Trade, Congress, Separation of Powers, the Administrative State, and the Constitution

One of the interesting games in Washington is deciding who on the right (however defined) is a “Trumpie” and who is a “Reaganite.”

Here are a few indicators.

• If you claim to be for small government, but cheer Trump’s support of greater federal involvement in child care, you’re not a Reaganite.
• If you claim to be for small government, but supported Trump when he broke the spending caps, you’re not a Reaganite.
• If you claim to be for small government, but no longer care about entitlements because Trump opposes reform, you’re not a Reaganite.

But, given the huge gap in their views, trade is probably the biggest way of separating the Trumpies from the Reaganites.

And if you want a clear dividing line for Members of Congress, just see whether they support the “Reciprocal Trade Act” or the “Congressional Trade Authority Act.”

The former is sponsored by Congressman Sean Duffy of Wisconsin and would empower Trump to impose more taxes on trade.

Bryan Riley of the National Taxpayers Union is wisely skeptical.

…treating our trading partners as allies rather than adversaries has paid enormous dividends for Americans. Just since 1990, world tariffs fell by nearly two-thirds as U.S. exports more than doubled, even after adjusting for inflation. …The Reciprocal Trade Act would turn this successful approach to trade on its head. …proponents who endorse this approach often argue that tariff reciprocity is needed to as a lever to reduce foreign trade barriers. But the White House’s own case studies show this is untrue. …Trump wants to replace a successful post-World War II policy based on the understanding that trade is win-win with one that is likely to encourage foreign governments to retaliate against Americans. …History shows trade policy is more likely to succeed if it is based on the Golden Rule instead of on hostile eye-for-an eye reciprocity. It turns out that the United States benefits when we treat our trading partners the way we would like them to treat us. …Princeton University’s Robert Keohane described how countries benefit from this “sequential reciprocity”… The goal of the Trump administration’s trade policy should be to promote reciprocal trade, not reciprocal taxes.

Here’s a chart from Bryan’s study that shows how trade liberalization in recent decades has been very successful.

In an article for National Interest, Clark Packard also pours cold water on the Reciprocal Trade Act.

The United States Reciprocal Trade Act, which will soon be introduced by Rep. Sean Duffy (R-Wis.), would expand the president’s already enormous unilateral authority to impose tariffs and other import restrictions. …the Reciprocal Trade Act would grant the president the authority to match the tariff applied to any given product by a trading partner. To use one of the administration’s favorite examples, the Europe Union applies a 10 percent tariff on imported automobiles, while the United States levies a 2.5 percent tariff on its imports. The Reciprocal Trade Act would allow the president unilaterally to raise the tariff to 10 percent on European cars as leverage for further negotiations.

He lists some of the reasons why the proposed law is bad policy.

The bill is enormously flawed and should be a nonstarter for myriad reasons. …violates U.S. commitments to the WTO’s Most-Favored Nation (MFN) principle of nondiscrimination. …The bill also would violate U.S. commitments under Article II of GATT. …the effect of the law would be that countries would retaliate against American exports and ensnare unrelated industries in a tit-for-tat. …The United States has been successful in getting other countries to lower tariffs and other trade barriers through negotiations. …the Reciprocal Trade Act would jeopardize this American-led system that has paid enormous dividends.

All of his points are accurate, though I don’t expect the president’s supporters would care about violating WTO obligations since they presumably would cheer if Trump pulled the U.S. out of the the agreement – even though it has been very beneficial for the United States.

Now let’s look at the Congressional Trade Authority Act, which would restrict rather than expand the ability of the executive branch to impose higher taxes on trade.

Adam Brandon of FreedomWorks explains the principles at stake.

…the Bicameral Congressional Trade Authority Act would ensure that all tariffs imposed by the executive branch in the name of national security must first be approved by Congress. Article I, Section 8 of the Constitution establishes that Congress “shall have the power to lay and collect taxes, duties, imposts, and excises.” The framers, in their wisdom, made this the very first power they delegated specifically to the legislative branch of the United States. Tariffs are taxes, and they adversely impact American consumers. Such measures should be enacted only after thoughtful debate by the elected representatives most accountable to the people of the United States. They should not be handed down unilaterally from the White House. …it’s time for Congress to reclaim their enumerated Article I power over trade. …FreedomWorks agrees with Rep. Gallagher and Sen. Toomey on the need to respect our Constitution and ensure Congress has full control over its Article I authority.

The Wall Street Journal opines favorably about Senator Toomey’s legislation.

…some on Capitol Hill are trying again to rein in the President’s tariff powers. …the Pennsylvania Republican…Mr. Toomey’s bill would require Congress’s blessing. Once a tariff is proposed, lawmakers have 60 days to pass a privileged resolution—no Senate filibuster to block consideration—authorizing it. No approval, no tariff.This is a serious reassertion of the Article I trade powers that Congress has long shirked. Since the bill is retroactive, President Trump would have to convince Congress that his tariffs on steel and aluminum are necessary. If lawmakers didn’t agree, the tariffs would end. …But that’s not all. The Commerce Secretary is now responsible for declaring that an import endangers national security. This bill would give the task, sensibly, to the Defense Secretary.

I like what Senator Toomey is trying to achieve. And I like it, not only because I don’t want politicians interfering with trade, but also because I support the Constitution.

America’s Founders deliberately set up a system based on Separation of Powers because they understood that unilateral power was a recipe for government abuse.

Interestingly, many Trumpies also claim to support the Constitution. Indeed, they are some of the biggest critics of the “administrative state,” which developed as federal agencies began to exercise legislative powers.

Which gives me an opportunity to contribute something to this discussion. I’m a great admirer of the American Enterprise Institute’s Mark Perry, in part because of his very clever hypocrisy-exposing Venn Diagrams (taxation and incentives, the War on Drugs, minimum wage, Food and Drug Administration, and consenting adults).

So, in hopes of showing Trumpies the error of their ways, here’s my humble attempt to copy Mark.

P.S. Even though open trade is very beneficial for American prosperity, I would not want a future president to assert unilateral power to eliminate tariffs. Yes, I want better policy, but I also support the Constitution and the rule of law.

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Grading the Senate Republican Tax Plan

Back on November 2, I summarized the good and not-so-good features of the tax plan put forth by House Republicans. Here are the parts that made me happy.

• Lower corporate tax rate.
• Ending the deduction for state and local income taxes.
• Death tax repeal.

And what was the most disappointing part of the plan?

• Absence of spending restraint.

Regarding my disappointment, I’m not just being a curmudgeonly libertarian. The bill is filled with timid and convoluted provisions, as well as some undesirable revenue-raising provisions, precisely because of congressional rules on long-run deficit neutrality. As I’ve noted in some of my TV interviews, Republicans are pushing sub-par policy because you can’t fit a football player’s body into Pee Wee Herman’s clothes.

If Republicans were willing to impose some modest spending restraint, by contrast, that would have given them enormous flexibility for large tax cuts (while also balancing the budget!).

