Part of the Bay Area News Group

McNerney, Gill & McDonald face off on issues

By Josh Richman
Friday, May 4th, 2012 at 1:17 pm in 2012 Congressional Election, Jerry McNerney, U.S. House.

The Bay Area News Group’s editorial board met this morning in Pleasanton with the three candidates for the newly drawn 9th Congressional District.

John McDonaldRepublican John McDonald, 44, a semiconductor executive from Mountain House, said he’s running because “America has a lot of structural problems, not stimulus problems, that need to get fixed.” He cited his experience in running three successful startups in the past 10 years, and said he’s grown concerned at increasing government intrusion into the private sector; an example, he cited capital gains taxes that drive venture capital overseas. He said he decided that rather than complaining about the state of politics “you’ve just got to go make a difference.”

Ricky GillRepublican Ricky Gill, who turns 25 on Sunday, is a UC Berkeley law student from Lodi who said he’s running to provide native representation to his district; he noted that no sitting state or federal lawmakers lived within the newly drawn district when he declared his candidacy. Gov. Arnold Schwarzenegger appointed him to a one-year term on the state Board of Education several years ago, he said, and he learned the value of a dollar in his family’s agriculture business. “I think we need a congressional representative who’s going to defend farmers. I’m going to be a friend, not a foe.”

Jerry McNerneyIncumbent Rep. Jerry McNerney, D-Pleasanton, 60, said he has built a lot of solid relationships in his five and half years in office, and wants to continue his “retail politics” – meeting constituents, and bringing federal resources home for local schools and infrastructure. He said he has focused on veterans’ issues to ensure those who serve the nation get what they deserve; on growing the local economy; and on protecting the Delta’s water resources. “Right now there are big forces aimed at taking our water.”

Lots more on specific issues, after the jump…

On balancing debt reduction with economic stimulus:
Gill said he wouldn’t have voted for the 2009 economic stimulus package. Instead of stimulus, he said he would focus on building international for farmers; skilled immigration reform; regulatory reform and tort reform. “I think these are ways that are economically efficient to grow the economy. Also, he said, “austerity is something most of the countries in the world are now rallying around” – trading some short-term pain for long-term gain.
McDonald called stimulus “an economic painkiller” that’s fine after a short-term problem like a terrorist attack or natural disaster. “But if you’ve got a cancer, a structural problem in your society, and you take a painkiller, you haven’t solved anything … It will feel good for a while and then as soon as the stimulus wears off, you’re back to the same problem.” He said he doesn’t oppose some public economic stimulus so long as it’s paired with structural reforms, which he said should include rolling back the Sarbannes-Oxley Act of 2002 (which enacted new regulations in the wake of major corporate management and accounting scandals) and lowering capital gains taxes.
McNerney said the nation in 2009 was headed for a depression, so “the consequences of not undertaking a stimulus would’ve been very, very severe.” What got us into this economic mess was Wall Street running amok and banks lending money where they shouldn’t have, so rolling back regulations isn’t the answer. He said the capital gains tax “may or may not be too high,” but America’s corporate tax rate is definitely higher than those of other nations and “that’s an issue that needs to be addressed;” so too, he said, are enormous tax breaks for a small, wealthy segment of the population. “We need to start working across the table to solve these problems.”

On the No Child Left Behind education law:
McDonald said he’s “not for the federal government getting highly involved in education,” but rather wants “as much local control as possible.” As to NCLB specifically, he said, there’s no evidence it works – “Where’s the beef? I don’t see it” – and so he would repeal it and return more control to state and local authorities.
McNerney said NCLB “had the best intentions but it’s a deeply flawed program” that encourages teaching to the test and doesn’t deal with foreign-language learners and disabilities. “The administration should propose a revision of that, and if it’s acceptable I’ll support it, but in its current form it’s not acceptable.”
Gill said NCLB had the unintended consequence of putting states “in a position where there was a race to the bottom in terms of standards.” He appreciates its encouragement of charter schools, he said, but would prefer to let state and local officials set educational standards. It’s fine for the federal government to encourage higher standards and school choice (a la President Obama’s Race to the Top program) but not to mandate them, Gill said. But as for NCLB, “I’d start fresh, I think it’s just not a workable paradigm right now.”

