Topic: Tax and Budget Policy

EPA’s Political Activism

Federal regulations are generally issued under a notice-and-comment process. A regulating agency releases a draft of a rule, the public provides comments on the draft, the agency reviews the comments, and then issues a final rule which incorporates public feedback.  

Outside groups can and do launch campaigns to encourage citizens to weigh in on proposed rules. But now it appears that a federal regulatory agency has been using grass-roots style activism and propaganda to push its own rules. The Environmental Protection Agency launched a lobbying campaign to encourage support for a major new rule on drinking water.

The New York Times reports:

Late last year, the EPA sponsored a drive on Facebook and Twitter to promote its proposed clean water rule in conjunction with the Sierra Club. At the same time, Organizing for Action, a grass-roots group with deep ties to Mr. Obama, was also pushing the rule. They urged the public to flood the agency with positive comments to counter opposition from farming and industry groups.

The piece continued:

The Thunderclap [a social media tool] effort was promoted in advance with the EPA issuing a news release and other promotional material, including a photograph of a young boy drinking a glass of water.

“Clean water is important to me,” the message said. “I want E.P.A. to protect it for my health, my family and my community.”

In the end, the message was sent to an estimated 1.8 million people, Thunderclap said.

The EPA advocacy campaign ginned-up more than one million public comments on the proposed water rule. Then Gina McCarthy, the EPA’s administrator, had the audacity to testify to the Senate that 87 percent of commenters supported the rule—as if that high percentage was actual spontaneous and broad-based support from the public.

The EPA’s campaign may have violated federal law, but even it did not, this is a dangerous path for federal agencies to go down.

From this incident, it appears that the EPA is not serious about taking opposing public comments into account before engaging in regulatory action. The purpose of public comments is to gauge public sentiment before a final rule is issued. The agency should act as an unbiased arbitrator of comments, not as an advocacy organization.

Reforming the Highway Trust Fund

Congress has created an ongoing crisis in the Highway Trust Fund (HTF). Year after year, policymakers spend more on highway and transit aid to the states than the HTF raises from gas taxes and other dedicated revenues. CBO projects that annual HTF spending will be $53 billion and rising in coming years, while HTF revenues will be $40 billion. That leaves an annual funding gap of at least $13 billion.

Congress faces a deadline at the end of May to reauthorize the HTF. However, Congress will probably enact a short-term HTF extension, and then grapple with the funding gap problem later in the summer. Everyone agrees that Congress should find a long-term solution to the funding gap.

The best solution for the HTF is simple: cut annual spending by $13 billion to match revenues. State and local governments are fully capable of funding more of their own highway and transit expenses. Congress can help the states by reducing federal regulations that boost transportation construction costs, such as Davis-Bacon and environmental rules.

Cutting federal aid for highways and urban transit would improve the efficiency of infrastructure investment. Ending transit aid would be particularly beneficial. Local officials often focus on maximizing the flow of money from Washington, rather than ensuring that projects generate overall net value. By injecting federal dollars and regulations into local transit planning, Congress distorts local decision making and increases the complexity, bureaucracy, and costs of projects. 

NYT Infrastructure Story Crumbles

In the New York Times on Wednesday, David Leonhardt presented a chart under the headline “Amtrak Crash and America’s Declining Construction Spending.”

The chart shows federal, state, and local government construction spending as a share of GDP. Leonhardt discusses America’s “crumbling infrastructure,” particularly rails, bridges, highways, and airports. He highlights the spending decline as a share of gross domestic product over the past five years.

Leonhardt also cites Joe Weisenthal of Business Insider, who presented a similar chart after the collapse of a bridge near Seattle two years ago. Weisenthal’s brief piece was called “The Collapse Of Public Infrastructure Spending In One Chart.”

There is a big problem here: the falling spending that Leonhardt and Weisenthal point to has very little to do with transportation. The data come from the Census, which the two writers extracted from this Fed database. The data can be broken out into a dozen subcomponents for the period 2002–2015. If the writers had done that, they would have come to different conclusions.

The three largest subcomponents of government construction are highways and streets, education, and (non-road) transportation, which includes airports, seaports, and transit. Using the Fed database, I charted the three components in millions of dollars; that chart is below the jump. (I’ll look at spending as a percentage of GDP in a moment.)