But I’m a semi-realist about Washington. I’m not going to make the perfect the enemy of the good (or, in this case, the sort-of-decent the enemy of the I-guess-this-is-acceptable).

Now let’s look at what Senate Republicans have unveiled. In some cases, my grades are identical to the House bill because many of the major provisions are quite similar. But there are some noteworthy differences.

Lower corporate rate: A-

America’s high corporate tax rate is probably the most self-destructive feature of the current system. If the rate is permanently reduced from 35 percent to 20 percent, that will be a huge boost to competitiveness. The only downside is that the lower rate is deferred until 2019.

Lower individual rates: C+

The proposal is relatively timid on rate reductions for households. This is disappointing, but not unexpected since lower individual tax rates mean considerable revenue loss.

Ending deduction for state and local taxes: A+

Next to the lower corporate tax rate, this is the best part of the proposal. It generates revenue to use for pro-growth provisions while also eliminating a subsidy for bad policy on the part of state and local governments. Indeed, the Senate bill goes farther than the House bill since it includes property taxes. So I’ve retroactively changed my grade for the House bill from A+ to A- so I can give the Senate bill an A+.

Curtailing mortgage interest deduction: C

The deduction remains for home mortgages, but is curtailed for home equity loans. A timed improvement that will only slightly reduce the distortion that creates a bias for residential real estate compared to business investment.

Death tax repeal: C+

There’s no repeal. Just an increase in the amount of family savings that can be protected from the tax. Better than nothing, to be sure, but disappointing.

Change to consumer price index: C

It is quite likely that the consumer price index overstates inflation because it doesn’t properly capture increases in the quality of goods and service. Shifting to a different price index will lead to higher revenues because tax brackets and other provisions of the tax code won’t adjust at the same rate. That’s fine, but I’m dissatisfied with this provision since it should apply to spending programs as well as the tax code.

Reduced business interest deduction: C+

The business interest deduction is partially undone, which is a step toward equal treatment of debt and equity. It’s not the right way of achieving that goal, but it does generate revenue to finance other pro-growth changes in the legislation.

Now let’s zoom out and grade the overall plan in terms of major fiscal and economic goals.

And you’ll see that all I’ve done is repeat exactly what I wrote about the House bill.

Restraining the growth of government: F

In my fantasy world, I want a return to the very small federal government created and envisioned by the Founding Fathers. In the real world, I simply hope for a modest bit of spending restraint. This legislation doesn’t even pretend to curtail the growth of government, which is unfortunate since some fiscal prudence (federal budget growing about 2 percent per year) would have allowed a very large tax cut while also balancing the budget within 10 years.

Collecting revenue in a less-destructive manner: B

This is a positive proposal. It will mean more jobs, increased competitiveness, and higher incomes. The wonks in Washington doubtlessly will debate whether these positive effects are small or large, but I’m not overly fixated on that issue. Yes, I think the growth effects will be significant, but I also realize that many other policies also determine economic performance. The most important thing to understand, thought is that even small increases in growth make a big difference over time.

Now let’s take a closer look at how the House and Senate plans differ.

The Tax Foundation put together a very helpful comparison. I’ve broken it into three parts so I can interject some final commentary.

For this first section, since I already gave my two cents about itemized deductions, I’ll simply observe that the Senate plan is slightly better on individual income tax rates.

For this second section, I’ll merely note that the first provision is basically an attempt to give relief to small businesses that are subject to the individual income tax.

The provisions are complicated because it’s not easy to lower tax rates for “Schedule C” income in a way that doesn’t benefit taxpayers who aren’t perceived as being conventional small businesses.

For this final section, the part that’s disappointing to me is “international income.” Both the House and Senate adopt territorial taxation for businesses, which is very good.

But the congressional plans then claw back a bunch of money with OECD-style “base-erosion” policies and Obama-style global minimum taxes. It’s unclear if the net effect is modestly positive or modestly negative, but it’s not what many of us wanted when we pushed for territoriality.

I’ll close by noting that I’m actually pleasantly surprised by the two plans. Yes, I’m grading on a curve, but I had very low expectations this year. I basically hoped to get a lower corporate rate with a bit of window dressing.

And at one point we were actually forced to play defense because Republicans were looking at a very troubling proposal for a “border-adjusted tax.”

So even though I fantasize about a flat tax, I’m reasonably happy about where we are now.

The bottom line is that there’s now a good chance of getting legislation that drops the corporate rate to 20 percent while also eliminating the deduction for state and local income taxes. Those are two very good policies. And if we somehow get death tax repeal, that means three substantive, pro-growth reforms. Fingers crossed.

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Highway Funding Battle Brings Out the Worst of Washington

When giving speeches outside the beltway, I sometimes urge people to be patient with Washington. Yes, we need fundamental tax reform and genuine entitlement reform, but there’s no way Congress can make those changes with Obama in the White House.

But there are some areas whether progress is possible, and people should be angry with politicians if they deliberately choose to make bad decisions.

For instance, the corrupt Export-Import Bank has expired and there’s nothing that Obama can do to restore this odious example of corporate welfare. It will only climb from the grave if Republicans on Capitol Hill decide that campaign cash from big corporations is more important than free markets.

Another example of a guaranteed victory – assuming Republicans don’t fumble the ball at the goal line – is that there’s no longer enough gas-tax revenue coming into the Highway Trust Fund to finance big, bloated, and pork-filled transportation spending bills. So if the GOP-controlled Congress simply does nothing, the federal government’s improper and excessive involvement in this sector will shrink.

Unfortunately, Republicans have no desire to achieve victory on this issue. It’s not that there’s a risk of them fumbling the ball on the goal line. By looking for ways to generate more revenue for the Trust Fund, they’re moving the ball in the other direction and trying to help the other team score a touchdown!

The good news is that Republicans backed away from awful proposals to increase the federal gas tax.

But the bad news is that they’re coming up with other ideas to transfer more of our income to Washington. Here’s a look at some of the revenue-generating schemes in the Senate transportation bill.

Since the House and Senate haven’t agreed on how to proceed, it’s unclear which – if any – of these proposals will be implemented.

But one thing that is clear is that the greed for more federal transportation spending is tempting Republicans into giving more power to the IRS.

Republicans and Democrats alike are looking to the IRS as they try to pass a highway bill by the end of the month. Approving stricter tax compliance measure is one of the few areas of agreement between the House and the Senate when it comes to paying for an extension of transportation funding. …the Senate and House are considering policy changes for the IRS ahead of the July 31 transportation deadline. …With little exception, the Senate bill uses the same provisions that were in a five-month, $8 billion extension the House passed earlier this month. The House highway bill, which would fund programs through mid-December, gets about 60 percent of its funding from tax compliance measures. …it’s…something of a shift for Republicans to trust the IRS enough to back the new tax compliance measures. House Republicans opposed similar proposals during a 2014 debate over highway funding, both because they didn’t want to give the IRS extra authority and because they wanted to hold the line on using new revenues to pay for additional spending.

