Topic: Tax and Budget Policy

An Anonymous Affront to Transparency

As the Federal Times reports, a bill designed to promote transparency in the federal government is being held up by a very non-transparent Senate procedure.

An anonymous senator has placed a “hold” on a bill that would create a publicly accessible federal database to track all federal grants and contracts. As Chris Edwards explains, it’s a meritorious piece of legislation. However, this bipartisan bill introduced by Sen. Tom Coburn is indefinitely stalled and might not reach the Senate floor this year.

The House has approved a similar, though slightly watered-down, version of this legislation that would monitor federal grants, but not contracts.

With 29 bipartisan senators co-sponsoring Coburn’s bill and roughly 100 diverse groups supporting it, you would think that this legislation would pass easily.  

Think again.

 

Your Tax Dollars at Work

Speaking of my claim yesterday that “people spend other people’s money far less efficiently than their own,” this just in from the Associated Press:

The federal program that provides legal help to poor Americans turns away half of its applicants for lack of resources. But that hasn’t stopped its executives from lavishing expensive meals, chauffeur-driven cars and foreign trips on themselves.

Agency documents obtained by The Associated Press detail the luxuries that executives of the Legal Services Corp. have given themselves with federal money – from $14 “Death by Chocolate” desserts to $400 chauffeured rides to locations within cab distance of their offices.

The government-funded corporation also has a spacious headquarters in Washington’s tony Georgetown district – with views of the Potomac River and a rent significantly higher than other tenants in the same building.

Chuck Grassley, chairman of the Senate Finance Committee, is upset. Maybe at last he can turn his attention from oversight of private charities and universities to his actual job, oversight of federal spending.

Every Day Brings an Emergency

The U.S. Farm Bill is due to be redrafted in the first half of next year and Cato will be part of what is shaping up to be a lively debate. The recent round of WTO negotiations were one hope for reducing the costly distortions that agricultural subsidies impose, but we all know what happened there. (The WTO news release can be found here if you are not up to speed).

The 2007 Farm Bill, then, provides the next best opportunity for much needed reform. But, considering the noises coming from Congressmen, we reformers have our work cut out. Consider this recent pearl, offered by Sen. Chuck Hagel (R-Neb.):”The fact is we know there is emergency assistance required every year, whether it’s for drought, floods or whatever natural cause…” Webster’s Encyclopedic Unabridged Dictionary of the English Language defines an emergency as “a sudden, urgent, usually unforeseen occurrence or occasion requiring immediate action.” I don’t think something (a different ‘something’ all the time, according to the Senator) that happens with certainty every year fits that definition.

Senator Hagel went on to say…”Why don’t we craft a farm bill that is visionary, relevant, real and deals with the challenges we know agriculture producers deal with?” I am sure the Senator meant the question to be rhetorical, but I agree with the Senator – why don’t we craft a Farm Bill that is visionary, relevant and real. A vision of farmers making a living from markets, relevant to the fact of the significant cost of these programs, and real – as in, real different to the last farm bill (a huge step backwards from the relatively tame 1996 farm bill). As for the challenges, surely farmers, like other small (and not so small) businesses should be able to deal with challenges unassisted by government (read: taxpayer and consumer) support?

I’m an Australian so I know something about drought. I’m also an economist, so I know something about comparative advantage. Maybe if every year is a disaster year in some place, then farmers shouldn’t be farming there….

Another Fiscal Conservative Sighted?

The Associated Press states as fact that Sen. Lincoln “Chafee is a fiscal conservative.” OK, let’s go to the tape.

According to the National Taxpayers Union, Chafee voted to restrain taxes and spending only 33 percent of the time in 2005. He introduced 43 bills to raise spending and only two to cut spending. He voted against Medicaid cuts. He voted not to allow a cap on spending increases. He voted to increase spending on community development block grants, low-income heating assistance, education, and a package of welfare programs.

What is the AP’s definition of a fiscal conservative?

Fiscal Conservatives, Again

The often astute Washington Post columnist Steven Pearlstein writes that Rep. Benjamin Cardin (D-MD), a candidate for the Senate, is “a budget-balancing fiscal conservative.”

