Archives: 03/2012

This One’s a True Porker

The Senate passed a transportation bill this week to replace a House bill that was killed by fiscal conservatives for being filled with “pork and special interest projects.” Not surprisingly, the Senate bill is far worse.

Where the House bill authorized deficit spending to the tune of about $10 billion a year, the Senate bill would deficit-spend about $15 billion a year. Where the House bill had no earmarks and few big-government expansions, the Senate bill has several earmarks, discourages the states from leasing roads to private partners, and expands federal regulation of public and private transit and intercity bus systems.

Fiscal conservatives pinned their hopes on an amendment that would allow states to opt out of federal funding by raising their gas taxes by the 18.4 cents that the federal government collects, thus cutting out the feds as middle man. The Senate predictably and decisively rejected this amendment by 68 to 30. Sen. Barbara Boxer (D, Calif.) argued that the amendment would “devolve” the highway fund, which of course was the whole point.

I’ve long argued that the only way to devolve federal transportation spending to the states is to first take the pork out of the gas tax. The House bill did this by rededicating gas taxes to roads (making them once again a true user fee), distributing gas taxes using formulas (preventing Congress from earmarking), and paying for transit out of other funds. Once the pork was gone, Congress would lose interest and let the states take over. The Senate bill, of course, does none of these things, and in particular continues to dedicate a share of gas taxes to transit, which will make it a lot harder to devolve gas taxes to the states.

The only good news is that the Senate bill is just a two-year bill, which means the whole debate can begin again in 2014 if not 2013. But the House has just two weeks to accept or reject the bill, as the current law expires on March 31. If they can’t reach an agreement by March 31, they are likely to simply extend the current law, which is not a whole lot different from approving the Senate bill.

If the House had been able to pass its bill, it would have been in a much stronger position to negotiate some improvements to the Senate bill. As it is, it now has a choice between the bad law now on the books or the slightly worse bill passed by the Senate. Fiscal conservatives should encourage the House to reject the Senate bill and start the debate over.

Americans Favor Accelerated Withdrawal from Afghanistan

In case you haven’t heard, the war in Afghanistan is in a tailspin. Following the turbulent events of the past two weeks—including yesterday’s incident on a Helmand runway and the disarming of U.S. Marines before Defense Secretary Leon Panetta—Afghan president Hamid Karzai has demanded U.S. troops withdraw from villages and operate only from large NATO bases. Furthermore, the Taliban announced that it is breaking off peace talks with the United States.

These new developments further call into question the Obama administration’s ability to implement its strategy of a gradual transition of responsibilities to the Afghan national security forces by 2014. And the American people recognize this.

A USA Today/Gallup poll finds 50 percent of respondents support an accelerated troop withdrawal from Afghanistan, while an Washington Post-ABC News-poll shows 54 percent favor a U.S. military withdrawal even if it means the Afghan security forces are not “self-sufficient.” That same poll finds 60 percent believe the war is “not worth fighting.” A majority of Americans rightly understand the futility of staying the course. Leaders in Washington should, too.

Do Liberals Oppose Affordable Housing?

I’m a little behind on my reading, so you’ll have to forgive that the paper I’m about to talk about has been out for over a year.  We tend to associate the push for more affordable housing, whether it is direct subsidies like the Section 8 Voucher program or lending requirements like the Community Reinvestment Act, with those more of the liberal persuasion.  A empirical analysis, published in the peer-reviewed Journal of Urban Economics, by UCLA economist Matthew Kahn (believe me, no conservative or libertarian is he), finds that:

across California metropolitan areas from 2000 to 2008…liberal cities grant fewer new housing permits than observationally similar cities located within the same metropolitan area. Cities experiencing a growth in their liberal voter share have a lower new housing permit growth rate.

Yes the analysis controls for income, so this isn’t just a NIMBY effect, but does seem to be the result of either ideology or political preferences.  So it appears that while liberals push for more federal housing subsidies, they fight against more housing, and hence less affordable housing, at the local level.  Now you might suspect that the hope is that one off-sets the other.  I wouldn’t be surprised to believe the citizens of, say, San Francisco want the rest of us to subsidize their lifestyle and also believe more federal subsidies can take care of affordable housing needs.  But the unfortunate truth is that the two, increased federal subsidies and local supply restrictions, end up driving up housing prices, contributing to housing bubbles and ultimately do little to provide affordable housing.  The reason is that increased demand, which is what most federal housing subsidies do, simply drives up price in the presence of inelastic supply.  If liberals truly cared about the poor and needy, they’d deregulate their local housing market and actually allow for the provision of affordable housing.



Ex-Im Shenanigans, cont’d

Kudos to Tim Carney, who has a great piece in the Washington Examiner today highlighting some of the politics and policy substance behind the fight over reauthorisation of the Ex-Im Bank.  It’s gratifying to see a journalist take a stand against outrageous corporate welfare. If only it were more common (I’m looking at you, New York “the bank is self-financing” Times).

My new paper on Ex-Im, in which I expand on this blog post from a few weeks ago, was released yesterday. You’ll find even more evidence –as if it were needed – of why the Ex-Im Bank, rubber stamped through Congress by both parties on behalf of their rent-seeking friends for almost 80 years, has got to go.

Suing the IRS for Fun and Liberty

This blogpost was coauthored by Cato legal associate Chaim Gordon.

On Tuesday, the Institute for Justice brought a lawsuit to stop recent IRS regulations that require independent tax return preparers to pay a yearly registration fee, take a competency exam, complete 15 hours of IRS-approved continuing education every year, and possibly subject themselves to mandatory fingerprinting. Our colleague Dan Mitchell observed two years ago that these regulations appear to be the result of “regulatory capture.” As the Wall Street Journal explained:

Cheering the new regulations are big tax preparers like H&R Block, who are only too happy to see the feds swoop in to put their mom-and-pop seasonal competitors out of business.

