Topic: Government and Politics

Obama’s $1.3 Trillion Tax Hike

Here are some notes on the tax proposals in the new federal budget:  (See Table S-6; All figures are 10-year totals)

  • There are $770 billion in “tax cuts for families and individuals.”  However, the fine print on page 129 shows that $326 billion of that is actually spending, or the “refundable” portion of the tax changes. That leaves a net $444 billion in tax cuts for individuals.
  • The budget would impose a $646 billion tax increase from new “climate revenues,” which would create a burden on families in the form of higher energy prices.  Thus, there is a net tax hike on “families” of about $202 billion, even aside from the income tax increases at the top end.
  • Income tax increases on those with higher incomes total $637 billion. Note that these hikes land on both individual filers and the huge number of small businesses that file through the individual system.
  • Other tax hikes on businesses total a net $183 billion.
  • Finally, Obama proposes to limit deductions for higher earners to raise $318 billion.
  • Thus, President Obama proposes to hike taxes by a net $1,340 billion, or about $1.3 trillion, over the next decade. That’s the last thing we need to recover from recession and to compete in the global economy in coming years.

How to Spend a Trillion Dollars without Waste and Fraud

You can’t.

And the federal government knows it. On Tuesday,

Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government’s experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud….

Gene Dodaro, acting comptroller general of the U.S., told the subcommittee that a reliance on contractors and a lack of written policies could “increase the risk of wasted government dollars without adequate oversight of contractor performance.”

With the government having already allocated $700 billion for TARP, and $787 billion for “stimulus,” and President Obama now calling for $635 billion for health care and a federal budget soaring to $3.6 trillion – well, you’d think two government reports on the likelihood of fraud and waste would be news. But this testimony didn’t make the New York Times or the Washington Post. There was a small inside story in the Wall Street Journal.

One of Greg Mankiw’s readers worked on the new Department of Homeland Security and reported recently:

you cannot juice up a government agency’s budget by tens of billions (or in the case of the stimulus package, hundreds of billions) and expect them to be able to process the paperwork to contract it out, much less oversee the projects or even choose them with any kind of hope for success. It’s like trying to feed a Pomeranian a 25 lb turkey. It’s madness. It was years before DHS got the situation under control and between the start and when they finally assembled a sufficiently capable team of lawyers, contracting officials, technical experts and resource managers, most of the money was totally wasted.

Linda Bilmes, coauthor with Nobel laureate Joseph Stiglitz of The Three Trillion Dollar War: The True Cost of the Iraq Conflict, analyzes the massive problems in three somewhat smaller government projects — the Iraqi reconstruction effort, Hurricane Katrina reconstruction, and the Big Dig artery construction in Boston — and finds that “in any organization that starts to increase spending very rapidly there are risks of waste, fraud and inefficiency.”

Saying “nobody messes with Joe” is not a solution to the inevitability of waste and fraud when an unaccountable bureaucracy is spending trillions of other people’s dollars.

President Obama’s Budget: Higher Taxes & Bigger Government

“As soon as I took office, I asked this Congress to send me a recovery plan by President’s Day… Not because I believe in bigger government – I don’t. Not because I’m not mindful of the massive debt we’ve inherited – I am.”
     –President Obama to congressional joint session, February 24

President Obama said some encouraging words about federal spending in his first major speech as president, but the budget released by his administration today reveals a substantial disconnect between his rhetoric and his policy.

Americans have a fundamental choice to make in coming months: Do they want President Obama and Congress to impose huge increases in the size of government, perhaps as dramatic as occurred in the 1930s and 1960s?

Apart from defense, federal spending has hovered around 16.5 percent of the economy since 1980, through both Democratic and Republican administrations. But under President Obama, nondefense spending is soaring to 23 percent of the economy this year and will remain at historic high levels in the future.

Even after current stimulus spending is supposed to end, nondefense spending is expected to be more than 19 percent of the economy – or 25 percent more than the size of government during the later Clinton years.

Americans need to decide whether they want the European-sized government that President Obama is promising – with all its damaging effects on individual freedom and economic growth – or whether they want to return to the greater prosperity of the smaller-government Clinton years.

Biden’s Shock Doctrine

Vice President Biden is the latest member of the Obama administration to declare the administration’s intent to use shock and awe to ram through their statist agenda in a crisis atmosphere:

“Opportunity presents itself in the middle of a crisis,” Biden said on ABC’s “Good Morning America.”

HT: Johan Norberg, the author of a devastating critique of Naomi Klein’s The Shock Doctrine.

The Bush administration used crisis tactics, too, of course, ramming through the Patriot Act, the nationalization of airport security personnel, the creation of the Homeland Security Department, and the war in Iraq after the shock of 9/11 and a bevy of bailouts during the economic crisis. As Steve Horwitz wrote:

Just as the Patriot Act was a bunch of laws waiting for a political “crisis,” so is much of the stimulus package a bunch of programs waiting for an economic “crisis.” 

Plenty of earlier administrations used the same tactics, from FDR’s first hundred days of frenetic legislation to LBJ’s forced march to the Great Society after the Kennedy assassination. The difference is, the Obama administration is the first one to publicly and proudly proclaim that they intend to use the crisis atmosphere to force through an agenda that wouldn’t otherwise be possible.

