This Week on Lincoln Radio Journal: Labor Bosses Lose Big


Radio Program Schedule for the week of December 3, 2016 – December 9, 2017

This week on Lincoln Radio Journal:

  • Matthew Brouillette from the Commonwealth Partners Chamber of Entrepreneurs and Neal Lesher from the National Federation of Independent Business-PA have a Capitol Watch look at labor union losses in this year’s elections
  • Lowman Henry has a Town Hall Commentary on the latest state budget skirmish

This week on American Radio Journal:

  • Lowman Henry talks with Phil Kerpen of American Commitment about how the GOP will go about repealing and replacing the Affordable Care Act
  • Dough Sachtleben of the Club for Growth has the Real Story on the upcoming U.S. Senate race in Louisiana
  • Eric Boehm of Reason magazine talks with Collin Roth from the Wisconsin Institute for Law and Liberty about occupational licensing reforms
  • Colin Hanna of Let Freedom Ring, USA has an American Radio Journal commentary on the Trump transition process

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Your Pain Is His Gain


The epic budget battle that began two years ago with the inauguration of Governor Tom Wolf resulted in school children and nonprofits being held hostage for over nine months as legislators battled the massive tax and spending increases advocated by the new chief executive.  State employees, however, were spared economic pain.

As the budgeting process for the new fiscal year gets underway the first shots in what is shaping up to be an even more intense struggle between the Democratic governor and a legislature heavily dominated by Republicans clearly will not let state employees off the hook.  In fact, some 520 workers in the Pennsylvania Department of Labor & Industry are among the first casualties.

Just as the battles at Lexington and Concord heralded the start of America’s Revolutionary war, the skirmish over funding for Labor & Industry represents the start of what may turn into Pennsylvania’s longest fiscal fracas.  Court rulings require state employees to be paid even if there is no budget in place by the constitutionally mandated June 30th deadline.  That is one reason why little pressure was applied to the governor and lawmakers during the lengthy budget battle two years ago.

But this is different.  At issue is continuing a dedicated funding stream that finances the operations of seven unemployment compensation service centers around the state.  As the last hours of the 2015-2016 session of the General Assembly ticked away the House passed a bill reauthorizing the spending.  Senate Republicans, however, wanted more information which was not forthcoming from the Wolf Administration in a timely manner and the clock ran out.

Sensing a political opportunity Wolf immediately announced lay-offs and sent a labor union ally out to blame Senator Scott Wagner who plans to challenge the governor’s re-election.  This despite the fact senate leaders indicated their willingness to renew the funding when the new session of the General Assembly reconvenes in January.

Senators argue the lay-offs are unnecessary because the administration could merely move funding among budget categories to cover costs until after the New Year.  Wolf claims he can’t do that, but during the long budget battle of two years ago he made hundreds of such transfers.  It isn’t a matter of can’t – it is a matter of won’t.

So once again Governor Wolf is signaling his willingness to inflict great pain upon innocent parties in his efforts to achieve his spending goals.  As 570 families enter the holiday season with paychecks about to end, they are the first of millions who will suffer economic harm in the coming months.  Charities and schools are soon to follow.

A representative survey of just 176 nonprofit organizations found that during the last budget battle 68% were adversely affected by the disruption in state reimbursements.  Had that fight gone on much longer numerous school districts across the state would have been forced to close.  Many kept their doors open only by borrowing.  Likewise many counties were forced to cut services and/or borrow money.  All of this came at significant cost to taxpayers.

The early signal by Governor Wolf that he plans to continue using fiscal hostage taking as a tactic is ominous.  The recent General Election produced a veto-proof Republican majority in the state Senate.  And while not holding veto-proof numbers in the state House, Republicans did add to their already substantial majority.  Thus the stage is set for a lengthy fight.

Overlay all these factors with the unofficial start of the 2018 gubernatorial election cycle and it becomes quite possible Penn’s Woods may see something it has never seen before: a fiscal year with no official budget.  It happens in Washington all the time where so-called continuing resolutions keep the money flowing because congress and the president can’t agree on a spending plan.

But even a state version of a continuing resolution is not possible unless all parties agree that money must continue to flow.  At this point it is unlikely Governor Wolf will bow to political reality any time soon. Rather he is doubling down on his policy of your pain is his gain.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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This Week on Lincoln Radio Journal: Public Sector Labor Climate


Radio Program Schedule for the week of November 26, 2016 – December 2, 2016

This week on Lincoln Radio Journal:

  • Lowman Henry talks with Elizabeth Stelle of the Commonwealth Foundation about their new report on Pennsylvania’s public sector labor climate
  • Joe Geiger from the First Nonprofit Foundation has Risa Paskoff of Aaron’s Acres in the Community Benefit Spotlight
  • Beth Anne Mumford from Americans for Prosperity-PA has a Lincoln Radio Journal commentary on Pennsylvania’s Economic Freedom Partners

This week on American Radio Journal:

