One Hand Clapping

You’ve got to feel sorry for Debby Barrett. She just can’t get no respect.

Barrett, who is (a) President of the Montana Senate and (b) just to be clear, not me, is all bent out of shape by the fact that proponents of the Flathead water compact have asked the legislature not to amend the agreement and to ratify it as is. Writing in the Missoulian she claims that this request – to not amend - is arrogant, disrespectful and “an insult to the constitutional role of the Legislature.” This is simply ridiculous.

Back when the 1979 Legislature formed the Reserved Water Rights Compact Commission, it recognized that in attempting to adjudicate all the water rights in the state, it was inevitable that Federal and tribal claims would come into sharp conflict with the state based claims of Montana’s farmers, ranchers, businesses and households. And rather than consigning those conflicting claims to endless, costly and divisive litigation, the Legislature told the commission to go out, sit at the table with tribes and Federal agencies, and come back with negotiated settlements. I’ll say it again: the Legislature explicitly wanted negotiated settlements.

What the Legislature presumably understood, and Barrett apparently does not, is that a negotiated settlement is a voluntary agreement between two or more parties. Opening up a settlement and changing its terms can only happen if all the parties agree to make it so; it simply can’t be changed unilaterally from one side of the table. That’s a fact the Legislature must face: it can amend the compact if it wants, but if it does, there’s no longer a voluntary agreement. Barrett, and other compact opponents, apparently want the impossible: an agreement that only they will agree to! It’s sort of like one hand clapping.

Barrett claims that “other proposed compacts have not been thrust on …the Legislature with such arrogance and disrespect.” You’re damned if you do and you’re damned if you don’t agree with this claim, but suffice it to say that the commission has always informed the Legislature that if a proposed compact were amended, there would be no guarantee - and certainly no requirement - that the amended settlement would be accepted by the other parties. That is simply reality, and there is nothing arrogant or disrespectful about pointing it out.

Even if it can’t, or shouldn’t, amend the compact, it is important to remember that the Legislature has played an active role in its negotiation. Four legislators, including Barrett (and, full disclosure, me) serve on the compact commission and have had ample opportunity to contribute constructively to the settlement. And for the past two years, the Water Policy Interim Committee has conducted numerous hearings on and studies of the compact and made recommendations to the commission for changes that have largely been incorporated into the agreement.

Barrett also claims – and this canard is popular with other opponents – that the CSKT are “threatening” the state with litigation if the compact is not approved. And indeed, the Tribes will file claims in the Water Court and pursue those claims if compact ratification fails. But let’s get this straight: it was the state that invited the CSKT to the table in order to avoid the litigation that the Tribes would otherwise, by law, have had to pursue in order to have their water rights adjudicated. The state cannot now walk away from the settlement reached at that table and complain that it is being threatened when the CSKT resort to the only remedy available to them.

Barrett resents the fact that she has been presented with what she thinks is a “take it or leave it” deal. But the irony is that that is apparently exactly what Barrett and other compact opponents intend – arrogantly and disrespectfully - to offer to the Tribes: a compact which they have amended to their liking and which the Tribes are apparently expected to agree to without consultation, question or legal recourse.

The Biggest Loser

You’ve got to hand it to Gary Marbut. The man is either going big or going home.

Marbut, who appears to run the Montana Shooting Sports Association as his personal fiefdom, was in town last week promoting a bill to give tax breaks to folks who might someday manufacture ammunition makings right here in Montana. The bill, SB 122, is sponsored by Matt Rosendale, the Republican Senate majority leader and well known drone assassin.

Most people, when they want the legislature to give their pet projects a little juice, settle for something – a credit or deduction or a rate cut - that will reduce their taxes for a while. It’s usually temporary, the idea being that once whatever-it-is is up and running, special treatment will no longer be needed.

Now I am not crazy about this kind of tinkering with the tax system. It creates a slew of inequities and often serves special interests rather than the interests of the public at large. So in that sense, I guess we should be grateful to Marbut, because rather than messing around at the edges of the tax system, he's going big and proposing that his ammunition makers pay no taxes at all.

