Topic: Tax and Budget Policy

Just Put Ernie in Charge of the Next Farm Bill

By
Tad DeHaven

Yesterday, the U.S. Senate passed a farm bill with a projected price tag of $955 billion over ten years. As my colleague Sallie James explains, neither the Senate farm bill nor the House version offer up much in the way of real “reform.” And as Chris Edwards notes, both the Senate and House versions would spend more than the previous farm bill.     

One reason why taxpayers are about to get handed another _____ sandwich is because the politicians responsible for crafting the legislation are, well, politicians. And out of the mouths of politicians often come statements that indicate a softness of thought. Take, for instance, the following comments from Senate Agriculture Committee chairwoman Debbie Stabenow (D-MI) who just successfully shepherded a farm bill through the Senate: 

“I don’t think you can have an economy unless you make things and grow things. This bill is about growing things. That’s what we need to do in this country,” said Sen. Debbie Stabenow (D-Mich.), who chairs the Senate Agriculture Committee.

The Senate just voted to take more money from average taxpayers and give it to higher-income farm households because we need to “grow things”? Things won’t grow unless the grower gets a check from the government? What in the world is Sen. Stabenow talking about? Grow things? 

Apparently, one need only to have watched Sesame Street to be qualified to centrally plan the nation’s agricultural economy:

Topics: 
Tax and Budget Policy

Plaintiffs Ask Court to Block IRS’s Illegal ObamaCare Taxes this Year

By
Michael F. Cannon

I have blogged about the Internal Revenue Service’s attempt to tax, borrow, and spend $800 billion contrary to the clear language of ObamaCare, and how both Oklahoma (in Pruitt v. Sebelius) and a group of individuals and small businesses (in Halbig v. Sebelius) have filed suit to block this raw power grab. The Congressional Research Service writes that these challenges “could be a major obstacle to the implementation of [ObamaCare].” George Mason University law professor Michael Greve writes:

This is huge: all of Obamacare hangs on the outcome…If successful…[either] case will bring Obamacare’s Exchange engine to a screeching halt…In short, this is for all the marbles.

Last week, the Halbig plaintiffs asked the U.S. district court for the District of Columbia to speed things up. Though the IRS doesn’t have to respond to the Halbig complaint until July, the plaintiffs filed a motion for summary judgment asking the court to rule on the case before the end of 2013. According to the plaintiffs:

Plaintiffs need a determination on the merits far enough in advance of January 1, 2014, to allow them to conform their behavior to the law. Because the validity of the regulation turns on a purely legal question and the administrative record is closed, Plaintiffs are moving for summary judgment now, and hope thereby to avoid the need to litigate a motion for preliminary injunction or temporary restraining order at the eleventh hour.

The plaintiff’s motion for summary judgment cites my paper (with Jonathan Adler), “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.”

On June 17, one week from today, Cato will host a policy forum on Halbig v. Sebelius featuring plaintiffs’ counsel Michael Carvin and other luminaries. Register here.

Topics: 
Government and Politics, Health Care, Regulatory Studies, Tax and Budget Policy

Larry Summers Redefines Balanced Budgets as Stimulus and Big Deficits as Austerity

By
Alan Reynolds

Former Treasury Secretary Larry Summers, in June 4 testimony before the Senate Budget Committee, offers a scatter diagram which allegedly shows “that countries that pursued harsher austerity policies in recent years also had lower real GDP growth.”  He acknowledges, but does not adequately explain, that the causality may well be backwards: Bond markets would not allow countries in severe economic distress (Portugal, Ireland, Greece and Spain) to continue financing deficits at the peak levels of 2010.

Summers defines “austerity” as the three-year change (regardless of the level) from 2010 to 2013 in cyclically-adjusted “primary” deficits (excluding interest expense) as a percent of potential GDP.  His scatter diagram then compares those changes to average real GDP growth from 2010 to 2013, using unexplained estimates for 2013.

