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This is another in my series of bad high school book reports on nonfiction books that I have read recently. It’s my effort to memorialize my thoughts in the vain hope of actually remembering a bit of what I read.

The book

Philip Rucker and Carol Leonnig, A Very Stable Genius, Donald Trump’s Testing of America (Random House 2018)

Why I read it

A Very Stable Genius was written by two WaPo reporters who cover the Trump White House. They obviously spent a lot of time interviewing various administration staffers – few of whom agreed to attribution. That, of course, should be no surprise given the retribution that will be visited on anyone who says anything less than flattering about Trump.

The book’s title is, of course, the way the president has described himself on several occasions – showing a total lack of self-awareness and any measure of modesty. However, the fact that he feels compelled to describe himself as “stable” is revealing in itself. The implication must be that his mental imbalance is a common narrative that must be rebutted. At least that is what I would conclude.

When it came out, the book got a lot of press, largely because of the disturbing anecdotes about the stuff Trump privately said or did. I generally avoid tell-all books or “real time biographies” but got sucked in by the coverage, figuring there might be more nuggets and actual insights about what makes the guy tick. To fair, I didn’t hold out much hope of the latter and mainly got sucked in by the prospect of more juicy nuggets about the internal idiocies and other goings on.

What I found interesting

The newspaper coverage and reviews of the book provided most of the salacious details that are in the book. Some eye-catching examples include Trump –

• Telling Modi that his country didn’t border China
• Failing to know the details of what happened at Pearl Harbor
• Suggesting that Seoul could be “moved” (We should not be surprised by his suggesting to use antiseptic internally to kill the coronavirus, I guess. He obviously talks before considering whether what he is going to say passes even the most rudimentary test of logic or reality.)
• Calling a collection of top generals “dopes and babies”
• Considering our troops as essentially a mercenary force that should be paid to provide protection that is (I presume) being done to serve our national interest
• Adoring authoritarian and ruthless foreign leaders while demeaning leaders of our democratic allies
• Etc.

The book, of course, presents all of that and less shocking but equally revealing stuff in more detail (over 400 pages worth). Sobering for the leader of the free world.

Reading the book brings home just how this administration has careened from one crisis to another, most self-created. There were so many that without reading the book, I had already forgotten most of them:

• The Flynn phone call and aftermath (ultimately yielding one of the most unusual examples of criminal procedure that I’ve observed)
• Trump’s bragging to the Russian foreign minister and ambassador after firing Comey
• Writing the false press release about Don Jr’s, Jared’s, and Manafort’s meeting with the Russian lawyer/agent
• Asserting that Obama wire tapped him
• Paying a porn star and a Playboy centerfold model to keep them quiet about their relationships with him
• Having his campaign manager and personal lawyer each be convicted of federal crimes
• Ivanka’s use of a private emails for government business – notwithstanding Hilary’s similar use being a (if not the) central point of the Trump campaign
• Mueller probe and Trump’s repeated efforts to thwart it (detailed in volume 2 of the report) – one does wonder if there really was nothing going on with Russia, why did he engage in so many questionable (if not clearly illegal) efforts to end the probe? I suppose just because that’s his nature? His interactions with Putin are deeply troubling.
• Badgering Jeff Sessions for recusing himself (admitted by nearly all experts on legal ethics to be required) and failing to act like Trump’s private attorney rather than the Attorney General of the United States
• Press conference with Putin and refusing to include aides in the meetings with Putin
• Family separation policy
• Ham-handed way he dealt with North Korea relations and thinking he could personally charm Kim in giving up his nuclear weapons and their advantages for his regime
• Withdrawing from Syria to placate Erdogan
• The list could go on for pages

One becomes numbed; it seems there were enough to span and bring multiple ordinary administrations to their knees. And the book ends before the call to Zelensky and ‘s hi jinks!

If I have forgotten many or most of these events, I’m sure that the average Joe or Jane voter has as well and Trump is likely to be judged on more recent events (the economy, racial issues, and the response to coronavirus would be the best guess at this point). I found the book mildly useful only because it forced me to relive and think about those events. It provided little new insight into Trump’s character or competence – just more detail on and confirmation of what I was already fairly sure of. I will pass on any more Trump books, I swear, for a good long interval anyway. Sorry, John Bolton and Mary Trump, you won’t be getting my money. One doesn’t need to read books; news stories like this one by Carl Bernstein detailing Trump’s appalling behavior and incompetence in making phone calls to foreign leaders are more than enough to drop one’s jaw/taken one’s breath away/sicken/whatever.