On gridlock in Washington:
McNerney said an out-of-control campaign finance system contributes to the problem. Also, he said, members of Congress should build better personal relationships which would allow them to work more collegially and cooperatively.
McDonald said it’s good to maintain open communications, but bipartisan legislation isn’t necessarily good legislation – he cited Sarbannes-Oxley as an example. He said he would favor good ideas no matter from which side of the aisle they come, but serious problems like the nation’s rapidly growing debt don’t always lend themselves to gentility. However, he said he disagreed with the national GOP’s attacks upon McNerney for allegedly cutting Medicare – which he called unfounded and a tactic “to scare old people” – and for hiring a consultant during the redistricting process. “I didn’t think it was a fair attack. … It bothered me that this congressman was accused in the redistricting of having some nefarious purpose. Those kinds of attacks I think are completely inappropriate … That’s what makes people lose confidence in our political system.”
Gill said he agreed with those criticisms of McNerney leveled by the national GOP: “They’re grounded in the record.” He also agreed campaign finance has poisoned the well of political discourse somewhat, but said his campaign is funded by Central Valley voters while McNerney has taken about $3 million from special interests over the years.

On global warming:
Gill said he believes it has “become very politicized and its been used to drive a particular agenda.” “I think global warming is a phenomenon that probably exists… I suspect there is a human contribution to it. … It does not rise to the level of supporting a unilateral federal mandate on the issue.” He clarified, saying he doesn’t support any federal action “at this point because I believe energy prices would go through the roof. … My objection is more grounded in the practical effect of rising energy prices, which is something I can’t countenance in an economy like this” – especially if America is putting itself at a disadvantage to other countries that aren’t acting likewise.
McDonald said “carbon dioxide is absolutely a global warming gas … that is settled science, it’s just a fact,” and there is “absolutely” a manmade component to climate change. “But I’m not an alarmist about it, I think that is where the science is not settled.” There’s no question the climate is changing, but “what I don’t like is environmentalists constantly crying wolf on all these things. … There are definitely negatives and there are definitely positives,” with many of the negatives exaggerated by “bad science.” Those who advocate change should favor federal regulatory relief and research to enable faster development of cleaner energies such as nuclear, natural gas with carbon sequestration, and wind.
McNerney said “global warming is here, its happening, the evidence is pretty overwhelming,” with glaciers receding, ocean acidification, and changes to biological habitats. Putting 30 gigatons of manmade carbon into the atmosphere each year is definitely a big part of it, and while there could be short-term increases in agricultural productivity, the negatives – including flooding of low-lying coastal areas and ocean acidification – far outweigh the positives. A federal response must be part of a comprehensive energy policy that embraces an array of power sources including nuclear, geothermal, wave, wind and more. If we act efficiently, he said, we can keep prices low and produce all energy domestically within 15 to 20 years.

On Social Security:
McNerney said millions depend on the program and so it must be protected, yet partisan scare tactics tend to get in the way of real solutions. He said he’s willing to discuss raising the payroll tax cap as well as adjusting the tax rate; look at ways to eliminate waste; and discuss methods of means testing. He would not, however, raise the retirement age.
Gill said it’s “not the debt driver that Medicare is, but it needs attention. Means testing “is an idea that some have said has merit … I’m not saying I’m absolutely committed to it.” Raising the retirement age “is something a lot of European countries are looking at… and perhaps its something we would look at.” “I’m less sold on the taxation side of it,” he said, because that would discourage job creation.
McDonald said “we definitely need to tie Social Security to age… to the longevity of American lives,” but that can be depoliticized by establishing a formula (rather than making changes every few years) to tie retirement ages to American longevity. No more than 10 percent of funds should go to anything but benefits (compared to about 15 percent now). “I believe in the salary cap as it stands today,” he said, but like linking retirement age to longevity, the salary cap should be tied by formula to wages so it’s not a political football every few years.

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  • JohnW

    What the heck is Mr. McDonald talking about when he mentions capital gains taxes as an example of “increasing government intrusion into the private sector?” The maximum federal capital gains rate is 15% and can be lower depending on income level. It was 28% under Reagan and 20% under Clinton. If you’re a private equity investor, like Romney, you even get to use the capital gains rate for income from investing other people’s money at no risk to yourself.