Measuring fiscal stimulus by the change in budget deficits means several countries with little or no budget deficit in both 2010 and 2013 appear as employing the most “fiscal stimulus” in Summers’ graph. Sweden’s deficit is estimated at 0.1 percent of GDP for 2013, according to The Economist, and was literally zero in 2010.  Keeping the budget balanced puts Sweden on the admirable left side of Summers’ diagram – the side ostensibly choosing growth rather than austerity.  Germany is another country Summers counts as avoiding austerity, even though Germany’s brief cyclically-adjusted deficit of 3.5 percent of GDP in 2010 was cut to zero in 2012-2013.

When it comes to real GDP Growth, Hong Kong, Singapore, the Slovak Republic and South Korea appear near the top of Summers’ graph.  It is revealing that Hong Kong is also far to the left on the pro-growth side of the austerity axis.  This may appear paradoxical since Hong Kong ran budget surpluses in 7 of the past 8 years, and will do so again in 2013. No amount of cyclical adjusting could turn chronic surpluses into deficits.  Simply because Hong Kong has not switched from a big deficit to a smaller one, that alone suffices to place it among the least “austere” economies on list.  Similarly, South Korea’s budget surplus is estimated at 1.3-1.4 percent of GDP in both 2010 and 2013, according to the OECD, but keeping the budget in surplus between those years counts as stimulative policy in Summers’ reckoning.

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Topics: 
Government and Politics, International Economics and Development, Tax and Budget Policy

The Federal Government’s “Rural” Industrial Complex

By
David Boaz

David Fahrenthold has another excellent article on waste in government in Sunday’s Washington Post. This time he finds a truly comic example of waste, duplication, and confusion:

[T]he U.S. government has at least 15 official definitions of the word “rural,” two of which apply only to Puerto Rico and parts of Hawaii.

All of these definitions matter; they’re used by various agencies to parcel out $37 billion-plus in federal money for “rural development.” And each one is different….

There are 11 definitions of “rural” in use within the U.S. Department of Agriculture alone.

It’s laughable. But the real question is, Why does the federal government even need to define “rural”? Well, of course the answer comes back to the real purpose of our modern tax-and-transfer state: The definitions define who gets the subsidies.

Every year, there are billions available to fund projects in rural communities. Money for housing. Community centers. Sewer plants. Broadband connections.

In a sidebar to the story, we get some details. The Census Bureau has one definition of “rural” so it can tell us how many Americans live in rural areas. Here are the purposes of the other 14 definitions:

Used for a variety of loan and grant programs, all meant to foster rural development…for loans and grants for “community facilities” in rural areas… for aid for water and waste-disposal systems… for aid for improvements in telecommunications systems…by farm-credit associations making housing loans… for certain lending programs for rural community development…to determine areas served by Office of Rural Health…by the National Rural Development Partnership…for grants to rural institutions of higher education…to determine what areas of Hawaii are eligible for rural-aid programs…to determine what areas of Puerto Rico are eligible for rural-aid programs…by various rural development loan and grant programs.

So let’s see. People in rural areas pay federal taxes. People in urban areas pay federal taxes. All that money goes to Washington – where a great deal of it stays – and then some of it is used to provide programs and services in rural and urban areas. Maybe both rural and urban Americans would be better off keeping their money at home and paying for whatever services they think are actually worth the cost. And then the federal government wouldn’t have to pay handsome salaries to well-educated people to form task forces to determine 15 different definitions of “rural.” And states, cities, and rural areas wouldn’t have to hire expensive lobbyists to get a piece of that federal pie.

Topics: 
Government and Politics, Tax and Budget Policy

National Journal: Top Obama Advisers Admit IRS Could Have Been Asked to Suppress Political Dissidents

By
Michael F. Cannon

I have already blogged about Ron Fournier’s remarkable National Journal column on how President Obama’s many scandals make it hard to support big government. But there’s an item buried in that column that bears highlighting:

If investigators uncover even a single email or conversation between conservative-targeting IRS agents and either the White House or Obama’s campaign, incompetence will be the least of the president’s problems.

Team Obama has publicly denied any knowledge of (or involvement in) the targeting. Privately, top advisers admit that they don’t know if the denials are true, because a thorough investigation has yet to be conducted. No emails have been subpoenaed. No Obama aides put under oath.

