The following letter was received by Congresswoman Liz Cheney (R-WYO) in November of 2017. It is now June 15,2018 and she still has not responded. Apparently cattle theft in Wyoming is of no importance.

FROM THE DESK OF WILLIAM DOENZ
P.O. Box 6474
Sheridan, Wyoming 82801
November 6, 2017

Massachusetts senator and Democratic presidential contender Elizabeth Warren has broken with that consensus by proposing a tax of 2% on net worth above $50 million and 3% above $1 billion. It may never be enacted; yet in spirit it marks a historic pivot in the focus of capital taxation, from growth to inequality.

While there is no “right” level of inequality, it stands near historic highs and Democrats are unified in wanting to reduce it. Taxing wealth is an immensely appealing, nearly surgical strike at its most glaring manifestation. Yet it may not be an efficient response.

Income consists of money received each year in the form of wages, benefits, interest, dividends, capital gains and government transfers. Wealth consists of income you’ve saved over your lifetime or inherited, then invested in assets such as cash, bonds, stocks, property and stakes in a business, minus debts.

Wealth has always been more skewed than income and the imbalance has grown since the financial crisis. The median U.S. family’s income, adjusted for inflation, fell 4% between 2007 and 2016, while its wealth plummeted 20%, according to Federal Reserve figures. For the richest 10% of families, median income rose 9% while wealth leapt 27%. More than 80% of American households had less wealth in 2016 than on the eve of the last recession, in great part because their homes, the principal asset for most families, were below their precrisis values whereas stocks, whose ownership is concentrated among the rich, have roughly doubled since 2007.

Two broader economic forces have accentuated the trend: low interest rates, which boost property and stock prices; and unusually high profits. Treasury estimates that 52% of all investment income this year will flow to the richest 1% of families by income. The richest 0.1% of families are expected to earn nearly $1.5 trillion, of which 60% will be from investments.

This poses a number of challenges. For the middle class, stagnant wealth limits their ability to buy a home, pay for college or respond to a financial emergency. Wealth imbalances may also undercut economic growth because assets, which typically rise in response to interest rate cuts, are concentrated among people who are less inclined to spend.

For policy makers who want to tax the rich more, this limits the reach of income and consumption taxes. Shielding capital income leaves a big chunk of the richest families’ incomes untouched by taxes, says Greg Leiserson, director of tax policy at the Washington Center for Equitable Growth, a left-of-center think tank.

While property and some estates are already taxed, a wealth tax would hit every form of wealth. It can also be quite selective: Ms. Warren estimates only 75,000 families would pay her tax, yet it would raise $2.75 trillion over 10 years.

This would create administrative headaches such as how to precisely define wealth to limit avoidance. It also would raise economic issues. It was barely a year ago that Republicans slashed the U.S. corporate tax rate to closer to international levels in hopes of juicing growth. A wealth tax would go in the opposite direction. For example, on an investment in a company averaging 8% annual returns, a shareholder may expect her holdings to grow 8% per year. A 3% wealth tax on that increase represents, on average, an implicit 37.5% income tax, on top of the corporate taxes. And unlike the corporate tax, it would have to be paid even if the company made no money that year.

Mr. Leiserson predicts the effects on investment and growth would be small, and offset by public investments financed with the tax.

Denmark abolished its wealth tax, borne by the wealthiest 2% of families, between 1989 and 1997. In the subsequent eight years, the wealthiest families’ net worth rose 30%, according to a study by Katrine Jakobsen and three co-authors distributed last year by the National Bureau of Economic Research. The authors attribute most of this to increased saving.

Alan Auerbach, an economist at the University of California at Berkeley, thinks this shows a U.S. wealth tax would reduce wealth and saving by enough to hurt investment and economic growth. This might be offset if the U.S. turns to foreign savings to finance an investment. This, however, means foreigners would take a bigger share of U.S. income.

There may be more effective ways to tax wealth. A large chunk of capital gains are never taxed because shareholders bequeath shares to their heirs without selling them. President Barack Obama proposed in one of his budgets taxing unrealized capital gains at death. Adam Looney, a Brookings Institution economist who worked on the proposal, says it would have raised roughly $200 billion over a decade. Mr. Auerbach says taxation at death seems to have less effect on the saving of the wealthy than taxation during life.