Obama’s Lobbying Bonanza

The Bush administration was good to lobbyists, especially in its final year, when lobbyists earned $3.2 billion, the most ever. But the Obama administration promises to be even better, according to those who follow the field. Marketplace Radio reports:

Washington lobbyists earned a whopping $3.2 billion last year. That’s the highest amount in the decade tracked by the nonpartisan Center for Responsive Politics. Executive Director Sheila Krumholz says interest groups spent $17.4 million on lobbying every day Congress was in session last year. And with Washington on a spending spree, companies are boosting their influence on Capitol Hill.

SHEILA KRUMHOLZ: There was this unique opportunity that government was handing out money and anytime that happens, companies will spend what they must to get in line to get a piece of the pie.

And that’s expected to continue. Craig Holman is a governmental affairs lobbyist with the non-profit group Public Citizen.

CRAIG HOLMAN: The amount spent on lobbying is not related to the disclosure or the regulation of the lobbying profession. It is related entirely to how much the federal government intervenes in the private economy.

That’s right. Even the Naderite Public Citizen understands that “the amount spent on lobbying … is related entirely to how much the federal government intervenes in the private economy.”

Marketplace’s Ronni Radbill goes on, “In other words, the more active the government, the more the private sector will spend to have its say…. With the White House injecting billions of dollars into the economy, lobbyists say interest groups are paying a lot more attention to Washington than they have in a very long time.”

Or, as F. A. Hayek explained the process 65 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

And just who is doing all this lobbying? The Center for Responsive Politics says that health and pharmaceutical companies were the biggest spenders, which wouldn’t surprise lobby-watcher Tim Carney, followed by the finance, insurance, and real estate industry (even though many of those companies cut back their lobbying late in the year, after getting the moolah they came for). But, Marketplace also reports, “There’s a report out today from the Center for Public Integrity that says the number of green lobbyists has tripled in the last five years. There are nearly 2,500 people now employed trying to get their clients views heard on climate policy. Wall Street in particular sank a lot money into green.” With the economy slowing, banks were pulling back from investments in so-called renewable energy. “That is, until the stimulus package tossed it a lifeline.”

So the $3.2 billion bonanza for lobbyists in 2008 was just a precursor of the lollapalooza to come. Within three weeks of Obama’s inauguration, the Washington Post reported that more than 90 organizations had hired lobbyists specifically to influence the stimulus bill. Since President Obama has made clear that in his “blueprint for America,” the $800 billion stimulus bill is just the start of his money flow to and from Washington, we can expect lobbying expenditures to keep on rising. Federal spending will be directed by politicians to politically favored recipients. That’s just reality. If you want money flowing to the companies with good lobbyists and powerful congressmen, then all this spending may accomplish something. But we should all recognize that we’re taking money out of the competitive, individually directed part of society and turning it over to the politically controlled sector. Politicians rather than consumers will pick winners and losers. That’s not a recipe for recovery.

I’ll give the last word again to Craig Holman of Public Citizen: “the amount spent on lobbying … is related entirely to how much the federal government intervenes in the private economy.”

Cato Scholars Address Obama’s First Speech to Congress

President Barack Obama’s first address to Congress laid out a laundry list of new spending contained within the stimulus legislation and provided hints as to what will be contained in the budget - a so-called “blueprint for America’s future” - he’ll submit to the legislature. Cato Institute scholars Chris Edwards, Jim Harper, Gene Healy, Neal McCluskey, David Rittgers, John Samples and Michael D. Tanner offer their analyses of the President’s non-State-of-the-Union Address.

Subscribe to Cato’s video podcast here and Cato’s YouTube channel here.

No Taxation Without Representation? OK, I’ll Take the No Taxation

The Senate is taking up, and looks ready to pass, legislation granting the District of Columbia full representation in the House of Representatives.  And the bill is co-sponsored by Utah’s Orrin Hatch, whose state would also get one additional House member – but only until 2012, when the new census will again reapportion representatives nationwide.

The problem (setting aside the cheap politics of adding one safe seat for each party) is that the DC Voting Rights Act is facially unconstitutional. The plain text of Article I limits representation in Congress to voters residing in “states” – a species of jurisdiction that the District of Columbia is not.

Now, this simple legal fact does not affect the moral argument that the voices of D.C. residents should resound in Congress no less than those of their fellow citizens of the several states. To remedy this historical accident – the Founders did not conceive that anyone would live permanently in the federal district, because the government was not supposed to grow this large – we have two constitutional options:

1) A constitutional amendment – like the 23rd Amendment, which in 1961 (yes, only that recently!) gave D.C. presidential electors, and without which it would be unconstitutional for D.C. residents to cast votes for president; or

2) Retrocession to Maryland – akin to the part of the original District that was returned to Virginia, all but the land under the Congress, White House, and certain other federal buildings could rejoin Maryland, and the people living there would then be counted toward that state’s congressional delegation (and be represented by Maryland’s two senators).

Better yet, if the political rallying cry for the D.C. Voting rights movement is “no taxation without representation,” then I suggest that we focus on the first part of the equation and cease federal taxation of D.C. residents. Regardless of the optimal solution, however, the course that Congress has chosen simply will not fly if we take the Constitution seriously.