Gee, isn’t it swell that Republicans have “grown in office” since last year.

But this isn’t just an issue of GOPers deciding that the DC cesspool is actually a hot tub. Part of the problem is the way Congress operates.

Simply stated, the congressional committee system generally encourages bad decisions. If you want to understand why there’s no push to scale back the role of the federal government in transportation, just look at the role of the committees in the House and Senate that are involved with the issue.

Both the authorizing committees (the ones that set the policy) and the appropriating committees (the ones that spend the money) are among the biggest advocates of generating more revenue in order to enable continued federal government involvement in transportation.

Why? For the simple reason that allocating transportation dollars is how the members of these committees raise campaign cash and buy votes. As such, it’s safe to assume that politicians don’t get on those committees with the goal of scaling back federal subsidies for the transportation sector.

And this isn’t unique to the committees that deal with transportation.

It’s also a safe bet that politicians that gravitate to the agriculture committees have a strong interest in maintaining the unseemly system of handouts and subsidies that line the pockets of Big Ag. The same is true for politicians that seek out committee slots dealing with NASA. Or foreign aid. Or military bases.

The bottom line is that even politicians who generally have sound views are most likely to make bad decisions on issues that are related to their committee assignments.

So what’s the solution?

Well, it’s unlikely that we’ll see a shift to random and/or rotating committee assignments, so the only real hope is to have some sort of overall cap on spending so that the various committees have to fight with each other over a (hopefully) shrinking pool of funds.

That’s why the Gramm-Rudman law in the 1980s was a step in the right direction. And it’s why the spending caps in today’s Budget Control Act also are a good idea.

Most important, it’s why we should have a limit on all spending, such as what’s imposed by the so-called Debt Brake in Switzerland.

Heck, even the crowd at the IMF has felt compelled to admit spending caps are the only effective fiscal tool.

Maybe, just maybe, a firm and enforceable spending cap will lead politicians in Washington to finally get the federal government out of areas such as transportation (and housing, agriculture, education, etc) where it doesn’t belong.

One can always hope.

In the meantime, since we’re on the topic of transportation decentralization, here’s a map from the Tax Foundation showing how gas taxes vary by states.

This data is useful (for instance, it shows why drivers in New York and Pennsylvania should fill up their tanks in New Jersey), but doesn’t necessarily tell us which states have the best transportation policy.

Are the gas taxes used for roads, or is some of the money siphoned off for boondoggle mass transit projects? Do the states have Project Labor Agreements and other policies that line the pockets of unions and cause needlessly high costs? Is there innovation and flexibility for greater private sector involvement in construction, maintenance, and operation?

But this is what’s good about federalism and why decentralization is so important. The states should be the laboratories of democracy. And when they have genuine responsibility for an issue, it then becomes easier to see which ones are doing a good job.

So yet another reason to shut down the Department of Transportation.

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‘Tis the Season…to be Thankful for an “Unproductive” Congress

Two years ago, I jumped on USA Today for stating that the 112th Congress was the “least productive” since the end of World War II.

My argument was very straightforward. It’s better to have no legislation than bad legislation. Here’s some of what I wrote about USA Today’s hypothesis.

…it does blindly assume that it is productive to impose more laws. Was it productive to enact Obamacare? What about the faux stimulus? Or the Dodd-Frank bailout bill? Wouldn’t the headline be more accurate if it read, “This Congress could be least destructive since 1947″? …To be sure, not all legislation is bad. …Congress would have to enact a law to repeal Obamacare. Laws also would need to be changed to reform entitlements, or adopt a flat tax. And some laws are benign, such as the enactment of Dairy Goat Awareness Week or naming a federal courthouse. But I’m guessing that the vast majority of substantive laws are bad for freedom and result in less prosperity.

One year ago, I criticized the Washington Post, which complained that the 1st Session of the 113th Congress wasn’t productive. Here are a few excerpts from that column.

Do you think that additional laws from Washington will give you more freedom and more prosperity? …I strongly suspect most Americans will say “no.” …That’s because taxpayers instinctively understand that more activity in Washington usually translates into bigger and more expensive government. …The first session of the current Congress may have been the “least productive” in history when it comes to imposing new laws, but…that “record-low congressional accomplishment” translates into a smaller burden of government spending. Indeed, government spending actually has declined for two consecutive years. That hasn’t happened since the 1950s.

Well, this topic is my version of Bill Murray’s Groundhog Day, because it’s time to deal with the same silly arguments.

Only this time, we’re looking at the final data for the 113th Congress. But we’ll still mock media outlets for mindlessly equating legislation with productivity.

Politico groused that “…this Congress has been singularly unproductive, shutting down most government functions for two weeks last fall, passing the fewest bills in memory and lurching from crisis to crisis.”

The Hill whined that “…the last two sessions of Congress with divided government are the two most unproductive in history in terms of bills cleared by both chambers.”

And Dana Milbank of the Washington Post whimpered that “According to a tally by the Library of Congress, 296 bills were presented to the president by this Congress — nearly the same as the 284 presented by the previous Congress, the fewest of any Congress since the counts began in the 1940s. …More than 10 percent of the bills presented were about naming or renaming things and awarding medals.”

So what’s my reaction to these complaints? Well, here’s where my Groundhog Day analogy breaks down. In the movie, Bill Murray learns to change his responses to win the heart of Andie MacDowell.

But I don’t have any new responses. My reactions today are exactly the same as two years ago and one year ago. As a general rule, I want less legislation.

Heck, I’d probably even be willing to double Congressional pay if lawmakers agreed to be even less “productive.” Maybe they could copy the Texas state legislature and only meet every other year, with a limit of being in session no more than 140 days!

Since I don’t really have anything new to add to the debate on legislative “productivity,” I may as well close today’s column by mocking another Washington shibboleth.

I wrote last year that “bipartisanship” isn’t always a wonderful thing, as is so often claimed in Washington. You have to look at the actual policies that are generated when Republicans and Democrats cooperate. And the track record isn’t very good.

Was TARP good legislation? Maybe for politically well-connected financial institutions, but not for taxpayers.

What about the supposedly bipartisan budget agreements of recent decades? In most cases, the result was that politicians banded together to take more money from taxpayers.

Or how about Bush’s No-Bureaucrat-Left-Behind education bill? Well, that was good news for the education establishment, but it certainly didn’t lead to better outcomes.

This doesn’t mean it’s always bad when the parties work together on an issue. Reagan’s economic program wouldn’t have passed Congress without a lot of support from Democrats. And transportation deregulation was a bipartisan operation during the Carter years, ably assisted by former Senator Ted Kennedy.

So my real message isn’t that bipartisanship is bad. Instead I’m simply saying that bipartisanship is akin to legislative productivity. You have to look at the legislation that’s being produced before you can make a reasoned assessment.

