San Francisco: Reaganomics is Back!

San Francisco might have seemed one of the least likely cities to rip a page from the economic play book of Wisconsin Governor Scott Walker.  Yet in approving a tax holiday for Twitter, Inc., the giant of micro blogging, the city’s Board of Supervisors has done just that.  Walker has become infamous for gutting his state’s collective bargaining law.  Less well known, though, is the package of tax cuts he had previously signed into law – including a two year income tax moratorium for companies moving into Wisconsin – that increased the very budget deficit he argued justified his drive against his state’s public employees.  San Francisco officials presumably won’t take up the cudgel against public employees or government services the way Walker did, but proposing new tax breaks while the city is running a serious deficit certainly smooths the path for those who will.

There’s nothing really new about this approach.  Call it “supply side economics,”“trickle-down economics” or “Reaganomics,” the idea’s the same: Cut business taxes, America thrives, and the tax cuts pay for themselves in increased revenue.  When the theory proved to be poppycock as those revenues failed to materialize, fiscal conservatives like Ronald Reagan found themselves born-again as deficit spenders.

Walker’s cuts were only a drop in the bucket compared to Wisconsin’s anticipated two-year shortfall of nearly $3 billion, amounting to $117 million over two years, with just a million or two for the relocating companies.  But his backers hope they’re just the start – eight of the cuts Walker campaigned on (there were more) would cost an estimated $3.8 billion over the two year budget cycle.

Likewise, the estimated $22-57 million payroll tax exemption that Twitter has apparently successfully demanded as its price for staying in San Francisco for the next six years falls far short the city’s projected $380 million deficit.  And since the deal only applies to new hires, Twitter won’t actually pay less than it does today.  But here too, that won’t be the end of it.

Online game creator Zynga has already announced it wants the same deal; others, likely including online review company Yelp, will certainly follow.  And since it’s not allowed to fashion a tax break for the benefit of a single company, this one is crafted for an entire “community revitalization” zone.  Business owners in other parts of the city will obviously ask their Supervisors why they can’t get them one too.

And there is a darker side to this.  Ronald Reagan was accused of being many things, but original thinker was not one of them.  He may actually have believed in what his future running mate, George H. Bush, once called his “voodoo economics,” but not everyone is so naive.  Grover Norquist, President of Americans for Tax Reform, proclaims his desire to shrink government “down to the size where we can drown it in the bathtub.”  And a major tax break for a wealthy corporation in an industry that’s currently thriving is just how you start the shrinkage.

It’s not that there are no legitimate policy issues here.  The city is currently one of the few with a payroll tax and some would prefer to switch to taxing a company’s gross receipts.  (The city had a hybrid system in which a company was taxed either on its profits or gross receipts until the latter was eliminated in 2001 by a lawsuit filed by the city’s businesses, an outcome that cost the city $25 million annually.)  And Supervisor Ross Mirkarimi, who voted against the Twitter deal proposed a two-year moratorium on taxing stock options.  Instead, for the moment the city has opted to stick with the current system and give Twitter what it wants.

And let’s be clear here – this tax break is not focused on an industry or individuals struggling to make ends meet.  The New York Times recently pegged the hi tech industry’s average salary for computer science majors just out of college at $80,000, (with Google going as high as $90,000 to $105,000.)  Twitter itself is currently valued at $7 billion and hi tech employment in San Francisco is almost at its peak level.

The bill needs to go through one more reading, but with the Supervisors having voted 8-3 in its favor and Mayor Ed Lee leading the cheers, it seems certain to become law next week.  The question of whether the Board still had a “progressive” majority had been a open one until it firmly embraced a corporate tax agenda with this vote.  Still, as the city elects a mayor later this year and Lee has pledged to serve only the remainder of now-Lieutenant Governor Gavin Newsom’s term, the Twitter vote may emerge as a litmus issue in that race.

Those behind the Twitter deal no doubt think it will be cool to keep such a hip company in the city.  Perhaps they’re too young to remember Reaganomics; perhaps they’ve forgotten.  And no doubt, they’ll continue to denounce politicians in Sacramento and Washington, D.C. for cutting taxes on the rich and services for the rest of us.  But when it comes time to balance the budget in San Francisco, hip and cool won’t pay the bills.  Let’s not the rest of us forget that.  And for now, the city’s Board of Supervisors has been tried and found wanting.

Interventions Past: Getting the Record Straight

The jumbled accounting of the 1999 events in Kosovo that respected Israeli journalist and peace activist Uri Avnery musters in support of the current Libya bombing campaign illustrates just how far the fog of war may extend.  In reviewing the recent history of what he considers humanitarian interventions, including NATO’s in Kosovo, Avnery writes:

Slobodan Milosevic was committing an act of genocide – driving out a whole people, committing barbarities along the way.

