Topic: Tax and Budget Policy

Taxing Us to Spy on Us

Reading some Frederic Bastiat last night, I circled his observation that the government takes advantage of citizen passivity to increase its power, often by promising to “cure all the ills of mankind.” The government initiates “in the guise of actual services, what are nothing but restrictions; thereafter the nation pays, not for being served, but for being disserved.”

The Wall Street Journal reports that we pay our hard-earned tax dollars for the federal government to spy on us on the highways. Americans might think they are footing the $29 billion annual bill for the Department of Justice to secure our freedoms, but instead the department is abusing those freedoms:

The Justice Department has been building a national database to track in real time the movement of vehicles around the U.S., a secret domestic intelligence-gathering program that scans and stores hundreds of millions of records about motorists, according to current and former officials and government documents.

The database raises new questions about privacy and the scope of government surveillance. The existence of the program and its expansion were described in interviews with current and former government officials, and in documents obtained by the American Civil Liberties Union through a Freedom of Information Act request and reviewed by the Wall Street Journal. It is unclear if any court oversees or approves the intelligence-gathering.

The documents show that the DEA also uses license-plate readers operated by state, local and federal law-enforcement agencies to feed into its own network and create a far-reaching, constantly updating database of electronic eyes scanning traffic on the roads to steer police toward suspects.

“Any database that collects detailed location information about Americans not suspected of crimes raises very serious privacy questions,’’ said Jay Stanley, a senior policy analyst at the ACLU. “It’s unconscionable that technology with such far-reaching potential would be deployed in such secrecy. People might disagree about exactly how we should use such powerful surveillance technologies, but it should be democratically decided, it shouldn’t be done in secret.’’

The disclosure of the DEA’s license-plate reader database comes on the heels of other revelations in recent months about the Justice Department, as well as the agencies it runs, gathering data about innocent Americans as it searches for criminals. In November, the Wall Street Journal reported that the U.S. Marshals Service flies planes carrying devices that mimic cellphone towers in order to scan the identifying information of Americans’ phones as it searches for criminal suspects and fugitives.

Why do government officials try to keep such programs secret? I suspect it’s because they know they are disserving us by undermining our liberties. As for members of Congress, they often do little more than say government spying on us “raises concerns,” but the license plate program is a good opportunity for them to stand up to the executive branch and put a stop to it.

Notes:

The Journal’s report is not an entirely new revelation. In this essay, I mentioned that the Department of Homeland Security also has a license plate spying program.

Walter Olson weighs-in here.

The Failed HealthCare.gov Launch

The launch of HealthCare.gov in 2013 was a disaster. A new report from the Health and Human Services Inspector General (IG) describes how the department mishandled the website’s construction. The department failed to follow federal contracting rules, and did not have a cohesive plan for the website. This led to cost overruns and project delays, and HealthCare.gov’s eventually rocky start.

The Center for Medicare and Medicaid Services (CMS) was given primary responsibility within HHS for HealthCare.gov launch. For the report, the IG reviewed 60 CMS contracts for the project. These contracts were awarded to 33 different companies.

One problem with these contracts was not designating a single company as the project lead. According to the IG, CMS “missed the opportunity” to designate a “single point-of-contact with responsibility for integrating contractors’ efforts and communicating the common project goal to all 33 companies.” A project of this complexity needs a central command to oversee project development. CMS failed to assign one.  

Another problem was that CMS only sought bids from a small group of previously-used companies. CMS claimed this was to speed along the contracting process, but it left the agency with limited options. For instance, CMS received only four bids for one of the main contracts. Three were determined to be technically insufficient leaving CMS with only one choice, CGI Federal. In other instances, CMS only solicited or received bids from one company.

Additionally, CMS did not consider the previous contractor performance for many bids even though federal contracting rules require it. CMS did not access the main performance management database in the case of CGI Federal, which had had previous missteps with the department.

