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This Week in Government Failure

Posted by Tad DeHaven

Over at Downsizing the Federal Government, we focused on the following issues this past week:

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Revisiting the ‘Christmas Tree Tax’

Posted by Tad DeHaven

Three weeks ago, a national commotion erupted when the Drudge Report headlined a story from the Heritage Foundation on the Obama administration’s implementation of a new tax on Christmas trees. I noted here that the 1996 legislation enabling the U.S. Department of Agriculture to implement the tax received most of its support from Republicans, including co-sponsor John Boehner.

The National Taxpayers Union gives a tidy explanation of how the law almost led to the “Christmas Tree Tax”:

The Federal Agriculture Improvement and Reform Act of 1996 permitted producers of agricultural commodities such as beef, pork, or popcorn to create what are known as research and promotion programs, or “checkoffs.” These are analogous to unions: producers pay “dues” to the checkoff which works to fund research and advertising efforts on behalf of the industry represented. Board members are appointed by the Secretary of Agriculture who also has authority to enforce dues-payment. Because the dues are government-coerced, they are essentially taxes passed on to consumers.

There are currently 18 checkoff programs. And while the Obama administration quickly stopped the Christmas tree tax checkoff program from going into effect, there are still other agricultural commodity groups, such as the hardwood lumber industry, pushing for their own checkoff. There are also efforts to allow the creation of non-agricultural commodity checkoffs.

NTU notes that now another Republican wants to create a similar scheme at the Department of Commerce:

Read the rest of this post »

Senate Postal Reform Bill Needs a New Title

Posted by Tad DeHaven

The USPS is supposed to operate like a business by relying on the revenues from the sale of postal products to cover costs. Congress makes that harder by imposing various obligations and stifling attempts to reduce costs. Add in a weak economy, the growth in alternative forms of communication, and a predominantly unionized workforce that has secured excessive compensation and privileges and the result is a financial mess.

The Senate will soon consider a postal reform bill that is supposed to save the USPS: “The 21st Century Postal Service Act of 2011.” That’s a mighty peculiar title considering that the legislation would keep the U.S. Postal Service stuck in the 20th century. It’s also an overly-confident title as there’s zero chance that the legislation would enable the USPS to “flourish” into the 21st century as Sen. Joe Lieberman (I-CT) claims.

I’m not going to go through all of the bill’s particulars (interested readers can view the committee’s summary here). The bottom line is that the bill does nothing to alleviate the USPS from the burden of congressional micromanagement. For example, one provision prevents the mere possibility of eliminating Saturday service for two more years. Talk about kicking the can down the road. For those who are perplexed by our enlightened leaders’ inability to reach a deal on deficit reduction, consider what this provision implies about their ability to oversee the government’s mail operation.

In the long term, either the USPS is going to be privatized or it’s going to go back to relying on taxpayer subsidies. Fortunately, a taxpayer bailout is off the table for now. However, taxpayers might not be so lucky the next time Congress steps in to “fix” a mess that is largely of its own doing. In fact, the continuing failure to think outside the box, which the Senate bill is a perfect example of, only increases the likelihood of government mail going on the dole.

See this Cato essay for more the U.S. Postal Service and privatization.

The ‘Tea Party Budget’

Posted by Tad DeHaven

The “Tea Party Debt Commission” affiliated with FreedomWorks recently released a budget plan (download here). In formulating its plan, the commission took into account fifteen budget plans introduced by various groups and policymakers, including Cato’s Downsizing Government website.

The effort comes in response to criticism – valid in my opinion – that the amorphous tea party movement hasn’t been sufficiently specific on what should be cut from the federal budget. I think the plan is an adequate response to that criticism. The following are some additional comments on the plan’s contents:

  • According to the commission’s calculations, the federal budget would begin running surpluses in fiscal 2015. Average spending over the next ten years would average 17.6 percent of GDP versus almost 24 percent for fiscal 2011. Gross and publicly-held debt would start to decrease. Assuming that the projections are accurate, the plan would represent a welcome – and necessary – reduction in the size and scope of the federal government.
  • The plan embraces a Balanced Budget Amendment to the Constitution. I’m against a BBA, but their hearts are in the right place – in contrast to a lot of Republican policymakers who champion a BBA because they’re afraid or unwilling to get specific about what they’d cut.
  • The plan calls for no tax increases but does not endorse a specific tax reform proposal. I give the commission credit for stating that acceptable tax reform “will never happen in the absence of massive spending cuts.” Kudos to the commission for not going along with the myopic fixation on tax cuts, tax cuts, tax cuts practiced by some individuals and policymakers.
  • Specific cuts include eliminating the Department of Energy, Department of Education, HUD, the Small Business Administration, farm subsidies, and corporate welfare programs at the Department of Commerce. The plan also calls for the privatization of Amtrak, air traffic control, and the Transportation Safety Administration. Good stuff. One curious proposed cut is “end all foreign aid to countries that don’t support us.” That’s probably an unfortunate capitulation to tea partiers with neoconservative sympathies.
  • On entitlements, the plan calls for allowing workers to divert one-half of their payroll taxes (employee share) to private accounts for retirement and medical needs. Medicaid would be block-granted to the states and capped. Medicare beneficiaries would be allowed to opt out of Medicare or enroll in the Federal Employees Health Benefit Program. Of course, the plan calls for the repeal of ObamaCare. Overall, I’d say not bad, but not great. It’s frankly depressing that these proposals will probably be labeled “radical” by establishment types.
  • I’m unimpressed by the proposed defense cuts: too much talk about eliminating waste and duplication and almost nothing on reining in our global military empire. In fact, the plan expresses worry that the Budget Control Act’s sequestration cuts to defense “could weaken our defenses, perhaps to a dangerously unacceptable level.”