Leaving aside the question of the appropriateness of the word “genocide,” Avnery describes things accurately enough.  In his book, Kosovo: War and Revenge, journalist Tim Judah wrote:

In the end almost 850,000 were either deported or fled Kosovo and hundreds of thousands were displaced inside.

The problem is that Judah here describes events that actually happened after the start of the NATO bombing campaign that Avnery thinks was aimed at stopping them.

I know from personal experience that Avnery is not the only one with an inverted time line of the period.  A couple of years ago, a friend of mine described an article he was planning to write accusing Noam Chomsky and Naomi Klein of dogmatism.  While I was in no way sympathetic to his point of view and ultimately thought that it was his article rather than its targets that was dogmatic, I nonetheless thought I’d save him from a bit of embarrassment by pointing out that the Kosovo bombing campaign he considered the “right thing” to do (while Chomsky hadn’t) had preceded the displacement campaign his memory told him had come first.

It’s not the case that these folks are recovering these memories out of thin air, though. There were Kosovars displaced before that. Judah again:

By the 3 August (1998) the UN High Commissioner for Refugees was estimating that 200,000 Kosovars had been displaced by the fighting.

But the chronology is not the only aspect of the Kosovo War that has been distorted – there were two sides to it and neither covered itself with glory. Slobodan Milosevic, leader of what was then still officially Yugoslavia, is accurately remembered as a war criminal.  But less well remembered is the fact that earlier that year, the U.S. State Department had branded the principle force fighting Milosevic’s government, the Kosovo Liberation Army (KLA), a “terrorist organization.” (While I personally do not place great stock in State Department “terrorist lists,” I had thought that the State Department did.)  At one point the organization threatened death to any ethnic-Albanian Kosovar leaders who might sign onto a pact for autonomy within Yugoslavia. The late American diplomat Richard Holbrooke thought the KLA was “taking very provocative steps in order to draw the west into the crisis.”

None of this is meant to whitewash either Milosevic, the disproportionate force employed by his government, or the fear at the time that something like the massacre of 8,000-10,000 Muslim men at Srebrenica at the hands of Bosnian Serb forces four years before could be repeated in Kosovo.  But neither should we forget that Yugoslavia had allowed the Organization for Security and Cooperation in Europe (OSCE) to station 2,000 monitors in the province in the midst of the fighting.  The monitors were removed when NATO began its bombing – against the wishes of Yugoslavia.

Only after the start of that 78-day campaign (which included the use both of cluster bombs and depleted uranium munitions and the bombing of a Belgrade television station that killed eighteen) did Yugoslav forces drive Kosovo’s ethnic Albanian population out.

(BBC’s official timeline of the conflict: 1999 March – Internationally-brokered peace talks fail. Nato launches air strikes against Yugoslavia lasting 78 days before Belgrade yields. Hundreds of thousands of Kosovo Albanian refugees pour into neighbouring countries, telling of massacres and forced expulsions which followed the start of the Nato campaign.)

But in his column on the Gush Shalom website Avnery writes:

When there was a worldwide outcry, President Bill Clinton decided to bomb installations in Serbia in order to induce Milosevic to desist. Nominally, it was a NATO action. It achieved its goal, the Kosovars returned to their homeland, and today we have the independent republic of Kosovo.

Judah, in fact, considered Yugoslavia’s responding to the bombing by driving the Albanian Kosovars out to be what ultimately undid it.  Absent that, the story the outside world saw was all about the bombing of Serbia.  “If this situation had continued for much longer,” he thought, “there is little doubt that uproar would have ensued.  The question would have been asked, ‘How can we bomb a small country – whatever we think of its government – because it refuses to sign an agreement about the future of part of its own territory?’”

In retrospect, one of the more significant aspects of NATO’s Yugoslavia bombing campaign has proved to be that it was the point at which many liberals “got over” Vietnam and came to like war again.  Avnery continues:

At the time, I applauded publicly, to the dismay of many of my leftist friends at home and all over the world. They insisted that the bombing campaign was a crime, particularly since it was conducted by NATO, which for them is an instrument of the devil.  My answer was that in order to prevent genocide, I am ready to make a pact even with the devil.

Or at least to lose his memory, apparently.

Some who do remember the chronology correctly still maintain that an effect of the bombing campaign was somehow actually its cause. As Noam Chomsky commented:

The logic, widely accepted, is intriguing. Uncontroversially, the vast crimes took place after the bombing began: they were not a cause but a consequence. It requires considerable audacity, therefore, to take the crimes to provide retrospective justification for the actions that contributed to inciting them.

We will surely not all agree on the future military interventions the U.S. will undoubtedly enter into, but if we could at least agree on the facts of the interventions of the past, we might have a firmer basis for discussing them.