An even better response would be to attack the concentration of economic power that results in monopoly-like profits by reducing barriers to competition. Competition policy, unlike tax policy, faces no tradeoff between equality and growth.

Appeared in the March 7, 2019, print edition.
Credits: Wall Street Journal

It has been widely reported that in the California Legislature Democrats won supermajorities of two-thirds. This understates their control, which is more like three-fourths of each chamber: 28 of 40 Senate seats (with two vacancies), and 61 of 80 in the Assembly.

At the local level, the GOP’s last redoubt, Democrats advanced, too. Earlier this decade, Republicans filled almost half of California’s 2,500 mayoral and City Council seats, which are officially nonpartisan and hence offer camouflage to candidates from an unpopular party. This election flushed them out of that cover. Republicans now hold only 38% of those positions.

The Democrats’ crushing dominance allows them to use California as a progressive policy laboratory. As a result, the state has the highest welfare numbers (a third of all Americans on welfare live in California), the largest contingent of illegal immigrants, a burgeoning homeless population, onerous regulations on business and private property, mediocre public schools, high income taxes (the highest marginal rate is 13.3%) and sales taxes, a yawning gap between rich and poor, its own summer blend of expensive gasoline, bedraggled and crowded roads to punish people further for driving, and a widely mocked high-speed rail boondoggle.

To risk an analogy, California is to today’s Democrats roughly what South Carolina was to pre-Civil War Democrats: the showcase state, the vanguard of enlightened public policy offering itself for emulation. Yet it’s been a long time since the state produced political figures of obvious national importance such as Earl Warren, Richard Nixon and Ronald Reagan.Pete Wilson, the senator and governor, seems to have been the end of that line. Arnold Schwarzenegger’s governorship was a box-office flop. Jerry Brown, after 16 years in the gubernatorial chair, still wrestled with the mystery of Jerry Brown.

Even so, the state has one declared presidential candidate, Sen. Kamala Harris, and one potential contender, newly elected Gov. Gavin Newsom. Having moved its primary election up to March 2—Super Tuesday—the state may actually play a significant role in picking the Democratic nominee this time.

One-party California seems to follow more than lead the Democratic policy dance. Yet its example remains instructive—especially its attempts to implement some of the party’s 2020 enthusiasms.

Take infrastructure. Rather than repair freeways or build new ones, Mr. Brown decided to construct the high-speed rail line between Los Angeles and San Francisco. Vowing “hard decisions” and “tough calls,” however, his successor announced in February that “the project, as currently planned, would cost too much and take too long.” The train’s cost, at last estimate, was between $77 billion and $88 billion, four times the funds available. Incredibly, however, Mr. Newsom didn’t cancel the project. He merely postponed it indefinitely, except for the rump railroad between Merced and Bakersfield, for which not a single mile of track has been laid.

Or consider health care. A bill to create a single-payer system in California passed the Democrat-controlled state Senate in June 2017, only to stall in the Democrat-controlled Assembly when Speaker Anthony Rendon confessed that his party had no idea how to raise the $400 billion annually the system is estimated to cost. (The whole state budget amounts to $201.4 billion.) Last month Mr. Newsom endorsed “the long-term goal of single payer” but pointedly didn’t introduce a bill to achieve it. In the long run, liberals used to say, we are all dead. It will be interesting to see which arrives first: the train or the government doctors.

The promises of California’s government programs are too good to be true, but also, apparently, too attractive to resist. Karl Marx called his kind of socialism “scientific,” as opposed to his predecessors’ “utopian” fantasies. California appears to be pioneering a third kind, which might be called “infantile.” Our Democrats strongly suspect their programs won’t work and know they can’t be paid for—but want them anyway. To analyze that perversity, Freud might be more helpful than Marx. At any rate, California’s experience offers cautionary lessons on the way to 2020.

Such a shift is happening right now with the country’s two major political parties. Both Republicans and Democrats are in the midst of—and in fact, may be near the end of—significant realignments that are altering who they are and what they stand for.

This realignment was on display in the results of both the 2016 and 2018 elections. Yet, as we’re seeing in the current policy debates in Washington, the parties haven’t caught up with their own new realities. In fact, they are facing a kind of identity crisis, in which they are pushing policy prescriptions that aren’t really in tune with their changed rank-and-file membership.