What disappointed me

I had hoped the book would provide at least some more insight in Trump’s psychology; it didn’t. But that may be simply because there is no there there.

SALT connection

None

Several friends alerted me to the obituary for Dan who died on Independence Day. Dan was a fixture on the Minnesota tax policy scene for years, a giant really. The Strib obit does not do justice to how much he contributed to Minnesota tax policy and the accomplishments of his long and distinguished career – in the Department of Revenue, the legislature, the private sector, and academia. To help fill that gap, I will expand on it a little based on my experience working with and observing Dan.

More importantly to me, Dan was friend and colleague for most of my career – somebody who was easy to work with and a great teacher.  Even though he knew more than I did, he was always gentle in enlightening me as to what I was missing.

Dan was an economist. I have found that as a profession, too many economists suffer from more than a healthy dose of ethnocentrism – particularly when it comes to how to analyze issues – and from a seemingly preternatural inability to communicate with non-economists. Dan was an exception on both scores. He never projected the aura that he knew or understood more than you did, but after a friendly discussion you realized he did. Dan had an unusual ability for an economist (I must say) to communicate economic concepts and theory so that a lay person could easily understand them. That served him well in dealing with legislators and (I am sure) governors and many others.

I observed and worked with Dan in multiple of his tax policy positions and roles, which gave him a seat at and a say from virtually all sides of the Minnesota tax policy table during his career. He served as:

• Director of the Research Division at the Department of Revenue (DOR)
• Director of Senate Counsel and Research
• Executive director of the Minnesota Taxpayers Association or MTA (now the Minnesota Center for Fiscal Excellence)
• Commissioner of Revenue under Governor Pawlenty

Dan’s most enduring contribution to Minnesota tax policy, in my judgment, was his role – primarily when he was director of MTA – in the campaign to reduce the ratio of effective property tax rates paid by commercial-industrial (C/I) and apartment properties to low-value homes. During the 1970s and 1980s, the legislature had consistently jimmied classification ratios (used to determine then assessed values) to shift the property tax burden from farms and homes to C/I and apartments. That helped to hold down property taxes on many homes at a modest (virtually no) cost to the state budget. C/I properties often paid effective tax rates that were 5X higher than homes.  But in the long term such disparities have undesirable policy effects – e.g., discouraging real estate investment and stimulating local government spending.

Business and apartment owners, as well as some civic groups, were convinced it had to end.  But stopping it, much less reversing it, was a tall political order. The appeal of cutting business and apartment property taxes is weak political tea, at best. (If you had asked me to bet on the outcome at the outset of the campaign, I would have lost the farm.) A long running effort – it took over a decade, a Bataan Death March for a lobbying campaign – generated results culminating in the 2001 property tax restructuring. Combined with the effects of lesser changes enacted during the Carlson administration in 1990s, the differential effective rates were reduced to something closer to 3X for C/I and 1.5X for apartment properties.

Throughout this whole campaign, Dan in his role at MTA was really (as far as I could tell) the brains behind the campaign – he crunched the numbers, generated the ideas, produced the analyses and so forth. Although he left the hands-on lobbying mainly to others, he was the one who could communicate to policy makers the gravity of the problem and come up with ways to solve it. Success, according to the aphorism, has a thousand fathers. But in this case, there is no question that Dan and the role he played was a necessary and critical component of the success. Without him, it would not have happened. Of course, many others played key roles as well.

The second of Dan’s big contributions that comes to mind was his role in rationalizing Minnesota’s local government aid (LGA) formula, a long running policy problem in the 1980s and 1990s. In his role as director of Senate Counsel and Research, he headed the group that produced the famous “Ladd Report,” which identified the many flaws in the LGA formula. The study (released in 1991) did not result in immediate policy changes; like many problems it festered for over a decade. But when the 2002-03 recession hit the state budget, Dan was commissioner of revenue. With a Republican in charge of the governorship and the House, the budget problems were going to be addressed mainly with spending reductions. That required large cuts in LGA and Dan was there, ready to use that opportunity to improve the formula. As a result of his efforts (and again, others) that is exactly what happened – a lower appropriation and a much better formula. He coordinated the effort to rewrite the formula, eliminating “grandfathers” and basing aid more closely on need and capacity to pay. Those fixes have largely endured. Most of the subsequent sparring in the legislature over LGA has not been over the formula (“throwing money out of an airplane” arguments have stopped) but over how big the appropriation should be.  That is another of Dan’s important legacies.