Now that we’ve made that serious point, let’s close with a couple of cartoons about the wrong kinds of bipartisanship.

Here’s Glenn McCoy with a scene from a school bathroom.

And here’s one from Lisa Benson, referencing the recently enacted “cromnibus.”

I don’t know the author of this final cartoon, but it’s also worth sharing.

If you like these types of cartoons, click here to see some gems from Lisa Benson and Gary Varvel. And there are also some funny cartoons about bipartisanship from Michael Ramirez and Glenn McCoy.

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Washington’s Nauseatingly Corrupt Culture…and 2014 Election Predictions for the House and Senate

I sometimes think that working at the Cato Institute and trying to change Washington must be akin to working at a church in the middle of Amsterdam’s red light district.

In both cases, you’re wildly outnumbered by people with a different outlook on life. And it’s not that easy to save misguided souls.

The crowd in Washington, for instance, benefits enormously from a complicated tax system, a Byzantine regulatory regime, and a bloated budget.

All of these factors create big opportunities for unearned income for bureaucrats, cronies, politicians, contractors, lobbyists, and other insiders.

Telling those people they should back away from the public trough is not exactly a way to make friends in DC.

To cite just one example, look at how the Washington establishment is trying to defend the Export-Import Bank, a grotesque example of corporate welfare that is opposed by honest people on the right and left of the political spectrum.

Or, if you want to be partisan, what about the Democratic insiders who are getting rich from Obamacare?

Conversely, what about the Republican insiders who also get rich from big government?

But maybe all these examples are too indirect. So today’s column will give specific examples of people who get undeserved wealth thanks to influence peddling in Washington.

Here are some passages from a brutal expose written by Michelle Malkin for the Washington Examiner. She starts by looking at how Vice President Biden’s son got special treatment, first when he was handed a plum spot as a public relations hack in the Navy Reserve and then after he got tossed out after failing a drug test.

Everything you need to know about Beltway nepotism, corporate cronyism and corruption can be found in the biography of Robert Hunter Biden. …The youngest son of Vice President Joe Biden made news last week after the Wall Street Journal revealed he had been booted from the Navy Reserve for cocaine use. …Papa Biden loves to tout his middle-class, “Average Joe” credentials. But rest assured, if his son had been “Hunter Smith” or “Hunter Jones” or “Hunter Brown,” the Navy’s extraordinary dispensations would be all but unattainable. …Despite the disgraceful ejection from our military, Hunter’s Connecticut law license won’t be subject to automatic review. Because, well, Biden.

But special treatment apparently is nothing new for Biden’s son. And a lifetime of insider deals has been greased by the favor factory of big government.

Skating by, flouting rules and extracting favors are the story of Hunter’s life. Hunter’s first job, acquired after Joe Biden won his 1996 Senate re-election bid in Delaware, was with MBNA. …Hunter zoomed up to senior vice president by early 1998 and then scored a plum position in the Clinton administration’s Commerce Department, specializing in “electronic commerce” before returning to MBNA three years later as a high-priced “consultant.” While he collected those “consulting” (translation: nepotistic access-trading) fees, Hunter became a “founding partner” in the lobbying firm of Oldaker, Biden and Belair in 2002. …Hunter lobbied for drug companies, universities and other deep-pocketed clients to the tune of nearly $4 million billed to the company by 2007. …Continually failing upward, Hunter snagged a seat on the board of directors of taxpayer-subsidized, stimulus-inflated Amtrak, where he pretended not to be a lobbyist, but rather an “effective advocate” for the government railroad system serving the 1 percenters’ D.C.-NYC corridor. …Hunter joined Ukrainian natural gas company Burisma Holdings — owned by a powerful Russian government sympathizer who fled to Russia in February — this spring. The hypocritical lobbyist-bashers at the White House deny he will be lobbying and deny any conflict of interest.

At this point, some readers may be thinking that Democrats are the party of big-government corruption.

I’ll agree, but then I’ll add a very important caveat. It’s possible that this description applies to more than one political party.

Let’s look at the sordid details of a story about GOP lobbyists and political hacks taking dirty money to push for big government.

First, some background. For those of you who haven’t heard about “Obamaphones,” you’ll be delighted to learn that our bloated federal government has an entitlement program for cell phones.

The Federal Communications Commission program…charges a dollar or two per line on every American’s phone bill. The revenue generated by the “Universal Service Fund fee” is then used to pay select phone companies $9.25 per month for each poor person they sign up for a free phone. …its cost doubled in five years to $1.75 billion in 2011, and in some states, the number of phones given out exceeded the total eligible population. …The company that has received the most income from the Lifeline program is TracFone, whose CEO, F.J. Pollak, was an Obama campaign fundraiser. The company spent nearly $1 million on lobbying last year.

While an Obama donor is making big bucks off this federal handout, there also are a number of Republicans who are willing to agitate for wasteful spending so long as they get their pieces of silver as well.

Mary Cheney and prominent Republican consultants linked to Karl Rove, Mitt Romney and the Republican National Committee are working to expand or protect the Obamaphone entitlement program, apparently on behalf of the telecom companies that make millions on it. …The strategy is aimed at convincing congressional Republicans…to back off of their opposition to the Obamaphone program, which has no connection to veteran status and is more commonly associated with welfare. …The FCC paperwork also lists the names Patti Heck, who is president of Crossroads Media, and Main Street Media Group, a Crossroads affiliate. Crossroads Media has ties to Rove’s American Crossroads…and shared an office used by several political shops employed by Romney’s 2012 presidential campaign.

And you won’t be surprised to learn that these Republican influence peddlers are willing to engage in loathsome demagoguery.

The ad’s voiceover says “some in Congress want to take away his phone,” implying that not having it would endanger him because of his cancer. …Bennett unabashedly defended the Obamaphone and other entitlement programs. “Of course I support these programs, because I don’t hate poor people,” he told the Examiner.

Yup, if you don’t support a federal cell-phone entitlement program, you want veterans to die of cancer and you hate poor people. How do these people sleep at night?!?

Ugh, I want to take a shower after having read both of these stories. Now you see why I always say that Washington is a racket for insiders to get rich at our expense.

Fortunately, the article does quote some other people who are disturbed by this philosophical corruption.

Bill Allison, a lobbying expert at the Sunlight Foundation, said the fact that major Republican consultants are promoting an entitlement program shows that “in Washington’s mercenary culture, there are few principles that stand in the way of a payday.” …“Wow. Just wow. Big government money ensnares a lot of people,” said David Williams, president of the taxpayers group, when told of Jansen’s new client.

By the way, this doesn’t mean everybody in Washington is sleazy. And even the ones that are corrupt on some issues may be principled on others.

But the incentives to “play the game” are enormous. As I explain in this video, big government is inherently corrupting.

P.S. Folks are emailing me to ask me predictions for the 2014 mid-term elections.