  • Lowman Henry talks with Brittany Hughes producer of the Media Research Center’s new film Collateral Damage: Forgotten Casualties of the Left’s War on Coal
  • Andy Roth of the Club for Growth has the Real Story on issues that will dominate the first 100 days of the Trump Administration
  • Eric Boehm of Reason Magazine talks with Christina Sandefur of the Goldwater Institute about Chicago’s attempt to regulate AirBNB
  • Col. Frank Ryan, USMC (Ret.) has an American Radio Journal commentary on illogical government

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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This Week on Lincoln Radio Journal: Challenges Facing Governor Wolf


Radio Program Schedule for the week of November 19, 2016 – November 25, 2016

This week on Lincoln Radio Journal:

  • David Taylor of the Pennsylvania Manufacturers Association and Matt Brouillette from the Commonwealth Partners Chamber of Entrepreneurs have a Capitol Watch look at challenges facing Governor Tom Wolf
  • Lowman Henry has a Town Hall Commentary on election winners and losers who were not on the ballot

This week on American Radio Journal:

  • Lowman Henry talks with John Philip Sousa, IV of the 2016 Committee about how Donald Trump won a larger percentage of minority votes
  • Doug Sachtleben of the Club for Growth has the Real Story on possible return of congressional earmarks
  • Eric Boehm of Reason magazine takes a look at Republican dominance of state legislatures
  • Dr. Paul Kengor from the Center for Vision & Values at Grove City College reflects on the real meaning of Thanksgiving on his American Radio Journal commentary

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Leo Knepper has Election Results on Lincoln Radio Journal


Radio Program Schedule for the week of November 12, 2016 – November 18, 2016

This week on Lincoln Radio Journal:

  • Lowman Henry has a Newsmaker interview with Leo Knepper from the Citizens Alliance of Pennsylvania examining General Election results
  • Dr. Jake Haulk and Eric Montarti have an Allegheny Institute Report on why the lack of job creation is creating a state revenue shortfall
  • Beth Anne Mumford of Americans for Prosperity-PA has a Lincoln Radio Journal commentary on the upcoming lame duck session of congress

This week on American Radio Journal:

  • Lowman Henry talks with John Gizzi of Newsmax about the impact of the presidential election on the Supreme Court of the United States
  • Andy Roth of the Club for Growth has the Real Story on the policy agenda for the first 100 days of the Trump Administration
  • Eric Boehm of Reason magazine and Matt Kittle of Wisconsin Watchdog discuss how Wisconsin and Pennsylvania put Donald Trump into the White House
  • Colin Hanna of Let Freedom Ring, USA has an American Radio Journal commentary on why Trump won

Visit the program web sites for more information about air times. There, you can also stream live or listen to past programs!

http://www.lincolnradiojournal.com

http://www.americanradiojournal.com

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Winners and Losers


One of the many quirks of our political system is that each year there are winners and losers among politicians whose names are not actually on the ballot.  This year is no exception.  Neither Governor Tom Wolf nor State Senator Scott Wagner was up for election this year, but results of the balloting sent their career paths in opposite directions.

Governor Wolf has had a tough first two years in office dealing with a Republican-controlled legislature. His efforts to dramatically expand government spending, and to implement the historic tax hikes needed to pay for that agenda resulted in the longest budget stalemate in state history.  Legislative Republicans won.

Tuesday voters rewarded the GOP with even larger legislative majorities. Democrats in the state senate are now on life support.  Two Democratic incumbents were defeated by challengers; a third Democrat seat went Republican after the incumbent gave up several months ago and resigned from the ballot.  Combined, the three seats give Republicans a 34-16 edge and something rarely if ever seen in state government: a veto proof majority.

Meanwhile, across the rotunda in the House of Representatives Republicans saw their already historically high majority expand by three seats as four incumbent Democrats and one incumbent Republican lost.  The Republican pick-ups came in southwestern Pennsylvania which has been trending toward the GOP for several election cycles.  In fact, the most endangered species in Penn’s Woods might well be the non-urban legislative Democrat, with only a handful of Democratic lawmakers representing districts outside of the state’s urban cores.

All of this matters because next year’s state budget battle is shaping up to be even tougher than the first.  Republicans caved into Governor Wolf’s spending demands this year, but failed to fully fund the budget.  That coupled with revenue sources that either never materialized or have failed to meet projections presages a major fiscal fight next year.

Not only have Republicans added to their numbers, but this year’s legislative elections moved both chambers further to the Right.  Moderate state senators like Cumberland County’s Pat Vance and Lancaster’s Lloyd Smucker have been replaced by far more conservative legislators.  The continued drift of the House GOP caucus from moderate southeastern dominance to conservative central and western Pennsylvania influence means tougher sailing for those wanting to raise either taxes or spending.