  • Truthclubber

    @1 –

    Like all good neo-cons, he (McDonald) means that if you make money from “betting on speculative stuff” (aka “gambling”, albeit with different words, like “investing”) you should owe no taxes whatsoever, whereas if you make money from “working” (aka “toiling for long hours”, albeit with different words, like “welding” or “digging” or “firefighting”), you should be absolutely obligated (due to your low social status, of course) to pick up the tab for the expenses of the economically friendly infrastructure that we “gamblers” enjoy (like good interstate highways, national security from bad actors like China, Russia, and Iran, to name a few, and so on) out of your family’s pocket, not ours.

    To hell with shared community, responsibility, and sacrifice (especially for those more fortunate by the grace of God) — it’s every man, woman and child (unborn or otherwise) for themselves! It’s the neo-con Republican way!

  • http://www.johnmcdonald2012.com John McDonald

    Hi John W,
    Good question. The President Obama has been throwing around a lot of capital tax rate numbers recently. In Jan he said he wanted 30%, in Feb 20%. Add to those numbers 9.3% in California and you get 39.3% and 29.3%. This type of uncertainty gives investors pause when they think about investing in California vs. other areas of the world which have 0% or very low rates in their effort to attract new businesses. An economically smart president would not causally about these tax rates as investors put his comments in their risk analysis calculations. Remember young companies add the most jobs and the most likely to hire young college graduates. Next, Sarbanes-Oxley, parts of Frank-Dodd, and long-permit time environmental regulation are expensive, add risk and once again hurt job creation. It is estimated by Grant Thornton that 2M jobs have been lost due in large part to Sarbanes Oxley.

    You are right. The capital gains rate was lowered first under Carter, then again under Reagan. These cuts sparked one of the most dramatic innovation cycles in the history of the world. 21% of the US economy and $3.1T of economic value per year and over 13M jobs are a direct result of those tax cuts. It is the only part of the economy that did not stop growing through this Great Recession.

    All the best,
    John McDonald

  • http://www.johnmcdonald2012.com John McDonald

    Hi Truthclubber,
    First, I’m not a neo-con. Second, investing is not gambling. The investors in the Silicon Valley work long and hard deciding which technologies are the most likely to succeed, building teams, and then work long in the night and on weekends turning their dream into reality. Their innovations have changed the world, helped lift billions of people out of grinding poverty, and put all the world’s information very near every child on the globe. These teams work long hours. I myself often work 60+ hours per week. The reason the capital gains tax rate should be low is because when a person invests they might lose everything. Think of it this way – when you go to a job “working” as you say — you expect to be paid for every hour you work. There is near zero risk that you will get your paycheck. If the employer fails to pay you, you can sue, complain to the state, etc. When an investor puts their money into starting a business, they can lose everything! 100%. Therefore, because society needs new young dynamic companies hiring young people and creating jobs, we provide an incentive for investors to take on these high risk activities through a lower capital gains tax rate.

    All the best,
    John McDonald

  • JohnW

    Hi John McDonald:

    Your reply was unexpected and much appreciated. I’m impressed.

    First, let’s stipulate that I’m a Democrat and Obama supporter. However, I do consider myself a centrist and pragmatist on economics and fiscal matters. In these areas, I like to think I can clearly see cow chips flying from both the left and right.

    Regulatory climate, red tape and similar matters certainly merit discussion. I’m a believer in the Pareto 80/20 rule and tend to think that 20% of regulations achieve 80% of the good that regulation does. I’m not a Romney fan, but he once made a proposal I’ve not heard repeated — that if an agency proposes a new rule, it should be required to find one of comparable economic impact that can be discarded. Theoretically, we would eventually get rid of the dead wood and end up with the regulations of highest value to society and the economy. That’s similar to the Jack Welch school of constantly weeding out the lowest performing 10% of employees.

    However, let me respond specifically on taxes. First, the federal government can’t calibrate its tax policies based on what the combined effect of federal and worst state taxes. California’s tax framework is a disaster. But that’s another conversation and should not determine where we go with federal taxes.