I’m not sure why anyone should care. Yes, I did a good job in 2010, but my 2012 predictions were not very impressive.

That being said, I’m happy to oblige. We’re 10 days from the election, so I’ll make a set of predictions today, then another set of predictions with five days to go, then a final set of predictions the day before the election.

For the House of Representatives, I can say with near-100 percent certainty that Republicans will maintain control. Indeed, I suspect they’ll pick up some seats and have a bigger majority.

How big? Let’s go with 246-189, the biggest GOP margin since the late 1940s.

But what about the Senate? The race for partisan control on the upper chamber is getting all the attention.

In the for-what-it’s-worth department, I think Republicans will take control by a 52-48 margin, meaning a net gain of seven seats. Here’s a map showing the seats that will change hands, though I confess Iowa, Colorado, and Georgia could go either way.

 

It’s also possible that Republicans could lose Kansas, while the Democrats could lose North Carolina and New Hampshire.

In other words, the final results could be anywhere between 55-45 Republican control or 52-48 Democratic control.

P.P.S. If Republicans take control, don’t hold your breath waiting for big changes in policy. Even if they don’t get corrupted (like the Obamaphone-loving GOPers described above), the White House will still be controlled by Democrats.

So there won’t be any tax reform and there won’t be any entitlement reform.

Though there may be some fights in the next two years that help determine whether those things can happen after the 2016 election.

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Be Thankful for “Diminished Productivity” in Washington

Let’s do a simple thought experiment and answer the following question: Do you think that additional laws from Washington will give you more freedom and more prosperity?

I don’t know how you will answer, but I strongly suspect most Americans will say “no.” Indeed, they’ll probably augment their “no” answers with a few words that wouldn’t be appropriate to repeat in polite company.

That’s because taxpayers instinctively understand that more activity in Washington usually translates into bigger and more expensive government. Or, to be more colloquial, this image summarizes how they view Washington. And the last thing you want is more “action” when you’re on the lower floor.

Sort of like living downwind from the sewage treatment plant.

So what’s the purpose of our thought experiment? Well, new numbers have been released showing that the current Congress is going to set a modern-era record for imposing the fewest new laws.

But while most of us think this is probably good news, Washington insiders are whining and complaining about “diminished productivity” in Congress. The Washington Post, which is the voice of DC’s parasite class, is very disappointed that lawmakers aren’t enacting more taxes, more spending, and more regulation.

…this Congress — which is set to adjourn for the year later this month — has enacted 52 public laws. By comparison, …90 laws were encated during the first year of the 113th Congress and 137 were put in place during the first year of the 111th Congress.

Just in case you don’t have a beltway mindset, another Washington Post report also tells you that fewer laws is a bad thing.

…whatever gets done in December will still be part of a year with record-low congressional accomplishment. …According to congressional records, there have been fewer than 60 public laws enacted in the first 11 months of this year, so below the previous low in legislative output that officials have already declared this first session of the 113th Congress the least productive ever.

Let’s actually look at some evidence. The first session of the current Congress may have been the “least productive” in history when it comes to imposing new laws, but what’s the actual result?

Well, there are probably many ways this could be measured, but one of the most obvious benchmarks is the federal budget.

And it appears that “record-low congressional accomplishment” translates into a smaller burden of government spending.

Indeed, government spending actually has declined for two consecutive years. That hasn’t happened since the 1950s.

And it’s worth reminding people that you begin to solve the symptom of red ink when you address the underlying disease of too much spending. That’s why the deficit has fallen by almost 50 percent in the past two years.

Interestingly, the Washington Post accidentally confirms that you get better policy when you have fewer news laws.

In 1995, when the newly empowered GOP congressional majority confronted the Clinton administration, 88 laws were enacted, the record low in the post-World War II era.

Needless to say, the author isn’t saying that we got good policy because there were a “record low” number of laws in 1995. But if we look at fiscal policy during that period, that’s when we began a multi-year period of spending restraint that led to budget surpluses.

In other words, we should be very grateful for “unproductive” politicians.

Now for some caveats.

It’s obviously a gross over-simplification to assert that the number of laws is correlated with good policy or bad policy. Sometimes politicians impose laws that increase the burden of government (with Obamacare being an obvious example).

But sometimes they enact laws that increase economic liberty and reduce government (with the sequester being a good example, even though very few politicians actually wanted that result).

To conclude, the message of this post is that we shouldn’t worry about “diminished productivity” in Washington if it means fewer bad laws.

That being said, we’ll never fix a corrupt tax code or reform bankrupt entitlement programs unless there are new laws to replace old laws that created bad policy.

P.S. Since we’re talking about low productivity in Washington, there’s good evidence that bureaucrats don’t work very hard compared to workers in the economy’s productive sector. But that’s probably a good thing. After all, do we want bureaucrats (like this one) being more diligent? That’s why we should focus on reducing their excessive compensation rather than encouraging them to put in a full day’s work.

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Least Sympathetic Obamacare Victims…Ever

I have great sympathy for almost all segments of the population that have been disadvantaged by Obamacare.

Among the victims are many relatively powerless people, including children, low-income workers, and retirees.

It’s equally tragic that millions of families – notwithstanding the President’s oft-repeated promise – already have lost their insurance plans, and it’s a crisis that this number could swell to more than 50 million over the next year.

And taxpayers, needless to say, are going to incur heavy burdens because of the President’s reckless new entitlement.

Heck, compared to all these groups, the unfortunate people who merely had to endure the “third world experience” of the Obamacare website should consider themselves lucky.

Yet even though I am brimming with empathy for the victims of Obamacare, there is one group that is suffering and I can say without hesitation or reservation that the people affected don’t tug on my heart strings or engender feelings of sympathy.

I’m referring to the staffers on Capitol Hill. According to a Politico story, some of these folks are having to pay more thanks to the President’s scheme to expand government’s control over the healthcare system. Here are the key excerpts.

Veteran House Democratic aides are sick over the insurance prices they’ll pay under Obamacare, and they’re scrambling to find a cure. “In a shock to the system, the older staff in my office (folks over 59) have now found out their personal health insurance costs (even with the government contribution) have gone up 3-4 times what they were paying before,” Minh Ta, chief of staff to Rep. Gwen Moore (D-Wis.), wrote to fellow Democratic chiefs of staff… In the email, Ta noted that older congressional staffs may leave their jobs because of the change to their health insurance.

Oh no, they might leave? Perish the thought! Surely they have more money to waste, more regulations to impose, and higher taxes to approve.

You may detect a slight tone of sarcasm in my remarks, but that’s for a good reason. First of all, many of these staffers are only in an unpleasant situation because their bosses voted for Obamacare. If they want to complain, perhaps they should schedule a meeting with the power-hungry politicians that caused the mess in the first place.

Second, I have a hard time feeling much empathy for these people when the Obama Administration already has arbitrarily and illegally altered the law so that taxpayers will cover 75 percent of their health insurance expenditures. I realize there’s an entitlement mentality in Washington, but you would think these people would have some sense of shame!