Finally, I must relate an early experience I had in working closely with Dan, one that I think reveals his strengths and skills.  In the late 1970s a big issue for the Republicans was to index the key parameters of the income tax. This came to fruition in the 1979 tax bill, which indexed the tax brackets, personal credits, and standard deduction. DFLers opposed the change because of revenue and other concerns. But the GOP’s big win in 1978 (the “Minnesota Massacre” election in DFL lore) had made it a political fait accompli. Dan was the director of research at DOR and I was a young House tax staffer at the time.  I think both of us thought little of the change other than that it was an important and sensible policy change.

Shortly afterward, however, the first of the double dip recessions of the early 1980s hit, sending state income tax revenues into a tailspin. Much of the revenue drop was simply due to the drop in income from the recession, but DFLers were convinced that indexing was the culprit. I was skeptical of these nonspecific claims, dismissing them largely as political grousing arising out of their opposition to indexing. But Dan took the possibility seriously and came up with an explanation why there was some truth to it: At the time, the Minnesota income tax allowed the deduction of federal income taxes, which were not indexed for inflation. So, the then high-inflation environment imposed a steep federal inflation tax, which also reduced the Minnesota tax base through the federal tax deduction. By indexing state tax parameters but not adjusting for this effect, inflation provided an automatic state income tax cut. (Of course, believers in the federal tax deduction considered that to be entirely appropriate because taxpayers were paying higher federal taxes which reduced their ability to pay Minnesota income taxes.)

Once Dan explained the problem, it was a head slap moment for me – something so obvious, I thought, that we should have recognized it before indexing was enacted. It was (as so often is the case) a simple matter of algebra. But I/we hadn’t seen it, of course. It took Dan’s application of basic math to the tax parameter to see the interaction.

How to “fix” it was not obvious. But Dan devised a modestly complicated formula – the infamous Tax Net Income Adjustment Factor or TNIAF – to modify the federal tax deduction so it was allowed on an inflation-adjusted basis.  It came to the DFL legislature to propose this (recall that Al Quie was the GOP governor who had championed indexing, so the administration was not about to propose changes that could be characterized as tax increases or crimping indexing). As a result, I converted Dan’s formula to bill language with his assistance and it was enacted into law. Somebody convinced the governor that the changes were acceptable because they helped fix the budget shortfalls. I had always assumed that Dan was involved in doing so but didn’t know that directly. It is a fair observation that in the current political environment that never would have happened.

That didn’t end the controversy with TNIAF, though. My drafting (I’ll take full responsibility although others, including Dan had signed off on it) was not perfect. As with converting any mathematical formula to English, the potential for ambiguity is high – it’s an order of operation issue that mathematical notation handles cleaning with its nesting conventions but with English it’s not so easy. TNIAF was no exception. After its enactment, the business lobby (then called Minnesota Association of Commerce and Industry or MACI, now the Chamber of Commerce) argued that the TNIAF statutory language could and should be read not to slightly increase the tax base, but rather to cut it in almost in half.  I discovered this to my horror on the front page of Minneapolis Tribune while eating breakfast a day or two after adjournment of the legislative session. On my way to work, I drafted a memo to the Speaker that explained why MACI’s reading of the language was incorrect and immediately on arriving called Dan to agree on a plan of action.  I sent my memo and he briefed the commissioner of DOR. I assume someone communicated with the governor to get his buy-in; I never asked Dan if he got roped into that. The commissioner put out a press release (or equivalent) that rejected MACI’s interpretation and everything went on as normal. The language was quietly modified in the next tax bill – we had regular special sessions in the early 1980s – to foreclose MACI’s absurd reading of the language and no one noticed or at least said anything. This little known and long forgotten episode captures both how Dan’s analytic skills served the state so well and how I was indebted to his favor for saving my bacon in a moment of high anxiety for a young and inexperienced legislative lawyer.

