My column this week from Washington, D.C., will deal with two bread and butter issues: the huge proposed AT&T/Time Warner merger and the proposed tax bill. These are probably not as exciting as President Trump’s trip to Asia, but they are a part of the nitty-gritty, essential work that Washington is supposed to do. First, the AT&T/Time Warner merger:
As a former U.S. Senate Commerce Committee chairman, I am strongly opposed to the current AT&T merger with Time Warner. Time Warner is the owner of CNN, HBO and Warner Brothers and produces a huge amount of content. It is a monopolistic force alone. I hope President Trump is able to block this merger. It fits very much with his desired image as a Teddy Roosevelt-type trust buster. If he lets this opportunity to stop a bad merger, the floodgates will be open for more.
As the author of the Telecommunications Act of 1996, I pushed for antitrust enforcement laws regarding our media and telecommunications giants. I believe we have lost diversity of voices and the public is paying the price. However, presidents of both parties have not enforced antitrust law. The two Bushes, Clinton and Obama let many bad mergers occur. Cable companies, for instance, have had numerous so-called “consolidations.”
During the consideration of the ’96 act, the cable companies promised there would never be more than 10 percent to 15 percent advertising if they could charge subscriber fees, but now there is 20-30 percent advertising alongside exorbitant fees.
Also, cable companies pleaded with Congress to not implement a regulation that they provide a la carte choices. Now a household is almost forced to buy one thousand channels of programming, most of which they never intend to consume. All this makes advertising income for the cable companies higher. In addition to running exorbitant amounts of advertising, they are also getting in excess of $100 a month for cable and internet. In our judgment in 1996, it should be about one third of that.
In other words, the cable companies were some of the biggest winners of the 1996 Telecommunications Act. They promised they would do good things in the private sector without legislation or regulation, but they misinformed me and my fellow legislators. It is time to stop the proposed merger.
Some people might confuse this issue as a personal vendetta for President Trump because Time Warner owns his nemesis, CNN. However, it should not be decided on that basis — there is plenty of merit in the pure antitrust issues against this merger.
Secondly, let me address the so-called tax reform legislation that is under consideration in Washington, D.C.
The proposed tax legislation as it now stands is a worthless hodgepodge of inconsistent deduction changes; the deficit is barely being mentioned. It is my judgment that the present tax bills will balloon the deficit. I have always been a deficit hawk, believing that the deficit problem will eventually bring our economy down.
The proposed Republican legislation does not touch the so-called “carried interest” issue. Former Republican presidential candidate Mitt Romney was blistered when he ran for president for using the “carried interest” deduction. Both parties said that they are in favor of repealing it. Even President Trump spoke out strongly against it in his campaign.
If everybody is against carried interest, then why is it still in the tax bill? The answer is highly paid lobbyists!
The carried interest matter allows fund managers and real estate investors to pay taxes at a capital gains rate (20 percent) rather than the ordinary income maximum of 39.6 percent. This is perhaps the most abusive part of the entire tax code. Both parties have called for its elimination, but suddenly in a bill about tax reform it is not even discussed! It is the largest tax loophole we have.
About the only thing that is agreed upon is to reduce the corporate rate. However, it will be such a revenue loser that we have to find other revenue sources. This bill does not do that. Thus, it appears to me that the traditionally conservative anti-deficit Republican Party is proposing a tax break for corporations that will be paid for by adding to the deficit. That is totally unacceptable. I would just as soon have the Republican controlled House and Senate pass no bill if passing it would mean a larger deficit. The only reason given for reducing the corporate rate is that it would stimulate the economy, but there is no economic foundation predicting that. With a higher deficit it may very well stall the economy.
The Republicans have gotten themselves into a situation where they seem to think they must pass something, but in this case I think passing nothing would be in the public’s interest.
This proposal takes away with one hand what it gives with the other. It just is not in the public interest; it is a political tax reduction for some. We must pass real tax reform in “regular order” in the Congress where the Congress casts between 50 and 100 votes a week to come up with a real tax bill. Congress then sends it to the president, who either signs it or vetoes it.
The present method used in Congress is to try to come up with something that everybody agrees to and pass it on one party-line vote. It is politically painless and does not work. Real legislation takes bruises and pain.
Citizens should tell their representatives in Washington to not pass the proposed tax bill.
Sen. Larry Pressler was a U.S. senator for 18 years and congressman for four years. He is a Rhodes Scholar, Harvard Law graduate and a Vietnam veteran.