2018: The Year in Review

strpJoin Capital Zoo as we peer into our crystal ball and review the year that’s about to be:

January 4: President Trump claims that the voice on the infamous Access Hollywood tape is really Hilary Clinton’s. Congressional Republicans demand an investigation into Clinton’s sexual assaults.

February 11: Soohorang, the official mascot of the 2018 PyeongChang Winter Olympics, is banned for blood doping.

February 20: President Trump signs an executive order requiring all federal agencies to pay government contractors in Bitcoin.

March 4: The Academy of Motion Picture Arts and Sciences announces that actors credibly accused of sexual assault or harassment are ineligible for Oscars. As a result, the Academy Award for Best Actor goes to Stormtrooper #2 from The Last Jedi.

March 14: Video surfaces of President Trump thanking Vladimir Putin for throwing the election to him. Congressional Republicans call for the appointment of a special counsel into Clinton.

April 7: Fresh off his Oscar win, Stormtrooper #2 wins season 26 of Dancing with the Stars.

April 20: The Homeland Security Department finishes construction of Trump’s border wall. However, due to a precipitous drop in the value of Bitcoins, the contractor is underpaid. As a result, the wall is thirty inches tall.



May 2: Lin-Manuel Miranda premieres his new musical, Trump, in which he successfully rhymes “Scaramucci” with “Pair of Guccis” and “Grab her tushie.”

May 5: President Trump rolls over his phone in bed, accidentally tweeting out 280 characters of gibberish. It is retweeted 784,000 times.

May 6: CNN devotes its entire day of programming to analyzing Trump’s tweet.

May 17: Stormtrooper #2 gets his own talk show on NBC.

June 1: The alt-right movement, suffering from a profoundly hostile public image, changes its name to “Crabtree & Evelyn.”

June 2: Ivanka Trump announces her new line of body lotions will be sold exclusively at Crabtree & Evelyn. It is not immediately clear which one she is referring to.

June 18: Special counsel Robert Mueller announces his team has found definitive proof that President Trump personally colluded with Russia during the 2016 election. Congressional Republicans commence impeachment hearings on Hillary Clinton.

June 20: North Korean ruler Kim Jong Un opens a Twitter account. Surprisingly, most of his posts are Stranger Things fan fiction and retweets of Bobby Flay recipes.

June 28: Hillary Clinton releases her next book, What Happened During the What Happened Book Tour, and its follow-up, How What Happened Happened During the What Happened During the What Happened Book Tour Book Tour.

July 6: Steve Bannon announces he is temporarily removing himself from public life.

July 7: Steve Bannon’s neighbors report seeing a six-foot tall chrysalis growing in Bannon’s living room, accompanied by a strange vibration.

July 15: House Republicans demand the appointment of a special counsel to investigate Special Counsel Robert Mueller. House Democrats respond by calling for the appointment of a special counsel to investigate the Special Counsel  investigating the Special Counsel.

July 25: The Department of Labor reports that 63 percent of working-age adults in the Washington, DC, metropolitan area currently are employed by special counsels.

August 3: The Trump administration issues a directive to agencies banning additional words, including “education,” “organic,” and “Mueller”

August 12: Looking to bolster their offense, the New York Yankees acquire Tectron X47, a sentient 15-door tall cyborg developed in Japan for a three-year, $591 million contract.


August 28: The Homeland Security Department acknowledges that, due to the devaluation of the Bitcoin, its 30-inch tall border wall was built out of blocks of government-surplus cheddar cheese.

September 1: The Border Patrol reports an unusually large number of feral mice entering the country illegally.

September 16: Every starting and back-up NFL quarterback gets a concussion, forcing the League to cancel the rest of the season. In an unrelated development, Colin Kaepernick begins working as a Jimmy John’s delivery boy.

September 23: Steve Bannon finally emerges from his chrysalis as a matterless black aura that floats above the surface of the Earth, menacing all who stand in its path, but mostly Jared Kushner.

October 2: Vice President Pence confesses that he once made eye contact with a woman who was not his wife and announces his immediate resignation from office.

October 10: President Trump’s first nominee to replace Vice President Pence is withdrawn when, during his Senate hearing, he fails to correctly identify the United States on a map.