    We can argue about 30% or some other number. But the central idea that Obama is pushing, whether you agree with it or not, is the notion of an alternative minimum income tax as it was originally designed — for truly very high income people. After all, the 30% is not much different than the current 28% AMT that hits mostly upper middle income people. By the way, I looked up my tax returns for the last 10 years before I retired to see what the effective tax rate was (taxes as a percentage of AGI). The period included two years after the Bush tax cuts and eight years prior. I was fortunate to make a decent W-2 income from salary, occasional non-qualified options and a lump sum payout and had few deductions or exemptions. My federal effective rate for those years was always above 30%. And I’m hardly part of the 1% or anything remotely close. Frankly, with generous executive deferred comp plans and such, there’s a lot of space between what many high income people really make and what shows up on the AGI line. I think we need to take a look at that.

    I agree that taxes on long-term capital gains (1 year is not long-term) should be lower than ordinary income tax rates to reflect risk and time value of money. But 15% is too low. It invites abuse, such as the treatment of “carried interest.” I’ve seen a number of people try to justify the latter, and their arguments are full of holes. One of my former bosses, Leo Hindery, now has a private equity company and has been on record saying that there is no justification for treating “carried interest” like capital gains. “Fairness” in taxes is a subjective notion. I’m more focused on what adds up (in math and economic terms). However, even though the amount of money involved with “carried interest” is relatively small, this truly is a matter of fairness. Our tax system depends, to a great extent, on voluntary compliance; which, in turn, depends on perceived fairness. We don’t want to be like Greece, as discussed in the book, “Boomerang,” where evading taxes is more the norm than paying them.

    As for corporate income taxes, I agree they should be low, so long as we can distinguish between a law firm or consulting firm or day trader and a real company. A value-added tax might be a better way to tax corporations.

    I also strongly believe that dividends should be taxed at ordinary income tax rates, as they always were, including under Reagan. The idea of treating them the same as capital gains didn’t happen until Bush 43.

  • Elwood

    I wish I had the opportunity to vote for John McDonald.

  • RR, Senile Columnist

    Little Ricky, finish school, take the bar exam, practice a while and then we’ll talk about running for office.

  • JohnW

    Re: #6

    Right, Elwood. Candidates for Congress can run in any district they choose, regardless of residence. So, why can’t voters do the same? Think of the possibilities. Republicans pouring into Pelosi’s district and Democrats pouring into Tom McClintock’s district.

  • Tanvir Singh

    Mr. McDonald,

    You managed Jass Singh’s campaign for Mountain House Board of Directors, which he won. He is now facing a recall, in part because of the lies he told to get elected, which you supported. You even stated you did not care about his lack off character or that that he could not live up to his promises as long as he addressed pay raises. Could you please explain your indifference to character?

    Until recently, Singh was listed as an advisor to your campaign. His name has been removed from your web site. Is he no longer an advisor to you? Could you please elaborate on your relationship with him now?

    At the beginning of your campaign, you stated you would not resort to negative attacks on your opponents, however, your web site makes spurious allusions to claims of wrong-doing by Ricky Gill. Isn’t this negative campaigning?

    I feel you are the wrong person to represent the 9th District. In the past, you have resorted to character assassination, mistruths, and manipulation of voters. I also feel you are not campaigning to win, but to take away votes from Gill to allow McNerney to win. I feel this because you specifically target Gill and Gill alone and never address McNerney’s insufficiencies.

    Regards,

    TS

  • http://www.johnmcdonald2012.com John McDonald

    Hi Tanvir,

    I did support Jass Singh because he was the only candidate who opposed the massive compensation increases that our public Mountain House employee managers were given (13%) after 50% of the staff was laid off. They also get $6K per year for car allowances and $23K for cafeteria plans for a total nearly $200K per manager. I’d be more than happy for public manager compensation to become a major issue in the campaign as other cities in CA-9 have the same issue. There are a whole lot more public employees losing their jobs in CA-9 who vote then public managers getting massive compensation increases — thanks for bringing it up. Please also bring up how during my first board meeting these same managers proposed a “learning to play bingo trip to Reno” All those facts are public documents easily accessed with Google.

    Anyways, all the best to you
    John

  • JohnW

    Kudos to Mr. McDonald for his comments defending McNerney against GOP attacks regarding Medicare and redistricting. Nice to see a little civility in politics. Also for saying what he really thinks about global climate change rather than pandering to the deniers. You would think that the farmers in the valley, regardless of political inclinations, would be among those most concerned about climate change. Yet the obviously intelligent kid fresh out of UC law school, says that he thinks global warming is a phenomenon that “probably exists.”