Compounding the mistakes, CMS selected contract types that put the government, not the contractor, at risk in the case of cost overruns for five of the six main contracts. Taxpayers are paying dearly for CMS’ choice. One contract grew from $58 million to $207 million. The six major contracts for HealthCare.gov grew in costs from $464 million to $824 million.

The IG summarized the findings:

When awarding the Federal Marketplace [HealthCare.gov] contracts, CMS did not meet all requirements and did not leverage all available acquisition planning tools, oversight activities, or contracting approaches to identify and mitigate risks…Because CMS did not leverage all of these tools, it operated without a comprehensive roadmap when awarding the Federal Marketplace contracts.

Construction of HealthCare.gov was a complex technical project. CMS’ mismanagement made the task even more difficult and even more expensive.  

Slashing the Budget?

I’ve written before about the propensity of journalists to declare modest budget cuts—or reductions in the rate of growth of government spending—in apocalyptic terms such as “slashing” and “draconian.” I was thus amused by this line in a Washington Post editorial today:

Mr. Hogan is slashing those payments by half, which will mean cuts approaching 1 percent to the school budgets of both Montgomery and Prince George’s counties.

The editorial is generally sympathetic to budget cuts proposed by the new governor of Maryland, and of course the “extra funding from Annapolis mainly to cover higher teacher salaries” may actually be subject to larger cuts. Still, when the impact on the county school budget is “approaching 1 percent,” I’d think “slashing” is, well, overkill.

Obama Presidency by the Numbers

Tonight, President Obama will deliver the State of the Union address. In addition to the lofty rhetoric and self congratulations, the president will likely claim that the federal government’s budget has improved during his tenure.

It is true that  the deficit has decreased in recent years due partly to  large tax increases, which have helped the government but not the economy. Also, spending levels have stabilized, partly due to Republican efforts to slow discretionary spending growth. However, these are temporary trends. Spending is expected to explode in coming years, which will fuel larger deficits and higher levels of debt. The nation’s longer term fiscal outlook is a mess.

Comparing today’s budget situation to the situation at the beginning of President Obama’s tenure is difficult. President Obama took office in January of 2009, several months into fiscal year 2009. Spending in 2009 was $3.5 trillion, up from $3.0 trillion in 2008. Part of the higher spending in 2009 was attributable to  the Bush administration, but President Obama’s big stimulus bill passed in February 2009 also added to the increase.

Obama Capital Gains Tax Proposal

President Obama’s economic policies always seem to be a zero-sum proposition with winners and losers. Usually the losers are all Americans, who suffer from slower economic growth.

The president’s new tax proposals are a case in point. One damaging item is a proposal to raise the top federal capital gains tax rate from 24 percent to 28 percent. That would come on top of his previous increase from 15 percent.

Despite what the president and his political advisors may think, low capital gains tax rates are not some sort of unjustified loophole. We’ve had reduced rates virtually the entire time we have had an income tax, and for very good reasons. Low capital gains tax rates are crucially important for spurring entrepreneurship, investment, and growth.

Recognizing that, nearly every other high-income nation has a reduced capital gains tax rate. The average top long-term rate in the 34 Organization for Economic Cooperation and Development nations is just 18 percent, according to Tax Foundation. By contrast, the U.S. rate (including state taxes) would jump to 32 percent under the Obama plan—far higher than the rate in most other nations.

For more, see my op-ed in Daily Caller today.

 

Wonk note: Data is from Tax Foundation and my Cato study. Unlike TF, I did not include the effect of the limitation of itemized deductions, which slightly increases the effective rate. 

Harvard Study of CBO Reports Says Nothing New or Interesting about King v. Burwell

Vox’s Sarah Kliff reports that Harvard University’s Theda Skocpol has produced a study purporting to show Congress intended for the Patient Protection and Affordable Care Act (PPACA) to authorize health-insurance subsidies through exchanges established by the federal government—even though the statute expressly and repeatedly says those subsidies are available only “through an Exchange established by the State.” Whether the PPACA authorizes those subsidies in the 36 states with federal exchanges is the question presented in King v. Burwell. The Supreme Court will hear oral arguments in King on March 4, with a ruling expected by June. Unfortunately for the administration and its supporters, Skocpol offers nothing either new or that supports the notion that Congress intended something other than what it expressly said in the statute.