October 15: President Trump’s second nominee to replace Pence is withdrawn when, during his Senate hearing, he admits to being Vladimir Putin with a fake mustache and nose.

November 6: The battle for control of the Senate comes down to Arizona, whose election is thrown into chaos when feral mice, having fully devoured the government-surplus cheddar cheese border wall, eat through thousands of paper ballots.

November 10: Paul Ryan relinquishes the Speakership and resigns from Congress to become the official spokesman for P90X.

November 15: Unable to find a candidate who is not the subject of an ongoing sexual harassment investigation, Republicans nominate Stormtrooper #2 to run for Ryan’s Wisconsin seat. He wins and is immediately elected Speaker of the House by acclamation.

December 5: Steve Bannon’s matterless black aura returns to work at Goldman Sachs, where it proceeds to make $5 billion hedging against the government’s use of Bitcoins.

December 30: Calling himself the winningest leader in the history of the world, Donald Trump announces he has nothing left to accomplish and resigns from the Presidency. Without a sitting Vice President, the line of succession falls to House Speaker Stormtrooper #2, who is administered the oath of office by newly confirmed Supreme Court Chief Justice Ted Nugent.

December 31: Billions of people around the world ring in the new year, vowing that 2019 will be a marked improvement over 2018.

Ignoring Threats is Bad for Our Health


Here’s a scenario to chew over:

It’s 8 a.m. on a chilly December morning. President Trump at his desk in the Oval Office, hard at work watching Fox and Friends. The first of his 12 daily Diet Cokes is in one hand, the twittering fingers of his other hand perched over his phone.

Suddenly, National Security Advisor H.R. McMaster bursts in with Vice President Pence, CIA Director Pompeo and, what the heck, Jared Kushner. McMaster informs the President that the NSA has picked up chatter about an ISIS plot to attack a major U.S. city in the coming days with a powerful nuclear device. The death toll could be in the tens of thousands, millions left homeless, the economy rocked.

The Vice President asks McMaster what the odds are that this chatter is real. McMaster responds that, of 100 security analysts he asked, 97 believe the ISIS plot is likely to happen. Only three cast doubt on the intel.

What does the President do?

After tweeting out something in ALL CAPS about KEEPING AMERICA SAFE and BUILDING THE WALL, one would expect him to direct his administration to do everything in its power to stop the attack.

In fact, were it to get out that the President was informed of the high probability of an attack and did nothing, the calls for his impeachment would grow louder. And arguing that he did not act because the security assessment was not unanimous won’t hold water. After all, if there is one thing that (most) Americans can agree upon, it’s that protecting the public from serious, genuine threats to their safety and security is a legitimate role for the federal government.

This is why this week’s announcement that the Trump Administration is removing climate change as one of the global threats to the country’s national security is so absurd.

In essence, the White House has made the decision that a serious, genuine threat to the country’s safety and security is not a real problem at all. (Just imagine for a moment if former President Obama had removed ISIS from the list of threats to the country. We can name at least one compulsive Twitter user who would’ve gone nuts over that.)

There really should be no dispute that climate change is a serious, genuine threat. Serious, in that the Defense Department itself has identified it as something that keeps them up at night, stating in a 2015 report to Congress that:

climate change is an urgent and growing threat to our national security, contributing to increased natural disasters, refugee flows, and conflicts over basic resources such as food and water. These impacts are already occurring, and the scope, scale, and intensity of these impacts are projected to increase over time.

And the threat is genuine, demonstrated by the fact that 97 percent (if not more) of climate scientists agree that the climate is changing due to human activity.

No, 97 percent is not 100. But if 97 out of 100 firefighters told you your house was on fire, will you listen to the three naysayers and go back to watching The Voice?

Apparently, the Trump Administration is. And while the public (and hopefully Congress) would revolt if they learned that the President had rejected the view of 97 percent of security analysts, the White House’s rejection of the consensus of 97 percent of climate scientists is met with a shrug.

Partly that’s due to the fact that terrorism is more visceral. We can more easily tie a terror attack to the perpetrators than we can attribute a natural disaster like the California forest fires or Hurricane Harvey to climate change. And while hearing of a terror cell broken up provides an immediate (albeit short-lived) sense of relief, we don’t get the same feelings from efforts to slow the impacts of a changing climate.