The Democrats, once the party seen, at least in stereotype, as the home of lunch-pail, working-class union members in the Rust Belt, now are a party dominated by higher-educated, higher-income voters, particularly women, on the coasts, combined with progressive young voters and minorities.

And the Republicans, once the party seen in stereotype as the party of the country club and the Chamber of Commerce, now are dominated by working-class and middle-class Americans, particularly men, as well as older citizens in exurban, small-town and rural America.

This shift is well illustrated by two groups my Journal colleagues have been tracking closely in recent years: college-educated white women, and men without a college degree. In the 1990s, these two groups voted almost identically: They were just right of center, almost in the middle of the political and ideological spectrum.

Now they have veered off in dramatically different directions. Last fall, college-educated white women favored Democrats in House races by 33 percentage points, while white men without a college degree favored Republicans by 42 points. These two groups also are rough proxies for Hillary Clinton and Donald Trump voters in the 2016 presidential elections.

As the rank-and-file has shifted, so has the geographical center of the two parties. Among Republicans, New York liberals and California conservatives once coexisted as powerful internal blocs. Indeed, since World War II, Republicans five times picked a presidential nominee from California (Richard Nixon three times, Ronald Reagan twice), and had a serious California contender as late as 1996 in former Gov. Pete Wilson. Twice they chose New York’s Thomas Dewey.

Now California and New York rarely produce a Republican candidate who can win statewide, much less lead the party nationally. The party is weak on the two coasts, and is centered in the interior of the country.

Democrats, meanwhile, regularly nominated presidential candidates from the heartland and the South—Missouri’s Harry Truman, Texas’ Lyndon Johnson, South Dakota’s George McGovern, Georgia’s Jimmy Carter, Arkansas’ Bill Clinton, Tennessee’s Al Gore. Each of those states has since turned Republican red.

The problem for the two parties is that these changes are creating some ideological and policy whiplash. Republicans, traditionally dominated by business interests, used to be the party of free trade and open movement of workers across borders. But the new, middle-America Republican party under President Trump has become the party of tariffs and border walls.

And when the core of the party is older, working-class Americans, can Republicans really advocate cutting entitlements, as former House Speaker Paul Ryan did in the wake of a big tax cut?

And for Democrats, can the party that increasingly represents wealthier Americans really be the party that stands for a 70% top tax rate and an across-the-board wealth tax on the most well-heeled? And can the party that considers climate change an existential threat really speak to the coal miners and auto workers that used to form part of its core constituency?

A lot of this realignment is captured in the immigration issue. To vastly overgeneralize, Democrats are the party that embraces diversity. Republicans are the party that fears diversity is changing the face and the economy of America in harmful ways.

Mr. Trump, better than most, has understood the change within his own party, while also accelerating it. The new GOP is, for now at least, the party of Trump.

For their part, Democrats have some tough choices: Do they pursue a more moderate policy path that tries to meld the impulses of the old Rust Belt version of their party with the new coastal and millennial sentiments? A couple of presidential contenders—Sens. Sherrod Brown and Amy Klobuchar—are trying to do that. Others—Sens. Kamala Harris, Cory Booker—play more to the new, progressive, millennial version of the party.

Footnote: The odd constituency out in the realigned world may be the business community, which now finds neither party particularly in sync with its free-market view of the world.

Appeared in the February 26, 2019, print edition.
Credits: Wall Street Journal

So far, every major Democrat who has declared for the presidency—Elizabeth Warren, Kamala Harris, Cory Booker, Kirsten Gillibrand, Amy Klobuchar, Tulsi Gabbard—has felt obligated at least to genuflect in the direction of Cardinal Bernie.

If in January 2015 you walked up to, say, 50 million American voters and asked them what they thought of when you said, “Bernie Sanders,” 99.9% of them would have replied, “Nothing.” If in early 2018 you had done the same thing with Alexandria Ocasio Cortez, same answer—nada.

Today, the two socialists are household names. The Democrat Party belongs to them.
Bernie” is running for president again. In the beauty-contest opinion polls he is only a step behind Barack Obama’s vice president. And by the current standards of America’s political culture, AOC is a star.

Science no longer believes that genes are destiny. But in politics, which no one will confuse with science, it was inevitable that the Democrats’ genetic code on day would bring them to this point—unabashedly the party of the far left.