Governor Wolf also saw his agenda rejected in another race; that the battle for Pennsylvania’s U.S. Senate seat.  The Democratic nominee, Katie McGinty, was Governor Wolf’s first chief of staff and architect of the tax and spend plan that triggered the epic budget battle.  Incumbent U.S. Senator Pat Toomey made hay of that effectively painting McGinty as out of touch with the financial needs of average Pennsylvanians. He won, she lost.

How then do the fortunes of one state senator rise on all of this? Senator Scott Wagner was an establishment pariah when he ran for an open seat in York County in 2014.  Shunned by his own party Wagner accomplished an historic first in Pennsylvania: He won a special election on a write-in defeating both party nominees.

The upstart senator has quickly gained clout and was tapped by his colleagues to lead the Senate Republican Campaign Committee.  The SRCC as it is known is tasked with recruiting, funding and electing Republicans to the state senate.  After playing a major role in helping to win several seats two years ago, Wagner effectively recruited candidates like Senator-elect John DiSanto of Dauphin County who upended Democratic incumbents last week.  Much of the credit for the senate’s now veto-proof majority goes to Wagner.

This is important because Scott Wagner has made no secret of his desire to run for governor in 2018 and is widely expected to announce his candidacy within weeks.  Having built a strong senate majority gives him a leg up both on the Republican nomination and on a grassroots organization for the battle against Tom Wolf who is expected to seek re-election.

Thus the 2016 election has set the stage for the beginning of the next big electoral battle in Pennsylvania. Political fortunes have risen and fallen. And the never ending cycle of campaigns has already begun anew offering no respite for weary voters.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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Grow Private Sector, Not Government


 

Tax policy received scant attention in the presidential debates, but when it did both candidates displayed a serious lack of understanding regarding at least one critical component of the tax code: carried interest. Although arcane in nature and unheard of by most, carried interest is a tax rule that fosters capital formation, encourages investment and ultimately leads to job creation.

Simply put, carried interest is a type of capital gain.  Homeowners are familiar with the term ‘capital gain’ which in that circumstance refers to the increase in value of your home over time as you make improvements or rising market prices increase its sale price.  If you sell your principle residence and make more than $500,000 in profit as a married couple, you must pay a capital gains tax.  You pay the capital gains tax rate, not the ordinary income tax rate, on the transaction because you have already paid taxes on the income used to purchase the house.

Likewise carried interest is a long-term capital gain that is earned by an investment partnership.  In this case the asset is not a house, but an investment portfolio that the partnership established and grew over time. When sold, the portfolio manager pays a lower capital gains tax rate on the fund’s profit, not the higher ordinary income tax rate.

The presidential candidates have, unfortunately, decided to portray carried interest capital gains as a loophole granted to special interests.  Both candidates want to raise this capital gains rate claiming it gives investment fund managers an unfair tax break.  Fairness, however, is not what such an increase would achieve. Rather it would amount to double taxation.

The negative effects would be much worse than over-taxing a sub-set of taxpayers.  The partnerships that are formed when an investor joins with a fund manager results in a structure that fosters informed investments that grow over time.  This growth generates profits.  When the profits are re-invested that is called capital.  Such capital is invested in businesses so that they can grow, expand and create jobs.

Carried interest capital gain rules play a critical role in allowing capital to form.  If you raise the carried interest capital gain tax rate, the government will take more in taxes–dramatically decreasing the amount of capital available for investment in the economy.

A significant portion of that capital available for investment is invested right here in Pennsylvania.  According to the American Investment Council, private equity firms invested an estimated $24.49 billion in Pennsylvania-based companies in 2015.  There are 143 private equity firms headquartered in Pennsylvania.  These companies support more than 185,103 workers at facilities both in Pennsylvania and in other states.

In other words, carried interest capital gains is not a tax device aimed at making Wall Street fund managers richer. Rather, it is appropriate taxation that makes more capital available for investment in the companies that are creating much needed new jobs for Pennsylvanians and elsewhere.

It is common in an election year for candidates to propose new government spending programs in an effort to win votes.  They then go looking for ways to pay for that higher spending. “Reforming” the nation’s complex tax structure is often an effective target.

But, changes can have unintended consequences.  Raising the current 23.8% carried interest rate to 33% as proposed by Donald Trump or almost 50% as suggested by Hillary Clinton would result in only a modest increase in tax revenue flowing into the federal treasury.  And we all know that any move to raise this rate would likely be coupled with other tax hikes on working families and small businesses.

Even if you set aside the unfairness of double taxing investors, raising the carried interest tax rate or eliminating that category of capital gain entirely would have the detrimental effect of reducing capital formation.  That means dramatically fewer dollars available for companies to grow and create new jobs.  Carried interest is not a tax break for the wealthy; rather it is a way for investors to put their earnings to work creating the new jobs needed as the nation struggles to recover from the Great Recession.

Lowman S. Henry is Chairman and CEO of the Lincoln Institute of Public Opinion Research, Inc. and host of the weekly Lincoln Radio Journal. His e-mail address is lhenry@lincolninstitute.org

Permission to reprint is granted provided author and affiliation are cited.

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