It seems Fournier has multiple sources close to the president who have basically said, “Did someone in the administration tell the IRS to suppress our opponents? Ehh, maybe.”

Topics: 
General, Government and Politics, Regulatory Studies, Tax and Budget Policy

Moral of the Story: Tax Havens Are Okay if You’re a Politically Connnected Statist

By
Daniel J. Mitchell

Earlier this year, I had some fun when it was revealed that the president’s new Treasury Secretary had a lot of money in the Cayman Islands.

After all, leftists want us to believe tax havens are rogue regimes that should be eliminated. Some of them even want military intervention against these low-tax jurisdictions!

Much to my amusement, Mr. Lew even pretended he was financially illiterate to justify making sensible decisions to invest via the Cayman Islands.

And unlike the president’s first Treasury Secretary, Mr. Lew didn’t break the law and cheat on his tax return.

You probably won’t be surprised to learn that Secretary Lew wasn’t the first Democrat to utilize tax havens. Lawmakers such as John Kerry, Bill Clinton, John Edwards, and others on the left also have utilized tax havens to boost their own personal finances.

And it appears that Mr. Lew won’t be the last Democrat to be caught with his hands in the cookie jar.

Here’s some of what’s being reported by the New York Times in regard to the president’s nominee to be U.S. Trade Representative:

Michael Froman, a longtime White House economic aide nominated to be President Obama’s trade representative, has nearly half a million dollars in a fund based in the Cayman Islands, according to financial documents provided to the Senate Finance Committee. …White House officials said Mr. Froman played no role in creating, managing or operating the investment funds and had done nothing wrong. “Mike Froman has paid every penny of his taxes and reported all of the income, gains and losses from the investment on his tax returns,” Mr. Whithorne said.

I don’t remember that compliance with the tax law mattered when Obama and the media were going after Romney in 2012 for legally investing in the Cayman Islands.

Could it be that tax havens are okay, but only if you support big government?

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Topics: 
Finance, Banking & Monetary Policy, Government and Politics, International Economics and Development, Tax and Budget Policy

The Pentagon as a Jobs Program, Part 3

By
Tad DeHaven

A couple of months ago, I cited the example of upgraded Abrams tanks being shoved down the Pentagon’s throat by certain members of Congress because tank production = jobs back in the district. I followed that up with some historical background on congressional Pentagon pork-barreling that is discussed in former Reagan budget director David Stockman’s new book. Yesterday, a Wall Street Journal article on congressional resistance to reprioritizing military spending provided a new example:  

The battle over the Global Hawk is emblematic of the difficulty the Pentagon faces in trying to reduce its inventory while shifting its focus from the ground war in Afghanistan to emerging threats elsewhere.  

The Defense Department has sought to ground the fleet of 18 Global Hawk Block 30 drones, which has been used to conduct surveillance from Afghanistan to Libya. The Air Force says its piloted U-2 planes have better surveillance equipment for the job—and that ending the Global Hawk program can save $2.5 billion over the next four years.  

Lawmakers have not only rejected the Pentagon plans, but set aside $443 million to compel the Air Force to buy three more Global Hawks. On Tuesday, the Air Force said it is moving ahead with buying the drones even though it doesn’t want them. 

Northrop can rely on bipartisan support. The planes are built in the district represented by Rep. Howard “Buck” McKeon (R., Calif.), who heads the Armed Services Committee, which will consider a plan to keep Global Hawk running through 2016.  

McKeon – who has issues with numbers when it comes to military spending – recently made news when it was discovered by Politico that a lobbying firm run by his brother and nephews is taking on military-related companies as clients. In a statement to Politico, McKeon said that “We are knowledgeable about the [ethics] rules involved and will be devout in our adherence to both the letter and the spirit of those rules.” Well, that’s good to hear. It’s worth noting, however, that when it comes to congressional ethics rules, the fox is guarding the henhouse. 

 

Topics: 
Foreign Policy and National Security, Tax and Budget Policy

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