All in all, the plan contains a lot of good recommendations that policymakers should pursue – especially the ones who were elected, in part, by embracing the tea party movement.

We’ve Had Enough Government ‘Stimulation’

Posted by Tad DeHaven

After three years and $4 trillion in combined deficit spending, unemployment remains stubbornly high and the economy sluggish. That people are still asking what the government can do to stimulate the economy is mind-boggling.

That the Keynesian-inspired deficit spending binge did create jobs isn’t in question. The real question is whether it created any net jobs after all the negative effects of the spending and debt are taken into account. How many private-sector jobs were lost or not created in the first place because of the resources diverted to the government for its job creation? How many jobs are being lost or not created because of increased uncertainty in the business community over future tax increases and other detrimental government policies?

Don’t expect the disciples of interventionist government to attempt an answer to those questions any time soon. It has simply become gospel in some quarters that massive deficit spending is necessary to get the economy back on its feet.

The idea that government spending can “make up for” a slow-down in private economic activity has already been discredited by the historical record—including the Great Depression and Japan’s recent “lost decade.”

Our own history offers evidence that reducing the government’s footprint on the private sector is the better way to get the economy going.

Take for example, the “Not-So-Great Depression” of 1920-21. Cato Institute scholar Jim Powell notes that President Warren G. Harding inherited from his predecessor Woodrow Wilson “a post-World War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit.” Instead of resorting to deficit spending to “stimulate” the economy, taxes and government spending were cut. The economy took off.

Similarly, fears at the end of World War II that demobilization would result in double-digit unemployment when the troops returned home were unrealized. Instead, spending was dramatically reduced, economic controls were lifted, and the returning troops were successfully reintegrated into the economy.

Therefore, the focus of policymakers in Washington should be on fostering long-term economic growth instead of futilely trying to jump-start the economy with costly short-term government spending sprees. In order to reignite economic growth and job creation, the federal government should enact dramatic cuts in government spending, eliminate burdensome regulations, and scuttle restrictions on foreign trade.

The budgetary reality is that policymakers today have no choice but to drastically reduce spending if we are to head off the looming fiscal train wreck. Stimulus proponents generally recognize that our fiscal path is unsustainable, but they argue that the current debt binge is nonetheless critical to an economic recovery.

There’s no more evidence for this belief than there is for the existence of the tooth fairy.

Not only has Washington’s profligacy left us worse off, our children now face the prospect of reduced living standards and crushing debt.

 

This article originally appeared in a PolicyMic debate between the Cato Institute’s Tad DeHaven and Demos senior fellow Lew Daly. Check out Daly’s piece here.

Debate on Government Stimulus

Posted by Tad DeHaven

I am debating the need for more government spending to goose the economy and create jobs over at PolicyMic.com. I argue that we’ve had enough government “stimulation” (see here). My opponent argues that the federal government hasn’t spent enough money (see here). Readers will decide the “winner” and can add their own two cents.

Adios Balanced Budget Amendment

Posted by Tad DeHaven

The House failed to pass a particularly bad version of the Balanced Budget Amendment this afternoon. Good. Kudos to the four Republicans who voted against it (see vote breakdown here).

House Republicans wanted a vote on a BBA for political purposes. The GOP wanted to be able to present the Democratic “no” votes to voters as proof that those particular members aren’t serious about reining in the exploding federal debt. They probably aren’t, but Republicans who voted “yes” shouldn’t cite their vote as evidence that they’re serious about cutting spending unless they’re prepared to detail what all they would cut in order to bring the budget into balance.

This Week in Government Failure

Posted by Tad DeHaven

Over at Downsizing the Federal Government, we focused on the following issues this past week:

  • The Washington Post does a nice job describing how Solyndra is just one of many energy subsidy failures of recent decades.
  • The cheerleaders for federal redistribution schemes would have the public believe that it’s all about “helping those in need” when in fact it’s really about fostering dependency on taxpayers.
  • Chris Preble on cutting military spending and rethinking our grand strategy.
  • U.S. policymakers should be asking: What have other countries privatized that we can privatize in this country?
  • Chris Edwards on crumbling bridges and infrastructure fear-mongering.
  • The “minibus” spending bill is largely business as usual.