Let’s finish by enjoying some new cartoons. Here’s one from Gary Varvel on the economic burden of Obamacare, which appeals to me for obvious reasons.

By the way, if you like the Aflac duck and the GEICO gecko, here’s another Varvel cartoon you’ll appreciate.

Now we have a Bob Gorrell cartoon that starkly exposes the President’s illegal changes to Obamacare.

In other words, this bit of satire turned out to be reality.

Nate Beeler has a very good cartoon that captures Obama’s disdain for the suffering of ordinary people.

It fits in well with the Ramirez cartoon in this post.

Then we have Jerry Holbert showing a way to really punish Iran.

Sort of like what Rand Paul said (quoting me!) about Syria.

Last but not least, here’s another Varvel cartoon that sums up what Obama staffers are trying to do.

Surprisingly, this is only the second time I can recall sharing a cartoon featuring Humpty Dumpty.

But don’t laugh too hard at these cartoons. Obama may get the last laugh if he can survive the short-run political damage and create more long-run government dependency.

P.S. Actually, the title of this post is wrong. There is a group of people in America who don’t like Obamacare and – believe it or not – they are even less deserving of sympathy than the army of staffers on Capitol Hill.

P.P.S. Let’s keep our fingers crossed that politicians don’t deal with this issue by re-hiring the taxpayer-financed “grief counselors” who were used to console Democratic staffers after the 2010 elections.

P.P.P.S. Here’s a very funny parody video about the Obamacare disaster.

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How Corrupt Is Washington?

Regular readers know that Washington is a very sleazy city. Just as rats and cockroaches are attracted to a dumpster, con artists and fraudsters are attracted to big government.

A bloated budget means many opportunities to get unearned wealth by being politically well connected. A loophole-ridden, 72,000-page tax code creates a sandbox for lobbyists. And special interest groups view Washington’s massive regulatory apparatus the way pigs view a mudbath.

You won’t be surprised to learn that politicians figure out how to get a cut of the action. Here are a few of the sordid details from a report in the Washington Post.

73 members of Congress…have sponsored or co-sponsored legislation in recent years that could benefit businesses or industries in which either they or their family members are involved or invested, according to a Washington Post analysis. The findings emerge from an examination by The Post of financial disclosure forms and public records for all 535 members of the House and Senate. The practice is both legal and permitted under the ethics rules that Congress has written for itself, which allow lawmakers to take actions that benefit themselves or their families except when they are the lone beneficiaries.

To be fair, the actions identified by the Washington Post are not necessarily immoral. A politician who supports a lower capital gains tax rate, for instance, presumably will benefit directly because of less double taxation on his investments and indirectly because of more prosperity.

I don’t view that as wrong. Indeed, the lawmakers use this kind of excuse to justify their behavior.

The legislators, in interviews and through spokesmen, said they saw no conflicts between their legislative actions and holdings. They added that they have a duty to advocate for their constituents, even when those interests align with their own.

But just because they use that excuse, that doesn’t mean their behavior is appropriate. There’s a simple way to determine what’s wrong, immoral, and corrupt.

If politicians take steps that enable everyone – including themselves – to keep more of their own money (or to earn additional money), that’s fine.

If they do something that enables anybody – including themselves – to take money or value from other people, that’s wrong.

Here’s my video explaining the connection between big government and corruption.

The moral of the story shouldn’t be that difficult to understand. Don’t take things that don’t belong to you, which is one of the rules of libertarianism that we hopefully learn in kindergarten (to see the rest of the rules, see the David Boaz quote in this post about Obama’s socialism-for-kids proposal).

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Correcting a Massive Typo by USA Today

Although this line is attributed to many people, Wikiquote says that Gideon Tucker was the first to warn us that “No man’s life, liberty, or property are safe while the legislature is in session.”

This cartoon about Keynesian economics sort of makes the same point, but not with the same eloquence.

But that’s not the point of this post. Instead, I want to focus on this grossly misleading headline in USA Today: “This Congress could be least productive since 1947.”

I don’t think it’s a case of media bias or inaccuracy, as we saw with the AP story on poverty, the Brian Ross Tea Party slur, or the Reuters report on job creation and so-called stimulus.

But it does blindly assume that it is productive to impose more laws. Was it productive to enact Obamacare? What about the faux stimulus? Or the Dodd-Frank bailout bill?

Wouldn’t the headline be more accurate if it read, “This Congress could be least destructive since 1947”?

Here are the relevant parts of the USA Today report.

Congress is on pace to make history with the least productive legislative year in the post World War II era. Just 61 bills have become law to date in 2012 out of 3,914 bills that have been introduced by lawmakers, or less than 2% of all proposed laws, according to a USA TODAY analysis of records since 1947 kept by the U.S. House Clerk’s office. In 2011, after Republicans took control of the U.S. House, Congress passed just 90 bills into law. The only other year in which Congress failed to pass at least 125 laws was 1995. …When Democrats controlled both chambers during the 111th Congress, 258 laws were enacted in 2010 and 125 in 2009, including President Obama’s health care law.

To be sure, not all legislation is bad. Now that the Supreme Court has failed in its job, Congress would have to enact a law to repeal Obamacare. Laws also would need to be changed to reform entitlements, or adopt a flat tax.

And some laws are benign, such as the enactment of Dairy Goat Awareness Week or naming a federal courthouse.

But I’m guessing that the vast majority of substantive laws are bad for freedom and result in less prosperity.

So let’s cross our fingers that future Congresses are even less productive (and therefore less destructive) than the current one.

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Is an Ex-Congressman Lobbyist Capable of Shame?

I’ve written before about the sleazy and corrupting impact of earmarks.

And I’ve debunked the lobbyist arguments in favor of earmarks.

Heck, I’ve even done NPR interviews about this unseemly Washington practice.

So I like to think I’m reasonably knowledgeable about the system. But even I’m shocked to learn how a former Massachusetts Congressman has taken graft to the next level.

And I’m slightly happy that he’s been caught with his hand in the cookie jar and feels compelled to give up his share of the loot.

Here are some excerpts from a report in the New York Times.

A former congressman who became a lobbyist has abandoned his plans to collect $90,000 from working on an energy project that he helped finance through Congress. …An apologetic Mr. Delahunt told town officials he wanted to eliminate the “black mark” created by questions of a possible financial conflict, Patrick Cannon, chairman of the Hull Light Board, said on Saturday. …Mr. Delahunt, a Democrat who retired from Congress last year, had faced criticism for the last week from legal and ethics specialists over the unusual lobbying arrangement he had struck with the town, which is seeking federal help to build an offshore wind energy plant at a cost of more than $60 million. While in Congress, Mr. Delahunt earmarked $1.7 million for the same project, and he was to be paid 80 percent of his monthly consulting fees out of that same pot of money. …Mr. Delahunt and executives at his firm did not respond to e-mails Saturday seeking further comment on the decision.