Both Republicans and Democrats have had to contend with challenges for control from the distant right and left. What primarily has kept these impulses at bay is the reality check of needing to assemble an Electoral College victory out of all the states. When the parties’ nominations have gone well right or left—Goldwater in 1964 and McGovern in 1972—they’ve usually lost by huge margins.

Eugene V. Debs was the first Socialist to run for president, in 1900. Debs, who had been a Democrat, helped found the Industrial Workers of the World. In 1935, playwright Clifford Odets wrote a play called “Waiting for Lefty.” His wait is over.

The Ocasio-Cortez Green New Deal is an explicit homage to FDR’s New Deal, and Nancy Pelosi understood exactly what she was doing when she called it a “green dream or whatever.” She knows it isn’t 1935.

The American left went into decline after World War II, as the U.S. economy rebuilt. One can’t overstate the central role that private-sector labor unions—auto, steel, mines—played in keeping the Democrats centered.

Whatever their tensions with industrial capitalism, American union leaders like George Meany, Lane Kirkland and Leonard Woodcock knew their success depended on the private sector’s success. With the private unions’ decline and the rise of public-sector’s success. With the private unions’ decline and the rise of public-sector unions, whose lifeblood is tax revenue, a significant brake on the party’s roll toward socialism disappeared.

The Democrat left re-emerged in the 1960s and ‘70s, pushing the party outside political and cultural norms with street protests, antiwar marches and “occupations’ of universities.

Left-wing academics in those years not only began to develop the theories of gender, sex, race and identity that today animate core liberal beliefs, but they also drove out dissenting professors, mostly conservatives, who might have challenged those ideas.

Without a rigorous opposition, these left-wing theories descended into intellectual gobbledygook like “intersectionality.” It is no accident that the Democrat Party is represented today by the Millennial goofiness of Ms. Ocasio-Cortez or the smiling anti-Semite, Rep. Ilhan Omar of Minnesota.

Nor is it an accident that the Democrats are embracing ideas untethered to proofs or logic such as the Green New Deal, free college and pre-1960s income-tax rates.

Mr. Obama is a central figure in this story. He held the door open for the socialists with his endless speeches about “the wealthiest” and “the 1%.” Arguably Mr. Obama was our first Pop Marxist president, obsessed with class issues.

Hillary Clinton’s 2016 defeat was the best thing that has happened to the Democrat left in the entire postwar period. She stood for what remained of the respectable administrative-state intellectuals who had worked for Bill Clinton and Al Gore. Nudge economics and all that. The left was tired of them.

Mr. sanders was in the right place at the right time. The modern left, the children of the new, no-standards university system, went gaga for Bernie’s comic-book socialism. “Medicare for All!” Bernie shouted across the land. They sent him $25 online donations by the millions. And still do.

The U.S. today has a labor shortage. The workers of the U.S. can’t unite because they’ve got to go to work.

What we have here is artisanal socialism, free-riding luxuriously on capitalism’s manifest success. In New Hampshire Monday, Kamala Harris said, “I am not a democratic socialist.” She should take a political DNA test. I’ll bet she is, or soon will be.

Appeared in the February 20, 2019, print edition.
Credits: Wall Street Journal

Former New Jersey Gov. Chris Christie sees things a bit differently. On MSNBC’s “All In With Chris Hayes” last week, he rejected the idea that the Trump administration is about to collapse: “They say this is the inflection point. This is when the whole thing falls apart. I don’t have enough fingers and toes to count how many times that’s been said.”

Whether we are at an “inflection point” or “inflection moment” or neither, the buzz word “inflection” is clearly having a moment.

In politics and business, an “inflection point” has come to signify a time of dramatic change. The catch phrase is typically delivered with a portentous air that makes it sound far more important than a mere “turning point.”

”Inflection point” comes out of mathematics, originally used for the point on a curve where it changes direction. ”Inflection” (or “inflexion” as it has some-times been spelled) comes from the Latin verb “inflectere,” meaning. “bend in” or “curve.” The bendy meaning of the “flect-ere” root ( shows up ‘in other words such as “reflect” (literally “bend back”), “deflect” (bend away) and ”.flexible” (capable of bending); In grammar, “inflection” came to refer to a kind of bending in the shape of a word-that is, when a base word is given an ending to indicate a. change in function, such as “-s” marking a plural noun .or “-ed” marking past tense verb.

