consumers to get out and spend. New research suggests that dormant economies won’t bloom until consumers lose their fear of the coronavirus.

“The state of the pandemic, not any orders the government imposes about the pandemic, is what drives people,” said Chad Syverson, an economist who has studied the phenomenon. “If the pandemic improves, people will go out at a higher rate. The orders themselves are icing on the cake.”

To measure the impact of government imposed lockdowns versus the effect of voluntary distancing, Syverson and his colleague at the University of Chicago, Austan Goolsbee, used cell phone data to track customer visits to 2.25 million businesses in commuter zones across the U.S. last year from January through May.

This allowed researchers to compare consumer behavior in neighboring jurisdictions with the same exposure to COVID-19, but different shelter-in-place policies. If shutdowns were responsible for last year’s economic collapse, jurisdictions that remained opened should have done significantly better than their neighbors that shut down.

Researchers found a 60% decrease in consumer traffic, with only 10% attributable to shelter-in-place orders. In other words, the decline was 10% greater in areas that locked down.

“What all these results have shown is the primary driver of business activity is how comfortable or uncomfortable people feel going out to businesses given what’s going on with the pandemic,” Syverson said.

So don’t expect the pioneers to boom much faster than the laggards like California, but don’t be surprised if the South has to pay the price in a new wave of infections like Europe is currently struggling with.

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Betting post mortem: Blame it on the pandemic

As they say in those ads for mutual funds and ETFs, “Past performance is no guarantee of future results.” That is certainly the case when it comes to sports betting, as I was reminded again over the last two days.

After 152 bets over eight years that produced a 65% win rate, I actually lost money betting the first round of the NCAA Men’s Basketball Tournament, going 6-8. If you followed my picks and bet at the $100 level (risking $110 to win $100), you would have lost $280. (Don’t worry: your stimulus check is on the way.)

I’m inclined to believe the pandemic had some influence. For starters, there was no regional play this year because all of the games are being played in Indiana. That meant, among other things, that some teams were spared a cross-country trip to play in their region.

The pandemic impacted at least two of my picks. Georgia Tech, my pick over Loyola Chicago, lost its best player to the COVID protocols. I lost that bet. Oregon, another of my picks, didn’t get to play when Virginia Commonwealth was forced to forfeit because it couldn’t field the required minimum number of players.

Nothing works all of the time, so I’m not ready to abandon a system that has worked eight out of nine years. I’ll be back next season, but you may want to look elsewhere for betting advice just in case.

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