I always considered Dan a kindred spirit on two counts. First, in carrying out his various roles, he remained above the partisan fray, something I strived to do as well. I generally had a good fix on his basic policy instincts and views (largely plain vanilla basic principles), but never heard him talk about or had any clue as to his partisan political leanings, if he had any. This served him well in dealing with legislators. I assume that it was also a factor in his willingness to continue serving at DOR after being relieved of his duties as commissioner.  (I assumed that occurred because he was insufficiently a “political spokesperson” type to keep the governor happy.) That allowed him to end his career, helping the DOR trains to keep running on time, a service to the public that many former commissioners would be unwilling to do.

Second, he shared my interest in and attraction to site value taxation. This resulted from his encounters with Mason Gaffney, a Georgist economist who was at UW Milwaukee when Dan was a student there. Site value taxation has undeniable policy attractions – it’s one of the few taxes that combines an effective zero efficiency cost with progressivity.  Put another way, it avoids the almost iron law of tax policy that requires trading off equity against efficiency. That combination makes it theoretically attractive and has inspired many of its supporters to become zealous true believers.  Dan and I shared an affinity for the tax in theory, but he was too well-grounded to become a true believer, much less a zealot. He recognized that ultimately it would never work (at least in its pure form) in the real world because of political, administrative, and transition barriers. But he and I talked about it many times and his knowledge and skills help me deal with legislators and others who were true believers (e.g., former Representative John Burger).

Dan’s passing is a sad time for the Minnesota tax policy community and Minnesotans generally who owe him a hearty thanks for his service. His friends and family should know that Dan leaves a lasting tax policy legacy and many warm memories of the kind and thoughtful way that he went about doing important jobs. We miss you, Dan.

Private sector, defined-benefit pension plans are going the way of the Dodo bird; most companies have abandoned them for 401(k)s or similar defined contribution plans. The reason is obvious: doing so shifts responsibility for the saving and investment management (with its attendant risk) from employers to employees.  An upside for employees: if you change jobs, your retirement savings are portable, which is not so easy with traditional, defined-benefit plans.

Who knew Minnesota and Iowa are the last bastions of traditional pensions in the private sector? I didn’t until I read this WaPo story. The reporter used Census Data (PUMS for those familiar with census data bases) to ferret out this interestingly tidbit for someone from Minnesota interested in retirement policy.

Most of the story, worth reading, delves into the question of why these two states are holdouts. The story rejects a number of hypotheses: Minnesota’s large number of big headquartered companies (Iowa flunks); Minnesota and Iowa “nice” (naw); lots of insurance companies (both states do have high concentrations but no clear reason why that should matter); unionization rates (neither state is high); more ESOPs (again, Iowa flunks), etc.

The article lands on a conclusion that the two states’ high labor force participation rates (both states have the highest national rates with many two-earned couples) and the need to be competitive on compensation to attract employees.  I guess the idea is that defined-benefit plans are particularly attractive to employees.

My observations

My reaction is that seems a bit off. I can’t imagine that defined-benefit pensions are an attractive recruitment tool, because they require a prospective employee to assume that he/she will remain with the company for years to see the benefits. That would not seem to have appeal to most recruits, I’d think, especially millennials.

I know when I was entering the workforce, such a policy would not haves been attractive to me.  A big attraction when I took my job at the House decades ago was Unclassified Plan coverage, the state’s defined contribution plan, rather than by the regular employee (defined benefit) plan. (The competing offers were in the federal government with traditional pension coverage.) I expected my employment tenure probably would be short (figured I would go into private practice) and knew that my 1-year stint as a judicial clerk had caused me to forfeit the employer contributions and most investment earnings. I figured the designers of government plans just skewed benefits to favor “lifers.” Unexpectedly, of course, I ended up a lifer.

By contrast, a defined benefit plan should be more attractive as an employee retention tool – incumbent employees who are happy and inclined to stay will find them beneficial and the plan will tend to handcuff them to the firm. The article quotes Myles Shafer, the U of M business professor who has studied Minnesota’s unlikely role as a headquarter location for an unexpectedly high number of Fortune 500 companies.  He concludes that it is difficult to attract employees to the Twin Cities, but when you do, they are more likely to stay.

I would think that continuing to use (of course, at a much lower rate than decades ago) defined benefit plans reinforces the retention effect. Of course, employment satisfaction and more couples where both spouses have professional jobs, making out-of-state moves less attractive, also helps. If employees are inclined to stay at a firm, they may value the defined benefit plan more heavily and if employers want to avoid the challenge of luring new employees here, they may concur. Those combined preferences likely reinforce the tendency to not abandon the plans as much as elsewhere. Employees’ willingness to stay may be more of a cause than an effect – more Minnesota and Iowa employers have held on to the plans because that is what their employees want. But it must make recruitment more challenging.