Federal Spending Cut Plan 2015

According to opinion polls, Americans think the federal government is too big and too powerful. On average, people think that more than half of the tax dollars sent to Washington are wasted. When Gallup asked people what the most important problem facing the nation was, more people identified “government” than any other concern, including the economy, immigration, health care, and terrorism.

The people are right. The federal government is too big, too powerful, and too wasteful. Rather than defending our rights to life, liberty, and the pursuit of happiness, the federal government often abuses those rights. The bigger it is, the more it abuses, and less well it functions.

The solution is a major downsizing. I have posted an updated plan to cut spending and balance the federal budget by 2020. The plan includes cuts to low-value and harmful programs across the government. Whether or not the government was running deficits, the proposed cuts would make sense because they would generate growth and expand freedom.

Political leaders should listen to the public’s concerns about big government. They should help lead a national discussion on programs to eliminate, devolve to the states, and privatize. They can start with the items in my new plan, including cuts to subsidies, entitlements, and state aid.

Why cut? Because Americans would gain more net benefits from the federal government if it were much smaller.

Huckabee’s Support for Higher Taxes and More Spending

Former Arkansas Governor Mike Huckabee launched his presidential campaign last week. Huckabee highlighted his fiscal successes as governor during his announcement. He claims that he cut taxes 94 times while governor, and he promised to bring his tax-cutting experience to Washington, D.C. Huckabee’s statements do not tell the full story. While Huckabee cut some taxes, his time in office also included a rapid increase in Arkansas state spending and multiple tax hikes. 

Huckabee took office in July 1996 after Governor Jim Guy Tucker was convicted for his involvement in the Whitewater scandal. Shortly after taking office,  Huckabee signed a $70 million  package of income tax cuts. It eliminated the marriage penalty, increased the standard deduction, and indexed tax brackets to inflation. The broad-based tax cut was Arkansas’s first in 20 years.  Huckabee followed it with a large cut to the state’s capital gains tax. These tax cuts were popular, and they improved Arkansas’s economic climate.

Huckabee’s fiscal policies then changed direction. Huckabee used the state’s tobacco settlement money to expand Medicaid, and he supported a large bond initiative to increase spending for infrastructure. These and other spending policies came with a hefty price tag.

Universal Savings Accounts (USAs)

My op-ed today at The Federalist discusses exciting developments in Canada and Britain regarding personal savings. Both nations have implemented universal savings vehicles of the type I proposed with Ernest Christian back in 2002. The vehicles have been a roaring success in Canada and Britain, and both countries have recently expanded them.

In Canada, the government’s new budget increased the annual contribution limit on Tax-Free Savings Accounts (TFSAs) from $5,500 to $10,000. In Britain, the annual contribution limit on Individual Savings Accounts (ISAs) was recently increased to 15,240 pounds (about $23,000). TFSAs and ISAs are impressive reforms—they are pro-growth, pro-family, and pro-freedom.

America should create a version of these accounts, which Christian and I dubbed Universal Savings Accounts (USAs). As with Roth IRAs, individuals would contribute to USAs with after-tax income, and then earnings and withdrawals would be tax-free. With USAs, withdrawals could be made at any time for any reason.

Retaliation and Intimidation within the VA

Mismanagement within the Department of Veterans Affairs (VA) is chronic. The agency mismanages its projects and its patients. Last year’s scandal at the Phoenix VA centered on allegations that veterans waited months for treatment while never being added to the official waiting lists. The VA Secretary resigned and the agency focused on changing course. New reports suggest that agency reforms still have a long way to go.

A congresswoman at a recent congressional hearing described the VA as having a “culture of retaliation and intimidation.” Employees who raise concerns about agency missteps are punished. The U.S. Office of Special Counsel (OSC), which manages federal employee whistleblower complaints, reported that it receives twice as complaints from VA employees than from Pentagon employees, even though the Pentagon has double the staff. Forty percent of OSC claims in 2015 have come from VA employees, compared to 20 percent in 2009, 2010, and 2011.

During the hearing, a VA surgeon testified about the retaliation he faced following his attempts to highlight a coworker’s timecard fraud. From July 2014 until March 2015, his supervisors revoked his operating privileges, criticized him in front of other employees, and relocated his office to a dirty closet before demoting him from Chief of Staff.

Another physician was suspended from his job shortly after alerting supervisors to mishandled lab specimens. A week’s worth of samples were lost. Several months later, he reported another instance of specimen mishandling and his office was searched. He became a target of immense criticism.