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Thoughts on the ‘Minibus’ Spending Bill

Posted by Tad DeHaven

The House is scheduled to vote this evening on a fiscal 2012 “minibus” packaging of three appropriations bills (Agriculture, Commerce-Justice-Science and Transportation-HUD) agreed to in conference on Monday. It includes a continuing resolution to keep the government funded through December 16th, thus avoiding a government “shutdown.”

In sum, I think the bill is largely business as usual, although policymakers and those who subsist on the federal programs funded by the affected agencies will claim otherwise:

  • The legislation provides funding at the higher levels sought by the Democratic-controlled Senate – about $5.4 billion more than what the Republican-controlled House wanted. Overall funding versus fiscal 2011 is flat, but lower than fiscal 2010. It’s less than what the president wanted to spend, but that hurdle was so low a mouse would have tripped over it.
  • It includes $2.3 billion for disaster spending, which is excluded from the budget caps negotiated as part of the deal to increase the debt ceiling.
  • Some programs saw cuts, some programs saw increases. Anything of consequence that would rein in the size and scope of government? Not that I can see.
  • The housing lobbyists win again: the bill increases the size limit on mortgages that Federal Housing Administration can insure to $729,750. That principled decision was made at a time when a taxpayer bailout of the FHA is becoming increasingly likely.

Once again, Congress hits the snooze button.

Coburn Report on Subsidies for Millionaires

Posted by Tad DeHaven

Sen. Tom Coburn’s (R-OK) new report on the various federal subsidies being collected by millionaires deserves applause for not resorting to class warfare rhetoric in making the point that it’s silly for wealthy folks to receive taxpayer handouts:

We should never demonize those who are successful. Nor should we pamper them with unnecessary welfare to create an appearance everyone is benefiting from federal programs.

Coburn says that “this reverse Robin Hood style of wealth redistribution is an intentional effort to get all Americans bought into a system where everyone appears to benefit.” That’s true. Whether it is food subsidies or unemployment benefits, the cheerleaders for federal redistribution schemes would have the public believe that it’s all about “helping those in need” when in fact it’s really about fostering dependency on taxpayers. A dirty little secret that the media typically fails to recognize is that many of the people pushing for these programs stand to financially benefit themselves. And as we have documented over at DownsizingGovernment.org, government programs do a poor job of helping the people that they purportedly serve.

This Week in Government Failure

Posted by Tad DeHaven

Over at Downsizing the Federal Government, we focused on the following issues this past week:

  • The “government efficiency” snake-oil salesmanship from politicians has become tiresome, especially when it comes from high-profile Republicans like Mitt Romney.
  • An establishment commission is planning to “reform the nation’s housing policy by crafting a package of realistic and actionable policy recommendations” for the Beltway establishment’s consideration. Hold onto your wallets, taxpayers.
  • Certain people saw the “Christmas Tree Tax” as an opportunity to further partisan aims rather than provoke a discussion and debate on the proper role of the federal government.
  • On so-called shallow loss proposals to provide subsidies for farms in cases when farm revenues fall slightly below the record high levels of the past few years.
  • Politicians who fixate on “government efficiency” probably aren’t truly interested in reducing the size and scope of government.

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Obama Demonstrates Why ‘Government Efficiency’ Is a Joke

Posted by Tad DeHaven

By the time I stopped working for Sen. Tom Coburn (R-OK), I had concluded that the pursuance of so-called “government efficiency” was largely a misguided waste of time for a politician who was interested in achieving smaller government. (I’ve been pleased to see my old boss spend more time trying to cut and eliminate programs since my departure.)

By the time I stopped working for Gov. Mitch Daniels, I had concluded that most politicians probably just pursue “government efficiency” for cheap p.r. purposes: take care of the special interests first, buy votes, and tell the suckers taxpayers that you care deeply about how their money is being spent. And as I’ve discussed in the past, to the degree that the governor’s office was really interested in saving money, it was because they wanted to free up funds to spend on Mitch’s “priorities.”

Put President Obama in the Daniels category. From the New York Times:

Cutting wasteful government spending is one of those exercises that even the most ardent political opponents agree is a good thing. But what one does with those savings is quite another matter.

On Wednesday, President Obama signed an executive order cutting federal spending on things like promotional plaques and mugs, cellphones and iPads, official travel, and chauffeured cars for senior officials.

‘It doesn’t replace the importance of the work that Congress needs to do in coming up with a balanced, bold plan to reduce our deficit,’ Mr. Obama said in a ceremony in the Oval Office, ‘but it indicates once again that there are things we can do right now that will actually deliver better government more efficiently.’

In fact, the administration said, only a small portion of the $4 billion in annual savings will go toward reducing the deficit. Rather, the money will be spent on other programs, like helping veterans re-enter the work force or improving the nation’s infrastructure, which the White House contends are more worthwhile.

As Forrest Gump might have put it, “Republicans and Democrats goes together like peas and carrots.”