But it’s also due in part to a certain level of timidity by those who believe the science in pointing out the impacts. Nobody should ever falsely attribute any one weather event to “climate change.” But the science behind the assertion that  climate change will lead to more extreme weather events is solid.

Perhaps it’s time, then, for some reframing.

In 2006, journalist Ron Suskind released The One Percent Doctrine, a book about the Bush administration’s fight against al-Qaeda. The title came from an anecdote in the book where then-Vice President Cheney articulated his approach to dealing with the threat of terrorism:

“If there’s a 1% chance that Pakistani scientists are helping al-Qaeda build or develop a nuclear weapon, we have to treat it as a certainty in terms of our response.”

The administration was criticized for the notion of taking decisive (and probably deadly) action based on just a one-percent risk; substituting a “hunch” for clear-eyed analysis and concrete evidence has disastrous ramifications (see “Iraq, 2003-?”).

But most sensible observers would agree that the consequences terrorists building nukes necessitates action even when 100-percent certainty is unattainable. If there was a 25 percent chance that a terrorist group was planning a devastating attack, would that be a high enough risk to take action? What about a 50-percent chance?

Or, more to the point, what about a 97-percent chance?

We understand the impacts of climate change – rising sea levels, more ferocious storms, droughts, resource deprivation, loss of life and property, and ultimately political instability – as well as we know the ramifications of a major terrorist attack.

So perhaps in the future, those who believe climate change is a threat need to adopt the “97 Percent Doctrine.”  Let the public know that there is a 97-percent likelihood that in 20 years their favorite beach destination will be underwater. A 97-percent chance that their community will be devastated by a Category 5 hurricane. A 97-percent chance that their children will inherit a lifestyle crippled by violent storms, political instability, and food shortages. If the public is willing to endure long lines at the airport to guard against a small chance of a terror attack, they should be willing to accept changes based on a 97-percent chance of an unstable climate.

If it sounds like fear-mongering, it’s not. The threat is real. It’s time to talk frankly and vividly about it.




The Simple Reason High-Tax States Are Getting Screwed by the Tax Bill

New-York-New-York-City-Chinatown-Manhattan-Usa-1777986.jpgAs the GOP-led tax bill stumbles its way towards the finish line, a number of House Republicans from New York and a handful of other states have come out against it. There aren’t enough to derail the bill, but the notion of a Republican voting against a tax cut still seems about as likely as a Star Wars fan rating the prequels as the best of the canon.

The reason is simple: the Tax Cuts and Jobs Act is potentially devastating to places like New York, New Jersey and California. By limiting the deductibility of state and local taxes (SALT) and property taxes to $10,000, the bill may actually increase the tax burden on many of these states’ taxpayers. As New York Republican Rep. John Faso put it in announcing his opposition to the final package:

I remain concerned that as a result of the state’s high income and property taxes, the partial elimination of the SALT deduction effective January 1, 2018 impacts New York families more severely than those in other states.  .  . the overall impact of changes to the SALT deduction will accelerate the trend of hardworking individuals and businesses already leaving our state – further eroding New York’s tax base.

It’s easy to think that this treatment of New York and the like is an intentional act of blue-state sabotage by Republicans. In truth, the lower SALT is more likely due to the fact that it raises a lot of revenue, helping to keep the bill under the $1.5 trillion bogey that Republicans had to hit to avoid needing the votes of Senate Democrats. (And if you had to choose between sticking it to middle class voters, or raising the corporate tax rate to 22 percent, well . . . never mind.)

The real reason that high-tax states are being screwed in this bill is much simpler, and it does not bode well for them: They simply don’t have any juice in Congress anymore.

Consider the Senate: In 1986, the last time a major tax reform plan passed, the 10 states* with the (current) highest tax rates were represented collectively by an even proportion of Democrats and Republicans. Today, those ten states send 19 Democrats and only one Republican to the Senate. That’s one of the reasons why, even though Ronald Reagan desperately wanted to eliminate SALT in 1986 (and had a Republican-led Senate), he ultimately gave up on it.


The House, meanwhile, presents a double whammy for these 10 states. First, those states are represented by a higher proportion of Democrats now than in 1986. In ’86, Democrats controlled the House. They don’t today, meaning that those 10 states’ representation in the House majority party has shrunk significantly.


