Tag: Fiscal Illusion

So You Want to Cut Spending

Back in 2011 there was a titanic fight between President Obama and the newly energized House Republicans over the federal budget. The ballyhooed result, which averted the frightening specter of a “government shutdown,” was “the largest annual spending cut in our history,” in the words of President Obama and the national media. I raised some doubts about it at the time, noting that it certainly wasn’t the largest budget cut in history and then pointing to a National Journal story suggesting that the cuts weren’t really there.

Now, in the Sunday Washington Post, David Fahrenthold follows up: What happened to the much-touted $38 billion in cuts (out of a $3,800 billion budget)? Oops. Not so much: 

Nearly two years later, however, these landmark budget cuts have fallen far short of their promises.

In some areas, they did bring significant cutbacks in federal spending. Grants for clean water dried up. Cities got less money for affordable housing.

But the bill also turned out to be an epic kind of Washington illusion. It was stuffed with gimmicks that made the cuts seem far bigger — and the politicians far bolder — than they actually were.

In the real world, in fact, many of their “cuts” cut nothing at all. The Transportation Department got credit for “cutting” a $280 million tunnel that had been canceled six months earlier. It also “cut” a $375,000 road project that had been created by a legislative typo, on a road that did not exist.

At the Census Bureau, officials got credit for a whopping $6 billion cut, simply for obeying the calendar. They promised not to hold the expensive 2010 census again in 2011.

Today, an examination of 12 of the largest cuts shows that, thanks in part to these gimmicks, federal agencies absorbed $23 billion in reductions without losing a single employee.

Read it all. It’s just an amazing investigation into what happens in the bureaucracy when Congress announces it’s cut the budget, and the reporters move on.

Which is why I wrote last week that if you really want to cut spending, you should shut down agencies and programs. Then you have some hope that the spending will actually stop.

New Orwellian Tax Scheme in England Would Require All Paychecks Go Directly to the Tax Authority

Our tax system in America is an absurd nightmare, but at least we have some ability to monitor what is happening. We can’t get too aggressive (nobody wants the ogres at the IRS breathing down their necks), but at least we can adjust our withholding levels and control what gets put on our annual tax returns. The serfs in the United Kingdom are in much worse shape. To a large degree, the tax authority (Inland Revenue) decides everyone’s tax liability, and taxpayers have no role other than to meekly acquiesce. But now the statists over in London have decided to go one step farther and have proposed to require employers to send all paychecks directly to the government. The politicians and bureaucrats that comprise the ruling class then would decide how much to pass along to the people actually earning the money. Here’s a CNBC report on the issue.

The UK’s tax collection agency is putting forth a proposal that all employers send employee paychecks to the government, after which the government would deduct what it deems as the appropriate tax and pay the employees by bank transfer. The proposal by Her Majesty’s Revenue and Customs (HMRC) stresses the need for employers to provide real-time information to the government so that it can monitor all payments and make a better assessment of whether the correct tax is being paid. …George Bull, head of Tax at Baker Tilly, told CNBC.com. “If HMRC has direct access to employees’ bank accounts and makes a mistake, people are going to feel very exposed and vulnerable,” Bull said. And the chance of widespread mistakes could be high, according to Bull. HMRC does not have a good track record of handling large computer systems and has suffered high-profile errors with data, he said. …the cost of implementing the new system would be “phenomenal,” Bull pointed out.  …The Institute of Directors (IoD), a UK organization created to promote the business agenda of directors and entreprenuers, said in a press release it had major concerns about the proposal to allow employees’ pay to be paid directly to HMRC.

This is withholding on steroids. Politicians love pay-as-you-earn (as it’s called on the other side of the ocean), largely because it disguises the burden of government. Many workers never realize how much of their paychecks are confiscated by politicians. Indeed, they probably think greedy companies are to blame when higher tax burdens result in less take-home pay. This new system could have an even more corrosive effect. It presumably would become more difficult for taxpayers to know how much government is costing them, and some people might even begin to think that their pay is the result of political kindness. After all, zoo animals often feel gratitude to the keepers that feed (and enslave) them.