Indeed, as others have already noted, one of the architects of this licensing scheme is Mark Ernst, former CEO of H&R Block. These protectionist regulations were even cited by UBS as a reason to buy H&R Block stock, on the grounds that they will “add barriers to entry (or continuation) for small preparers.”

In defending the need for these regulations, IRS Commissioner Douglas Shulman’s most insightful explanation was that “in most states you need a license to cut someone’s hair.” This statement undoubtedly caught IJ’s attention because that “merry band of litigators” has devoted itself to fighting such senseless and corrupt regulations (including in hair salons).

But these regulations are not just misguided and corrupt.  They are, as IJ’s complaint contends, simply beyond the IRS’s regulatory authority. The IRS claims the power to regulate tax return preparers under 31 U.S.C. § 330. But that statute only authorizes the IRS to regulate “the practice of representatives of persons,” and tax return preparers do not represent persons before the IRS and do not “practice” in the sense that lawyers do when they appear before a court. Taxpayers are only “represented” when they authorize someone to act on their behalf before the IRS in an exam, controversy, or litigation setting. This is especially clear in light of the statute’s plain purpose, which is to ensure that such representatives have the “competency to advise and assist persons in presenting their cases” (emphasis added).

Moreover, under the IRS’s expansive reading of the law, which puts under the agency’s purvey “all matters” connected with a “presentation” to the IRS, anyone who advises another about the tax aspects of a particular transaction could theoretically be guilty of unauthorized practice before the IRS. Congress clearly meant no such thing. In fact, Congress specifically amended 31 U.S.C. § 330 to allow the IRS to regulate the provision of written advice that the IRS “determines as having a potential for tax avoidance or evasion.” Such additional authority would be unnecessary under the IRS’s broad reading of the original statute.

IJ had previously warned the IRS that its then-proposed regulations were unfair to mom-and-pop tax return preparers and exceeded its statutory authority, but the IRS neither altered its plan nor explained why it thinks that it has the authority to regulate tax return preparers in the first instance. Now the IRS will have to explain its power grab to a federal judge.

Watch IJ’s excellent case launch video.  IJ attorney Dan Alban explains the case in an editorial here and in an interview here.

Pool Closed Until Further Notice

Tomorrow is a deadline that looms large for worried pool operators at hotels and public recreation facilities across the country, as USA Today reports:

Hoteliers must have pool lifts to provide disabled people equal access to pools and whirlpools, or at least have a plan in place to acquire a lift. If they don’t, they face possible civil penalties of as much as $55,000.

As Conn Carroll at the Washington Examiner explains, the mandate has taken an even more irrational form than might have been expected. Because the elevator lifts are space-consuming, unsightly, potential hazards to curious children, and unlikely to be used very often, many pool operators assumed it would be enough to purchase a portable lift that could be wheeled over to poolside on user request and stored when not in use. No such luck: the Obama administration has announced that the lifts must not only be of permanent construction, but must apply to each separate “water feature”, so that a pool with adjoining spa would need two of them. “Each lift costs between $3,000 and $10,000 and installation can add $5,000 to $10,000 to the total.” Many budget hostelries are expected to simply shutter their pools until further notice rather than take the risk that entrepreneurial fast-buck artists will begin filing complaints against them for cash settlements, as in California’s notorious ADA filing mills.

I think Carroll probably goes too far when he suggests that the Obama administration made the rules unreasonable in order to give its friends in the ADA bar more litigation to file. The problem is more that this administration (and not just this one) has outsourced its thinking on the law to advocates in the legal academia-disabled rights-“public interest law” community, which tends to embrace interpretations and applications of the law geared to advance ambitious versions of social change. In the pool case, the federal appointee in charge (according to this blog post) was Samuel Bagenstos, who after his stint in the Obama Justice Department has now returned to legal academia, where he is perhaps the leading proponent of expansive ADA interpretation. (His view of abusive ADA suits – he puts the term “abusive” in quotation marks – is here.) Academia’s other best-known advocate of an expansively interpreted ADA (and a drafter of the law) is Chai Feldblum of Georgetown Law, who serves the Obama administration as head of the Equal Employment Opportunity Commission.

Don’t look to Republicans for relief on this. The Bush administrations both pere et fils were consistently wretched on it, and a large bloc of GOP members of Congress predictably joins the Democrats in opposing legislative ideas for even modest rollback of the ADA’s most extreme applications.

Reforming the Army Corps of Engineers

At Downsizing Government, we have published an essay on the Army Corps of Engineers.

The essay will be of interest to people who follow infrastructure issues, people looking for ways to cut spending, and people curious about the long history of bureaucratic mismanagement in the federal government.

The Corps is a federal agency that is involved in river navigation, flood control, seaport dredging, hydropower generation, beach replenishment, and many other activities. While the Corps has built some impressive structures, many of its projects have been economically or environmentally dubious.

The Corps’ activities often subsidize private interests, and they are too often determined by political factors not sound analysis. The agency has a history of distorting its cost-benefit analyses, and it has suffered major engineering failures, such as those contributing to the Hurricane Katrina disaster.

Fortunately, most of the Corps’ activities do not need to be carried out by the federal government. The essay discusses those activities that could be either privatized or transferred to state and local governments.

At DG, we put aside the “bedtime stories” about how programs are supposed to work, and instead focus on how they actually work in the real world. Federal infrastructure spending makes for good political sound bites, but the reality is much different, as decades of experience with the Army Corps illustrates.