Second, those 10 states have lost a net of seven seats due to reapportionment since 1986, giving them even less clout in the House.


The loss of clout among high-tax states has ramifications far beyond the tax bill. Let’s assume that voters in those states demand their state and local governments lower taxes to offset the increase on the federal side, particularly to help them get below the $10,000 cap. (This would be a tall order: some estimates put the average SALT deduction by California taxpayers at $23,000 and by New Yorkers at $26,000.)

Any reduction in revenue at the state and local level will likely be accompanied by spending cuts, particularly in states with balanced budget requirements. Those states will be forced to look to Washington for extra help. But with shrinking power in D.C., that help won’t come. And, as Rep. Faso warned, there is the possibility that the combo of higher taxes and less spending will lead more people to leave these states, further reducing their representation in the House.

From a purely political perspective, this should concern Democrats and cheer Republicans. But disrupting the longstanding fiscal relationship between states and the federal government that has been the cornerstone of tax policy for more than a century should concern everyone.

And, by the way, the White House should keep this in mind: While nine of the 10 “high-tax” states voted for Hillary Clinton in 2016, number four on the list is Wisconsin, the state that was critical to President Trump’s victory. Badger State voters might have second thoughts next time around if their loss of SALT leads to a tax increase.

*New York, Connecticut, New Jersey, Wisconsin, Illinois, California, Maryland, Minnesota, Rhode Island, Oregon

Photo: Max Pixel

Get Ready for the Great 2018 Tax Mess

files-1614223_960_720That big gust of wind you’re about to hear is a massive exhalation of relief from Republicans that, at long last, they’ve managed to pass a major piece of legislation in 2017.

Notwithstanding Doug Jones’ upset win in Alabama on Tuesday, Congressional Republicans appear to be on track to send to the White House a sweeping tax bill in the coming weeks. But that joy may be short-lived, for 2018 could be a very messy year – for taxpayers, and for them.

It’s worrisome enough for Republicans that their tax plan is massively unpopular. Their bigger problem is that the plan is massively complicated. Even with a carefully thought-out process, major changes to the tax code always lead to unintended consequences and intractable conflicts between provisions that won’t become apparent until CPAs and tax attorneys apply the new laws to their clients’ finances. The tax code is like a humongous Jenga tower: change one incentive or rule, and it impacts scores of others downstream.

And the current bill is hardly the product of thoughful deliberation. Already the bill’s writers have had to confront glaring contradictions and paradoxes as they cobbled together enough votes to pass it.

Once the final bill is signed into law, it will fall on staff at the Treasury Department and IRS to make sense of the new law, educate the public about how to apply new rules and clarify details that Capitol Hill left fuzzy.

And that’s the real problem: Treasury doesn’t seem even remotely ready to handle it.

The current fiscal year 2018 budget plan cuts funding for the IRS, on top of years of cuts that have left its staff depleted. As National Treasury Employees Union President Tony Reardon testified before a House Ways and Means subcommittee this week:

Since FY 2010, overall funding for the IRS has declined by more than $900 million, or 17 percent when adjusted for inflation, while the number of individual taxpayers has increased by 10 million, or more than 6 percent.  These reductions have forced the Service to reduce the total number of full-time, permanent employees by almost 21,000, and resulted in a reduction in the number of employees assigned to answer telephone calls from 9,400 in 2010 to 6,200 in 2015, a 34% drop.

Meanwhile, National Taxpayer Advocate Nina Olson highlighted IRS budget cuts as one of the agency’s major challenges in her 2016 annual report to Congress, stating that “the IRS cannot function well in the 21st century with the budget it has today.”

Reardon also pointed out that during the 1986 tax reform process, Congress actually provided additional funding to IRS to hire more staff.  That’s a far cry from today, when Treasury could only muster a measly  one-page “report” on the bill that would get them kicked out of a high school AP class.

Capital Zoo raised this issue with a moderate Republican House member from the northeast this week. This member, who wants to support the final bill, shared his concern that the administration hasn’t been up to the task so far of explaining or analyzing the bill. But it’s unlikely that pedestrian concerns about competence or capacity will slow down the tax train.

As a result, once the bill passes, expect a hot mess of confusion and controversy about how to interpret and apply the new laws. Remember the disastrous rollout of Health.gov following the enactment of Obamacare? That will look like a walk in the park in comparison.

