What's the point of a K-shaped economy?

Dems looking for a middle that doesn't exist.

Economists and pundits talk about a “K-shaped economy.” This is a description of two economies diverging. The vertical line of the K is the “y axis” that tells how much money we are making. The horizontal “x axis” is implicit, running along the bottom of the letter. It represents the passage of time. The two legs of the K show that over time half of us are earning more (our resources are going up) and half of us are earning less (our resources are going down). I would argue we have a “small k-shaped economy” where those doing well have room for further growth while others have bottomed out. Regardless, my purpose is to draw your attention to the inflection point, the point where the lines meet. It is this point that too many of our political leaders are trying to protect. It’s at the center going nowhere.

There are too many examples of Democratic political leaders focused on the inflection point, trying to maintain a status quo in a time that is not normal. They argue for compromise as things blow up about them. They seek to continue elected dynasties and trend lines the utility of which have long since passed. In NH, where I live, the futility of being a centrist shows up most often in the context of how we fund our public schools. I pay attention to school funding because I have worked to improve how we fund our schools for thirty years. Last week provided a prime example.

Two Roads Diverged but the Middle Remained Unperturbed

The NH legislature convened last week to begin the second year of our 2025-26 biennial session. Lots happened that is worthy of discussion. There were even a (very) few bright spots but I want to focus on the money. Follow what happens with the money to get the real pulse of political leadership.

State revenues are down and budget shortfalls are projected. Programs are being cut for lack of resources. As Garry Rayno of IndepthNH writes:

The state used billions of dollars of federal money to fuel its economy creating revenue surpluses in the hundreds of millions of dollars since the pandemic and responded with tax cuts and increased spending that now is unsustainable as revenues have trended down in the last two fiscal years.

HB 155, another cut in business taxes.

Despite these worrisome trends, House Republicans put up yet another cut to business taxes. NH has two business taxes. Neither tax is imposed at a high rate which earns NH an “A+” rating from robber barons and other free marketeers who only consider what their businesses pay in taxes and not what benefits a properly resourced state can offer (e.g., good roads, a strong community college system, or a viable statewide healthcare system). The two business taxes have been cut nine times in the last ten years depriving the state of a billion dollars in revenue. For context, NH’s entire state budget is eight billion dollars. Business taxes are the largest source of funding for the state budget. The current cut, contained in HB 155, removes another $20 million in revenues each year.

Republicans supported the business tax cut. Democrats did not. The vote was 189-165 in favor of the tax cut. Four Republicans voted against the cut: Representatives Andrus (Salisbury), Proulx (Manchester), Sytek (Salem), and Taylor (Freedom). No Democrat voted for the cut.

Yay us!

HB 503 to Reverse Business Tax Cuts and Restore NH’s only Tax on the Wealthy

On the same day as HB 155 passed in the House, Rep. Tom Oppel (D-Canaan) made a motion to waive House rules to allow the House to re-consider HB 503 that reversed previous cuts to business taxes and reinstated the Interest and Dividends Tax. The Interest and Dividends Tax was a small 5 percent tax on the passive earnings of the state’s wealthiest taxpayers. Its repeal costs the state $180 million in revenues each year. The tax had been in place in one form or another for more than 100 years.

You might have expected 165 Democrats to support Tom’s motion to allow NH to restore revenues at a time when they are most needed and at a time when two recent court decisions conclude that the state of NH is not meeting its constitutional obligation to fund education at the state level. You would be wrong. Tom’s motion garnered 57 Democratic votes.

The 57 vote tally was an improvement. The original bill to reverse the tax cuts introduced last year by Rep. Tom Schaumberg (D-Sutton) garnered 27 Democratic votes. The roll call of the vote on Oppel’s motion may be found here. Please speak to your state rep about their vote. I know I will.

The two votes happening on the same day encapsulate Democratic leadership’s fierce protection of the center going nowhere. Many elected Dems in leadership will claim that restoring business taxes and taxes on the most wealthy will result in Dems being accused of being “taxers” and Dems will then lose more elections.

Folks, here’s the sad truth. You lost state elections for the last decade and Dems will be accused of being taxers no matter how they vote. You’ve let that accusation become a rallying cry for Republicans because you never defend votes to find revenues to fund important programs. And the solid opposition to HB 155’s tax cut seals the deal. You now are on record as opposing tax cuts.

Why not give voters a reason to vote for Dems?

Dems have proposed a number of bills this session to help public schools and to save taxpayers from oppressive local property taxes that are the prime source of public school funding. None of the bills, however, propose a funding source.

Not a single one.

Why defend being a (do-nothing) centrist?

A Substack writer, Sydney Michalski, who I follow has engaged in an interesting public exchange with Maine’s US Senator Angus King. She asked King to focus on the Epstein files, preventing foreign wars and restoring ACA subsidies. King responded that he is increasingly concerned with the “growing gulf between the left and right and the shrinking middle.”

Michalski wrote in response:

When we talk about political ideology, the center of the spectrum in the United States is meant to be the Constitution and the rule of law. That is the standard, the baseline, the bare minimum of agreement against which the full right-to-left spectrum of policy negotiations and compromises must ultimately be tested.

The gulf that has developed today is not about polarization. The left and right are not migrating further apart. The right has launched off the edge of the chart into violent authoritarianism. There is no corresponding leftward lurch towards social revolution.

The overwhelming and growing public reaction, these thousands and millions of protestors flooding the phones and taking to the streets to demand that the law and the Constitution be followed - we ARE the center!

The center is not supposed to be negotiated ever rightward into fascist dictatorship. The center is supposed to be uncompromisingly anchored in the Constitution and the rule of law. This is supposed to be the line of absolute principle.

That is why I am disappointed every single time you vote with the regime. It’s not because I’m polarized. It’s because you’re negotiating with people who don’t believe in the center at all. You are negotiating with terrorists . . . .

Subscribe to Michalski here.

I consider Angus King a personal friend. We worked together at my old law firm. It pains me to write this but when he votes to protect his centrist credentials, he votes to protect that meaningless inflection point. This includes when Angus voted to capitulate to the Republicans over the ACA subsidies, a surrender that was led by NH’s senior senator Jeanne Shaheen.

Renee Good

Renee Good is the woman killed by ICE agent Jonathan Ross in Minnesota last week. Her name deserves to be mentioned often, and not by Trump who considers her killing a justified response to her “disrespectful” attitude.

The FBI has now excluded state authorities from the investigation of the killing which involved three shots fired at point blank range into Good’s car when she was turning the car to leave.

Expect a whitewash.

To be frank, I don’t understand the handwringing by state authorities. They can still gather evidence that includes witness statements and a number of videos of the actual shooting. At the appropriate time, they can subpoena the vehicle, gun and bullets from the FBI for a murder trial. They should demand that evidence be preserved to meet forensic standards and that destructive testing not take place.

If the feds don’t cooperate, Good’s family should pursue civil litigation for the violation of Good’s constitutional rights under color of law. Ross and ICE are not completely immune. These kinds of civil cases are strongly disfavored by the courts but filing suit is better than nothing. Some causes of action for constitutional violations by federal officers are still recognized under a case called Bivens v. Six Unknown Federal Narcotics Agents (1971). The constitutional violations are that Ms. Good was detained without probable cause and killed without due process. Perhaps more on this in a future post.

Note, I release a recorded version of this post a few minutes after this text version hits the wire. Some people like to “download me” for their commute to work.