Wow. For all intents and purposes, Congressman Delahunt directly pilfered the Treasury for personal gain.

This is amazing. But what’s remarkable isn’t that he stole money. After all, the federal budget is largely a big scam enabling various groups of people to obtain unearned loot.

The noteworthy thing about this story is that he didn’t launder the money.

In most cases, politicians do earmarks as part of a corrupt quid pro quo. They direct money to a certain group of beneficiaries and, in exchange, get campaign contributions from both the lobbyists who facilitated the deal and the interest groups that receive the taxpayer funds.

But Delahunt cut out one of the middlemen. He created an earmark, and then became one of the lobbyists pocketing the cash.

So it is poetic justice that this unsavory deal has become public knowledge and the former Congressman has been shamed into giving up his fees.

But don’t be deluded into thinking this is a victory.

The earmark is still there. Money is still being wasted. Delahunt is still a lobbyist. Government is still too big. And corruption is still rampant.

And if you think the former Congressman is genuinely apologetic….well, please get in touch with me. I’m selling a bridge in Brooklyn and need a gullible buyer – i.e., the kind of person who doesn’t think there’s anything wrong with this unseemly example of sleaze.

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Washington’s Revolving Door of Legal Corruption

If you want to know why Washington is a cesspool of corruption and graft, you should read this story from the Washington Post about how Capitol Hill staffers use their positions as stepping stones to jobs in the lobbying community.

Nearly 5,400 former congressional staffers have left Capitol Hill to become federal lobbyists in the past 10 years, according to a new study that documents the extent of the revolving door between Congress and K Street. The data published by the online disclosure site LegiStorm found close to 400 former U.S. lawmakers also have made the jump to lobbying. The report…underscores the symbiotic relationship: Thousands of lobbyists are able to exploit experience and connections gleaned from working inside the legislative process, and lawmakers find in lobbyists a ready pool of experienced talent. …The study also documents the reverse movement, finding 605 former lobbyists who have taken jobs working for lawmakers in the past decade. …About 14,000 people work on the Hill, and about 11,700 people are registered to lobby this year, according to the Center for Responsive Politics.

If this sounds like sleaze, that’s because it is. It’s a story about how the political class has created a system that loots the American public and enables the well-connected to skim a good share of the booty.

I explained in a previous post that some of the most despicable people in Washington are Republicans, but this story gives me an opportunity to elaborate.

What happens is that idealistic people come to Washington to work for Congress (also, because they get elected to Congress). They earn good salaries, considerably above the average for the U.S. economy.

But if they want to make big money – and if they have weak morals and an absence of character, they are drawn to the lobbying community.

I have known dozens of good people over the years who have been corrupted by this process. They came to Washington to do good, and they wound up doing well instead.

They began their careers thinking Washington is a cesspool, and they eventually decided it’s a hot tub.

The only solution to this problem is to shrink the size and scope of government, as I explain in this video.

And if we shrink the burden of government, we can return to the good ol’ days when each member of Congress could do their job with 2 or 3 staffers rather than 20 or 30.

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Time for Some Weiner Jokes

I’m a bit disappointed in the selection of jokes I’ve seen about Weinergate. One can only wonder if they’re going easy on him (and John Edwards) because of bias.

But several of these are worth a chuckle.

From Conan:

Democrats and Republicans are calling for Congressman Anthony Weiner to resign. Late night comedians are asking him to hang in there.

The women who Weiner communicated with were a college student, a single mom, a blackjack dealer, and a porn star. Or, as we call that here in Los Angeles, the circle of life.

Comedy people sit around for years hoping for a scandal called “Weinergate.” And then it happens.

Fifty-one percent of New York voters think Weiner should keep his seat. The other 49 percent think he should disinfect it.

It turns out that one of the women Congressman Anthony Weiner was communicating with was a porn star. When asked how it was possible to get involved with someone in such a sleazy business, the porn star said, “I don’t know.”

From Letterman:

There’s a word for people that take pictures of their privates and send them out: “stupid.”

If Weiner resigns, they’re already talking about replacing him with Ashton Kutcher.

From Kimmel:

There’s a heat wave over half of the country. It got so hot in New York, a congressman took off his pants and tweeted a picture of himself.

Many of Anthony Weiner’s Democratic colleagues are calling for him to resign to preserve his dignity, but that ship sailed a long time ago.

From Leno:

Congressman Weiner has admitted that he did carry on explicit online relationships with six different women. Well, he thought they were women. Turns out three were woman, one was a guy pretending to be a woman, and the other two were congressmen.

From Fallon:

Lawmakers here in New York have proposed a new program to teach teenagers about the dangers of sexting. Seriously? How about a program to teach New York lawmakers about the dangers of sexting?

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Barack Obama and Harry Reid Are AWOL in the Fight for Fiscal Responsibility

In the past 10 years, the burden of federal spending has skyrocketed, more than doubling from$1.86 trillion in 2001 to an estimated $3.82 this year.

President Bush deserves a lot of the blame thanks to the no-bureaucrat-left-behind bill that bloated the Department of Education, the corrupt farm bills, the pork-filled transportation bills, the new prescription drug entitlement, and bailouts for banks and auto companies.

Obama then came to office promising hope and change, but he simply grabbed the baton and continued the spending spree, adding more TARP bailouts, and then giving us the boondoggles of a fake stimulus and government-run healthcare.

Taxpayers finally said enough is enough last November and there’s a new Congress with marching orders to stop Washington’s spending orgy.

But Barack Obama and Harry Reid are saying no. They want us to believe that the House spending cuts are too severe.

What does this mean? Are Republicans trying to reduce spending to $2.98 trillion, which is where it was in 2008? That would be a spending cut of nearly $1 trillion and music to my ears. Or are they being even more aggressive, perhaps trying to cut spending to about $2.5 trillion, about halfway between the 2001 and 2008 totals? That would be a spending cut of almost $1.5 trillion, which would be a fantasy for a libertarian wonk like me.

If these were the options being considered, we could understand President Obama and Senator Reid vigorously resisting  spending cuts of that magnitude.

But that’s not what’s happening. Republicans in the House are not trying to reduce spending by a big amount. They’re not even trying to reduce the budget by $500 billion. Heck, they’re not even trying to lower this year’s spending levels by $100 billion.

Instead, the House GOP has put forward a very modest proposal to trim spending by $61 billion – and that tiny bit of nibbling around the edges of the welfare state has Barack Obama and Harry Reid acting as if the safety net is being ripped to shreds.

This video from my colleagues at the Cato Institute puts $61 billion of cuts in context – and indirectly shows that President Obama and Senator Reid have no credibility on fiscal policy.

I can’t resist making one final observation. The burden of government spending has jumped by about $2 trillion in the past 10 years. Does anybody think our economy is stronger as a result? More stable? More competitive? More vigorous? More entrepreneurial?