As early as 1721, the lexicographer Nathan Bailey defined the “inflection point of a curve” in his “Universal. Etymological English Dictionary” as “the point where a curve begins to bend back again a contrary way;’ The expression remained in the geo-metric realm for ·a few centuries before it made the metaphorical leap into other spheres of life.

Economic types began using “inflection point” in the 1970s and ’80s to talk about times of rapid transformation, no doubt influenced by the curves on financial graphs and charts. In 1980, the economist Walter Heller predicted that the country would pull out of a recession since the economy was at an “inflection point.”.

From there, “inflection point” got taken up in the business world to label. moments of significant change for a company or industry. The term especially gained currency in the technology sector; Intel CEO Andrew Grove was credited with popularizing it in Silicon Valley. “ Inflection point” joined other mathematical terms that have turned into business metaphors, such as “parameter,” “exponential growth” and “calculus.”

Politicians eventually gravitated toward this momentous phrasing as well. ”Inflection points” flourished as rhetorical touchstones in the Obama administration, particularly in speeches by then-Vice President Joe Biden. At an entrepreneurship summit in Istanbul. in 2011, Mr. Biden declared that “we are at an inflection point in world history,” adding that the expression was something his “physics professor used to say.”

“An inflection point is when you sit behind the wheel of an automobile that is going 60 miles an hour, and abruptly you turn it five degrees in one direction,” Mr. Biden explained. ”It means you will never be back on the path you once were. It is impossible to return to that path.”

Nowadays, when Ms. Harris or other political figures call out an “inflection point” or “inflection moment,” such an elaborate elucidation is no longer required. The historical pathway of the word “inflection” has been irrevocably bent.

Appeared in the February 16, 17, 2019, print edition.
Credits: Wall Street Journal

The bill from Rep. Pramila Jayapal and other House Democrats is expected to closely mirror a Senate Medicare for All bill from Sen. Bernie Sanders (L, Vt.), which would expand government-run health insurance to all and do away with the current system of employer-provided coverage. At the same time, more than 100 organizing events will take place this week nationwide to build grass-roots support for Medicare for All.

The initiatives will put added pressure on Democratic candidates to make clear where they stand on the issue.

Some of the candidates want a total government health system, also known as single payer, that would end employer and most private coverage. Others are supporting steppingstones to single payer, such as a letting people younger than 65 buy into Medicare, the popular program for seniors.

The disagreements are providing an opening for opponents to attack.

”Medicare for All’s bumper sticker message sounds good until we find out what’s under the hood,” said Rep. Greg Walden (R., Ore.) in a February subcommittee hearing. ”We know it ends employer and union coverage and hurts the Medicare trust fund.”

More than half of Americans support Medicare for All, according to a January poll by the Kaiser Family Foundation.

But support slips when people are asked about aspects of the plan. Just 37% of people back Medicare for All if they hear it requires higher taxes or eliminates private insurance.

Democratic candidates largely support a national government health system of some sort, where people pay for publicly funded health coverage instead of paying private insurers. But they remain polarized over implementation.

Democratic Seri. Kamala Harris of California, a presidential candidate, faced a backlash after she said at a re-cent town hall that the Medi-care for All plan she supports would eliminate private insurance, which currently covers more than 150 million Ameri-cans. She has said she is also open to more moderate ideas.

Sen. Cory Booker of New Jersey said he backed Medi-care for All but still saw a role for private insurance, a system that exists in countries such as the U.K. that have a government health plan. “I’ve gone across this country, sat with Republican farmers, independents, everybody agrees that the United States of America, we should never have some-one who can’t get access to care because they can’t afford it,” Mr. Booker said recently.

Democratic candidates such as Mr. Booker and Sen. Elizabeth Warren (D., Mass.) have signed onto the Medicare for All bill from Mr. Sanders but are treading cautiously by also backing more incremental measures. Other potential candidates, such as Sen. Sherrod Brown (D., Ohio), have refrained from supporting Mr. Sanders’s plan.

Ms. Warren said Medicare for All wouldn’t necessarily mean an immediate end to employer-provided health insurance.

Republicans and industry groups opposed to Medicare for All are stepping up their attacks. Partnership for America’s Health Care Future, made up of hospitals, drug makers and insurers, has had briefings with Democratic lawmakers and launched digital ads opposing a national health care system.

Appeared in the February 16, 17, 2019, print edition.
Credits: Wall Street Journal