I am not making this up: Gary Marbut would like businesses that make ammunition components to pay no state taxes at all. Ever.  No state property taxes for schools. No business equipment taxes. No individual income taxes. No corporate income taxes. No taxes even on the income banks or others earn from making loans to ammunition component manufacturers. And even though these businesses will pay no taxes to the state, they will be eligible for economic development grants from the Department of Commerce.

Why on earth is all this largesse needed? Well, it turns out that none of this stuff – powder, primers, and so forth – is produced in Montana, and not much is produced in the rest of the country. A lot of it is imported, presumably because foreign manufacturers are more efficient and produce at lower cost. And would be Montana manufacturers apparently can only compete if they are given a free pass on their state taxes. So what we have here is protectionism, pure and simple.

Folks seeking this kind of special treatment always try to justify it as somehow being in the public interest. So Marbut would have you believe that our Second Amendment rights (you knew that was coming, didn’t you?) will be hollowed out unless we can buy ammunition made right here at home. He presents no evidence at all that there’s a shortage of ammunition, or that foreign manufacturers or Barak Obama are plotting to cut us off cold  turkey, or that gun owners don’t have  enough ammunition lying around already to deal with the threats they endlessly worry about. In other words, he gives us no reason to think that ammunition is more deserving of protection than the thousands of other vital products - medicines, for example - that we import and use in Montana every day.

Marbut also wants us to coddle the ammunition industry because doing so will create jobs. In the questionable game of picking economic development winners and losers, he wants us to pick an industry that by his own admission is too costly and  too inefficient to compete without being propped up by the public. In other words, in Marbut’s topsy turvey world, the biggest loser should be the big winner.

Voodoo Economics

The Missoulian reported this week that Reps. Art Wittich and Keith Regier appeared in front of the House Tax Committee Tuesday, seeking approval for a couple of great big tax cut bills and dishing out the usual conservative Republican assurances about how wonderful the results would be.

You’ve probably heard all this before: If we cut tax rates and let people (and especially rich people) hold on to the money they make, they’ll want to make a lot more of it. The economy will flourish, the tax base will expand, and lo and behold, total tax revenues will rise. This notion, that a cut in tax rates will produce an increase in tax revenue, is usually attributed to the economist Art Laffer, who allegedly hit on the idea while drinking with some buddies in a D.C. bar. Laffer was an adviser to Ronald Reagan, who became enamored of the idea and put it into practice, thereby becoming the first president in 35 years to grow the national debt faster than the economy as a whole.* In 1980, George H.W. Bush, anticipating the train wreck that was to come, famously accused Reagan of espousing "voodoo economics."

Wittich also argues that we are sitting on a great big pile of money - $350 million idling in the checking account – and that it’s only right to give it back to the taxpayers. The problem is that we are about to have a battle royal about whether that money is really there to give back.

The first thing we have to do when we start to build a budget – that is, figure out what services we want to provide, what we can pay for them, how much of a cushion we need to leave in the bank, how much we can afford to cut taxes, and so forth – is to estimate revenue. And it turns out that right now the Governor’s budget director thinks we will have a lot more revenue than the Legislature’s own analysts are forecasting. How much more? Well, coincidentally, a little more than $350 million.

Now usually when Republicans are presented with several revenue estimates, they gravitate towards the smallest one they can see. What better way is there to “shrink government.” The irony here for Wittich is that if he’s going to do business as usual, he’ll want to low ball the revenue estimate. But that will eat up all the money he wants to give back. What to do, what to do?

Stay tuned on this one. It’s going to get interesting. And don’t be surprised if the conservatives figure out that the only way to low ball the revenue estimate and give back a lot of tax money is to gut programs. It’s what Paul Ryan would do.

*When Reagan entered office in 1981, total public debt equaled 30.8% of gross domestic product. When he left office 8 years later, it was 49.6% Prior to 1981, the debt had declined in relation to GDP under every president, Republican or Democrat, since the end of the WW II.