The larger problem, however, is not the confuision itself, but its consequences. If the new rules go into effect in January 2018, business will need to account for the new law as they plan finances for the year, debate investing in new equipment and make capital investments. How can they make business decisions like these without understanding their true tax implications?

If the tax code is unclear, and Treasury is unable to provide answers, both businesses and individuals could choose to delay spending decisions, which would slow the economy – the precise opposite of what the bill’s backers hope to see. That would make 2018 an extremely bumpy ride for an already unpopular bill – and for those who voted for it.

Democrats Might be Repeating their 2016 Mistakes in Alabama

polling-station-2643466_960_720With 24 hours to go until Alabamians vote in the season finale of “Who Wants to Elect a Pedophile?” it appears the closing argument from Democratic candidate Doug Jones and his backers boils down to, “Please, please don’t embarrass our state.”

Sen. Cory Booker (D-NJ) made that pitch this weekend, as did Alabama’s senior senator Richard Shelby (R). Shelby, though not a Jones supporter, said he could not back GOP candidate and perpetual controversy machine Roy Moore because, “I think Alabama deserves better.”

As the Washington Post’s James Hohmnann recounts today, Alabama’s business and media elite are piling on, too, making the case that a Moore win would set back the state’s economy and reputation:

A pro-Jones Super PAC called Highway 31 has spent $3.6 million on the race. “Don’t let Alabama’s good name be tarnished,” a narrator says in the group’s final radio ad. “Don’t wash it all away. Don’t let Roy Moore become Alabama.”

Even Jimmy Kimmel is getting into the act, donating to Jones’ campaign. The allegations against Moore are so serious that it may end up turning this safe red seat into a blue one. But as they look ahead to 2018, are Democrats falling into the same trap they walked right into in last year’s Presidential election?

While it does not appear (yet) that Vladimir Putin is helping Roy Moore win, the similarities to 2016 are striking – and in a state that Donald Trump won by 28 points, those parallels matter.

In 2016, a sober-minded but generally uninspiring Democrat took on a flamboyant outsider with a penchant for controversy and a sexual harassment scandal – and lost. (Yes, it is unfair to call Jones – who prosecuted the 1963 Birmingham bombers – uninspiring. But is anybody in Alabama talking about Jones right now?)

Like Jones, Hillary Clinton had the support of the “establishment,” and numerous Republicans came out against Trump, warning that he would be a disaster as President. But that did not help with the kinds of swing voters who were drawn to Trump’s burn-the-place-down approach to politics. Many opted to stick it to the establishment. And if that worked for Trump in places like Michigan and Wisconsin, it may very well work for  Moore in Alabama.

Alabama, of course, is the state whose very existence is predicated upon giving elites the finger. It was fourth to secede from the Union in 1861. It also gave us George Wallace, and while Lynyrd Skynyrd is actually from Jacksonville, Florida (h/t Wikipedia), their ode to the Cotton State makes it clear that Alabamians don’t like being told what to do by northern folk.

Consequently, exhortations from business leaders, journalists, celebrities and even the state’s beloved senior senator – all card-carrying members of the Establishment – to oppose Moore may be for naught.

Or worse, may drive some Alabamians to choose Moore.  If you are a conservative Republican who is troubled by the accusations against Moore but nonetheless agrees with him on some issues, being told by elites that everything Moore (and you) stand for will tarnish Alabama’s good name might just be enough of a nudge to get you to pull his lever in the voting booth.

The Alabama race has one other parallel to the 2016 election: Democrats are making the race all about the Republican candidate. And as a result, the Democratic candidate is not making a compelling case for his election. Does anybody in Alabama know what Doug Jones will do for the economy, or national security? Other than being “not-Roy Moore,” it’s not clear what he stands for. That was Hillary’s problem as well. Telling voters that Trump would embarrass our country did not resonate with people worried about pocketbook issues.

Of course, nobody can predict how the election will turn out. And when you go up against a candidate as troubled as Roy Moore, making the election all about Roy may be sufficient.  But this race is, arguably, exceptional. As Democrats start to ponder 2018 and beyond, they need to remember that elections are won or lost on the issues that matter to the voters.