The article quotes an employee of a building maintenance service firm (providing janitorial and similar services, I assume) that has a traditional plan. Employees of firms like that (lower paid, nonprofessionals) would benefit from not being stuck with deciding how much to save and managing their investments in 401(k)s, in my mind.  (Professionals are fine in defined contribution plans, by contrast.) My assumption has been that many of those types of employees were covered by no employer plan at all, not even a 401(k), because the firms are small businesses, pay is low, and employees need the cash, rather than long off retirement benefits. Of course, that was based solely on my biases and not any data.

The current low-interest rate environment (10-year treasuries are now yielding 0.6% and 30-years 1.3%!!) will make maintaining these defined benefit plans even more difficult and I expect that more erosion (including in Minnesota and Iowa) in the number of private plans will occur. Every recession typically causes more terminations. That will make the public plans even bigger outliers and make maintenance of them more difficult politically (why should public employees have these plans if almost no one else does?), as the recession simultaneously makes their already weak finances even more tenuous. Of course, it really is a matter of sensible design of employee compensation, which is rarely talked about intelligently because it is mixed up with the need to satisfy improvident promises to retirees and senior employees made by elected officials during boom times.

I have previously blogged (here and here) about the constitutional issues with the statute authorizing the governor to declare peacetime emergencies.  Minn. Stat. § 12.231. The best characterization of the legislature’s role under the statute is that it is constitutionally suspect. The legislative authority to terminate declarations longer than 30 days likely either gives the legislature executive powers or allows it to de facto enact legislation while circumventing the governor’s veto power. By compelling the governor to call special sessions, the statute also may unconstitutionally impinge on gubernatorial discretion to make those decisions.  This is all speculation on my part since I know of no Minnesota court decisions addressing these issues.

COVID-19 and Governor Walz’s declaration and executive orders have focused attention on the workings of this previously obscure statute. Naturally, the legislature considered changes to it based on that experience. The Senate passed a bill, S.F. No. 4519, that would have changed the legislature’s procedural role. The House did not take up the bill, so it died when the regular session ended.

So, would S.F. No. 4519’s changes have addressed the separation of powers issues with the current statute? On a strictly technical basis probably not, but as a practical matter it would. The bill prohibited the governor from extending a declaration beyond 30 days without each house of the legislature approving the extension by a majority vote. Technically, the legislature would be ratifying an executive action – not something exactly envisioned by the separation of powers. But the ratification process is almost the same as enacting the declaration as a law, since the governor’s declaration could be characterized as signing it into law or allowing it to become law without his signature. In this way it is similar to the procedure used for approving state employee contracts, also an odd hybrid arrangement of executive power shared with the legislature.

The current statutory procedure allows the legislature, if each house approves by majority vote, to terminate declarations of more than 30 days. That means deadlocks or ties allow the declaration to continue. By contrast, S.F. No. 4519, is about the equivalent of legislative enactment of declarations longer than 30 days.

It’s hard to know exactly what would have happened if S.F. No. 4519’s rules had applied during the current crisis. (As an aside, given the Senate vote it seems unlikely that this approach will find much favor in the DFL-controlled House in a special session, if it is revived. It looked to me like only one DFL senator voted for it.) It certainly seems possible that something more like the situation in Wisconsin (absent the need for a lawsuit) would have occurred after the end of the first 30-day period of Governor Walz’s declaration: that is, state-imposed restrictions on businesses and private behavior would have ended or been much more severely curtailed.

Requiring legislation to address an ongoing health crisis is likely to be more cumbersome and difficult, especially given a partisan split in control but even in its absence, compared to the governor acting alone. I would expect, based on my legislative experience, that the response would involve more horse-trading and give-and-take. The ability to make calibrated changes quickly in response to changing conditions would be hampered. Decisions would be more “political”- in particular, I would expect more exceptions and carve-outs needed to gain assent of a few or small groups of key legislators and/or to address local situations. That could be bad or good, depending upon how well you think the current arrangement is working.

As a final note, the bill includes a provision that addresses the possibility that a governor would evade the 30-day duration limit by allowing declarations to lapse and, then, after a short gap declaring a new emergency but to really address the old emergency.  This suggests to me a growing perception at least by some senators of the potential for gaming playing or bad faith by the administration. Not a good sign.