Well. According to the National Taxpayers Union, Cardin voted 13 percent of the time to restrain taxes and spending in 2005, making him slightly more spendthrift than the average Democratic House member. He has introduced 42 bills in this Congress to raise spending, and one bill that would cut spending. It’s true that he has supported some IRS and budget process reforms, but he has not supported a Balanced Budget Amendment to the Constitution.

As I wrote last week, the search for a fiscally conservative Democrat continues.

Meanwhile, a headline in the Post reads:

“President Remains Eager to Cut Entitlement Spending”

Honestly, it’s like reporters are Charlie Brown and Bush is Lucy, pulling the football away time after time. Bush promises to control spending, then increases spending by 48 percent. Bush promises to control spending, then passes a multi-trillion-dollar expansion of Medicare. Bush says, “We need to cut entitlement spending,” and he gets a six-column headline in the Post.

Exit Against Predation

Those who have strong feelings about how wealth ought to be distributed, and who think that government policy ought to be more redistributive, often fall victim to the fantasy that their golden geese will not just wander off into another jurisdiction.

No doubt the members of the Chicago City Council are nonplussed that their attempt to squeeze large retailers has led Wal-Mart, Lowes, and Target to put their plans for new Chicago stores (and new Chicago jobs) on hold. I bet a million billion dollars that at least a few council members have lamented that they can’t legally force the big boxes to open stores within Chicago city limits. They’re learning the bitter lesson that the right of exit is a powerful check on politicians who can’t keep their hands out of other people’s pockets.

Worried about inequality? Why not really sock it to the rich? Because the rich — or their money at any rate — will just leave town. Even champions of the poor, like Bono, head for the greenest pastures:

Irish rock band U2 has transferred part of its multi-million-euro business empire out of Ireland due to changes in tax laws there, a British newspaper has said.

In a report from Dublin, the Daily Telegraph said Tuesday the band had moved part of its publishing company, U2 Limited, to the same Dutch finance house used by the Rolling Stones because royalties are virtually tax-free in the Netherlands.

[…]
According to the Daily Telegraph, the band — whose frontman Bono campaigns against global poverty — made the move in response to Ireland imposing a 250,000-euro (170,000-pound, 321,000-dollar) cap on tax-free incomes.

I bet Bono thinks he knows better than politicians in Dublin how to use his money. And I bet Bono’s right.

A recent Washington Post article details how France is bleeding millionaires thanks to outrageously punitive tax rates:

[High-tech millionaire Denis] Payre, who moved his family to neighboring Belgium eight years ago, is today part of a sizable community of rich expatriate French driven out by the world’s highest tax bills on wealthy citizens. The exodus continues: On average, at least one millionaire leaves France every day to take up residence in more wealth-friendly nations, according to a government study.

Now, I bet that more than a few of those fleet-footed millionaires were in favor of those high tax rates, illustrating that the gap between ideology and actual consequences can open up even within a single soul.

What’s Another Taxpayer Liability?

Today’s New York Times includes an excellent article — the first of a series — on the underfunding of state and local government pension plans. Different calculations of the nationwide unfunded liability — which ultimately is the taxpayers’ burden — range from $375 billion to $800 billion.

Times reporter Mary Williams Walsh nicely summarizes the dynamic that creates this liability:

[Public pension plans] are governed by boards that often include municipal labor leaders, whose duty to represent their workers’ interests can easily conflict with their fiduciary duty to represent the plan itself. And even the most exemplary pension boards can be overruled, in many cases, by politicians whose priorities may be incompatible with sound financial management.

In other words, politicians and labor leaders who need political help today make grand promises of future benefits to special interests. But the politicians don’t want to anger taxpayers with the cost of those benefits, so they underfund the promises — after all, the bill won’t come due for years or decades. Between then and now, I suppose we’ll hide under some coats and hope that somehow everything will work out.

On a related note, Jagadeesh Gokhale and Kent Smetters calculate that the present value of the fiscal imbalance for Social Security stands at more than $8.4 trillion and Medicare stands at more than $63.4 trillion.