Tax Reform’s Seismic Shift that Nobody’s Talking About

6757821397_ba181435ea_bNobody disputes that if Congressional Republicans and the White House succeed in dragging their gargantuan tax plan over the finish line, it will reshape massive parts of the economy (and keep accountants in business for years to come).

But its impacts go way beyond the nation’s fiscal state. In fact, this bill may mark a watershed moment in conservatives’ decades-long movement to remove the federal government as a factor in the civic life of the country.

On the chopping block in the House or Senate bills – and in some cases, both – are scores of tax incentives for everything from orphan drugs and medical devices to historic preservation and energy efficiency. Even tax credits for adoption were slated for elimination, until Republicans remembered that humans like adoptions. Other changes, like the increase in the standard deduction, would render many tax incentives effectively useless.

True, some or all of these incentives may find their way back into the final bill. But there’s little doubt Republicans don’t like them. Why? The bill’s supporters maintain that these are “special-interest deductions that increase rates and complicate Americans’ taxes.” And nobody likes a special interest, other than their own.

Besides, Republicans argue that businesses and families won’t miss these deductions and credits since they come along with a hefty tax cut (putting aside for the moment analyses that show the tax cuts aren’t as generous as advertised, unless your last name is Kardashian, Gates, or, well, Trump).

But the real reason conservatives want to gut these incentives is more fundamental:  they are, in their view, nothing more than social engineering run amok. “We’re going to tax the hell out of you,” is how they perceive shifty-eyed bureaucrats thinking, “but if you do things that are socially acceptable (read: politically correct), we’ll kindly let you keep a little more of your hard-earned money.” In their view, only a Democrat would support tax incentives like these (and many do).

But here’s the thing: Republicans used to love tax breaks, and Democrats? Not so much.

In the New Deal and Great Society eras, if you wanted to address a social problem, you created a program that spent taxpayer funds directly: Pell Grants for education, Section 8 for housing, and so on. That all changed when Ronald Reagan declared that government was the problem. Ever since, Republicans have gone to war against direct government spending.

But cutting taxes? That’s far more popular than creating spending programs. And in the conservative world, a dollar refunded to the taxpayer stimulates the economy far more than a dollar spent by Uncle Sam.

Progressives, meanwhile, would much prefer direct spending on government programs. For one thing, tax incentives tend to skew towards the wealthy. The Center on Budget and Policy Priorities notes that more than half of the money from these tax expenditures goes to the top 20 percent income-earners – and nearly one out of every six dollars out the door goes to the one-percenters. Second, running social programs through the tax code provides far less oversight and fewer guarantees the funding goes to its intended recipients.

For the last two decades, however, Democrats have learned to love tax incentives (or at least dislike them less), since creating new spending programs has become politically impossible. When Bill Clinton announced in 1995 that the “era of big government is over,” conservatives may as well have strung a Mission Accomplished banner across the Capitol.

The fact is, tax breaks represent big government just as much as direct spending – even more. In 2015, tax expenditures drained the federal coffers of more than $1.2 trillion, more than spending on all defense and non-defense programs combined. That’s why they’re called, in DC-speak, tax expenditures. You’re still spending taxpayer money, but in a far more opaque way.

As a result, the IRS has a bigger role over government policy than most other agencies do. The federal government “spent” more than $7 billion for energy-related tax incentives in 2017, as much as half of the Energy Department’s entire non-nuclear budget. And while the tax experts at the IRS are pretty smart, they aren’t experts in energy – or in R&D, or adoption, or medical devices, or the countless other items that qualify for tax breaks.

Tax expenditures are a lousy way of making policy.  But in the “government-is-bad” era, they’re the only way for Washington to achieve social policy goals.

That’s why the current tax plan portends an ominous future for those who support a federal role in domestic affairs. Having made direct spending politically unfeasible, conservatives are now furiously working to make tax incentives equally obsolete. Once they’re gone, conservatives will be one step closer making the federal government so small they can, in the words of ant-tax crusader Grover Norquist, drown it in a bathtub.

At the end of the day, the Frankenstein monster that is the current tax bill may fall short of conservatives’ goal of eliminating tax expenditures completely. But their efforts will likely continue. The federal government hasn’t been drowned in the bathtub quite yet. But the water level is getting awfully high.

Photo: 401calculator.org