What evidence does Skocpol claim to have found in support of her counter-textual interpretation of congressional intent? She combs through 68 analyses issued by the Congressional Budget Office during 2009 and 2010. She finds that in none of those reports did the CBO entertain the idea that the PPACA’s exchange subsidies might be available in some states but not others. She interprets this as both “excellent evidence” and “the best objective evidence we have that no one in Congress considered premium subsidies restricted to certain states to be either possible or desirable.”

Yeah, about that.

An alert Vox reader already informed Kliff that the claim that CBO never considered the possibility of exchange subsidies in some states but not others isn’t exactly true. The comprehensive health care bill approved by Democrats on the Senate’s Health, Education, Labor, and Pensions (HELP) Committee in 2009 (S. 1679) would have given states four years to establish exchanges themselves, after which point the federal government would establish an exchange. As my partner-in-crime-fighting Jonathan Adler and I write in an amicus brief filed with the Supreme Court in King:

S. 1679 asked each state to adopt certain health insurance regulations, and either establish an Exchange itself or ask the federal government to establish one “in” the state… S. 1679 withheld Exchange subsidies, as well as many of its insurance regulations, for up to four years until the state complied.

The CBO scored S. 1679 assuming that some states would establish exchanges early and some would not. Thus the agency’s cost projections assumed that exchange subsidies would be available in some states but not in others. So we’ve already got a problem with Skocpol’s analysis.

Adam Smith on Infrastructure

I love Adam Smith. He didn’t get everything right, but he got the big things right. Oftentimes, he really nailed it.

Today, I woke up early and my newspaper had not arrived yet. So I cracked open The Wealth of Nations on the infrastructure section, Book V, Part III.

With the highway bill soon in front of Congress, and there being lots of agitation to increase federal funding, Smith had words of wisdom for policymakers. He advocated user-pays and decentralization.

Smith said user-pays is often possible, is equitable, and prevents political corruption, as opposed to what we saw with the Bridge to Nowhere:

It does not seem necessary that the expence of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries assigned to the executive power. The greater part of such public works may easily be so managed, as to afford a particular revenue sufficient for defraying their own expence, without bringing any burden upon the general revenue of the society.

A highway, a bridge, a navigable canal, for example, may in most cases be both made and maintained by a small toll upon the carriages which make use of them: a harbour, by a moderate port-duty upon the tunnage of the shipping which load or unload in it.

… When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tunnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works.

… When high roads, bridges, canals, &c. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and consequently where it is proper to make them. Their expence too, their grandeur and magnificence, must be suited to what that commerce can afford to pay. They must be made consequently as it is proper to make them. A magnificent high road cannot be made through a desart country where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord to whom the intendant finds it convenient to make his court. A great bridge cannot be thrown over a river at a place where nobody passes, or merely to embellish the view from the windows of a neighbouring palace: things which sometimes happen, in countries where works of this kind are carried on by any other revenue than that which they themselves are capable of affording.

Smith said that when user revenues are not enough to pay for useful infrastructure, it should be funded by local governments, not the national government. The result will be higher quality services, lower costs, and less chance of abuse:

Even those public works which are of such a nature that they cannot afford any revenue for maintaining themselves, but of which the conveniency is nearly confined to some particular place or district, are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by the general revenue of the state, of which the executive power must always have the management. Were the streets of London to be lighted and paved at the expence of the treasury, is there any probability that they would be so well lighted and paved as they are at present, or even at so small an expence?

… The abuses which sometimes creep into the local and provincial administration of a local and provincial revenue, how enormous soever they may appear, are in reality, however, almost always very trifling, in comparison of those which commonly take place in the administration and expenditure of the revenue of a great empire. They are, besides, much more easily corrected.