The answer to all these questions is a resounding no. So if the 10-year Bush-Obama experiment of bigger government has failed, isn’t it time we try a different approach?

To conclude, here’s one of my videos, looking at just a small fraction of the evidence in favor of smaller government.

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Can the GOP Win the Government Shutdown Fight?

When existing spending authority expires on March 4, the “non-essential” parts of the federal government will shut down unless Republicans and Democrats reach an agreement. This is causing lots of agitation in Washington, both by Democrats who don’t want the money spigots in the off position and Republicans who fret that they will be blamed for (gasp) gridlock.

I have a new piece at National Review that explains how the GOP can win this fight. Indeed, I explain that Republicans actually did a pretty good job during the 1995 fight, even though they now have negative memories of the experience. This excerpt provides my basic assessment, but the full article has lots of additional information, including quotes from news accounts in 1995 showing that the GOP held the upper hand, as well as four specific recommendation of how advocates of limited government can do even better this year.

With the GOP-led House and the Democratic Senate and White House far apart on a measure to pay the federal government’s bills past March 4, Washington is rumbling toward a repeat of the 1995 government-shutdown fight (actually two shutdown fights, one in mid-November of that year and the other in mid-December). This makes some Republicans nervous. They think Bill Clinton “won” the blame game that year, and they’re afraid they will get the short end of the stick if there is a 1995-type impasse this year. A timid approach, though, is a recipe for failure. It means that President Obama and Senate Majority Leader Harry Reid can sit on their hands, make zero concessions, and wait for the GOP to surrender any time a deadline approaches. In other words, budget hawks in the House have no choice. They have to fight. But they can take comfort in the fact that this is not a suicide mission. The conventional wisdom about what happened in November of 1995 is very misleading. Republicans certainly did not suffer at the polls. They lost only nine House seats, a relatively trivial number after a net gain of 54 in 1994. They actually added to their majority in the Senate, picking up two seats in the 1996 cycle. More important, they succeeded in dramatically reducing the growth of federal spending. They did not get everything they wanted, to be sure, but government spending grew by just 2.9 percent during the first four years of GOP control, helping to turn a $164 billion deficit in 1995 into a $126 billion surplus in 1999. And they enacted a big tax cut in 1997. If that’s what happens when Republicans are defeated, I hope the GOP loses again this year.

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Republican Sellout Watch

Grousing about the GOP’s timidity in the battle against big government will probably become an ongoing theme over the next few months, and  let’s start with two items that don’t bode well for fiscal discipline.

First, it appears that Republicans didn’t really mean it when they promised to cut $100 billion of so-called discretionary spending as part of their pledge. According to the New York Times,

As they prepare to take power on Wednesday, Republican leaders are scaling back that number by as much as half, aides say, because the current fiscal year, which began Oct. 1, will be nearly half over before spending cuts could become law.

This is hardly good news, particularly since the discretionary portion of the budget contains entire departments, such as Housing and Urban Development, that should be immediately abolished.

That being said, I don’t think this necessarily means the GOP has thrown in the towel. The real key is to reverse the Bush-Obama spending binge and put the government on some sort of diet so that the federal budget grows slower than the private economy. I explain in this video, for instance, that it is simple to balance the budget and maintain tax cuts so long as government spending grows by only 2 percent each year.

It is a good idea to get as many savings as possible for the remainder of the 2011 fiscal year, to be sure, but the real key is the long-run trajectory of federal spending.

The other item for discussion is the GOP’s apparent interest in retaining Douglas Elmendorf, the current Director of the Congressional Budget Office.

Many of you will remember that the CBO cooked the books last year to help ram through Obamacare. Under Elmendorf’s watch, CBO also was a relentless advocate and defender Obama’s failed stimulus. And CBO under Elmendorf published reports saying higher taxes would improve economic performance.

But Elmendorf’s statist positions apparently are not a problem for some senior Republicans, as reported by The Hill.

The new House Budget Committee chairman, Rep. Paul Ryan (R-Wis.), gave a very public endorsement of the embattled head of the Congressional Budget Office during his first major speech as committee head Wednesday night. …“You’re doing a great job at CBO, Doug,” Ryan said after receiving the first annual Fiscy Award for his efforts at tackling the national debt. He added that he looked forward to crunching budget numbers with him in the future.

In the long run, the failure to deal with the problems at CBO (as well as the Joint Committee on Taxation) may cause even more problems than the timidity about cutting $100 billion of waste from the 2011 budget. Given the rules on Capitol Hill, it makes a huge difference whether CBO and JCT are putting out flawed numbers.

I’ve already written that fixing the mess at CBO and JCT is a critical test of GOP resolve, and I actually thought this would be a relatively easy test for them to pass. It is an ominous sign that Republicans aren’t even trying to clean house.

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Congressional Staffers Should Cry on Their Own Dime

I saw a story linked on Instapundit, but it really belonged on The Onion.

Apparently, our tax dollars are being used to fund grief counseling for congressional staffers who will lose their jobs in January because of the elections. Can you think of a better example than this of how Washington is screwed up?

This isn’t just a symbol of fiscal excess (though it definitely belongs in that category). It’s also a sign of the wuss-ification (not a technical term, but you know what I mean) of American society. Are we really so pathetically fragile that we need professional hand-holders for something like this? It’s not like people who work on Capitol Hill don’t know ahead of time about elections.

Besides, there’s a what-goes-around-comes-around element to this story. I’m not trying to be callous. Unemployment can be a terrible thing, particularly for people who have kids. But these congressional staffers spent their days figuring out ways to impose costs on the rest of us. They schemed to reduce our freedoms and take our money. These are people who pushed policies that resulted in job losses for millions of people in the productive sector of the economy.

Asking me to feel sorry for these people is like asking me to have pity on burglars who dislike door locks, alarm systems, and armed homeowners.

Here’s an excerpt from the Politico story.

A staffer for a congressional Democrat who came up short on Tuesday reports that a team of about five people stopped by their offices this morning to talk about payroll, benefits, writing a résumé, and so forth, with staffers who are now job hunting. But one of the staffers was described as a “counselor” to help with the emotional aspect of the loss — and a section in the packet each staffer was given dealt with the stages of grief (for instance, Stage One being anger, and so on). “It was like it was about death,” the staffer said. “It was bizarre.”

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Obama Tax Plan: Putting Demagoguery Before Jobs

I’ve already commented on the Democrats deciding to wait until after the election before figuring out what to do about the 2001 and 2003 tax cuts. This was a remarkable development since failure to extend these pieces of legislation means a big tax increase next January. But this doesn’t mean the Democrats are sitting on their hands. The President has a proposal to significantly increase the tax burden on American companies that compete in world markets, and Democrats on Capitol Hill think this is a winning political issue. They think higher taxes will encourage companies to keep more jobs in America, and they hope voters agree. But as the Wall Street Journal opines, this is a recipe for undermining the competitiveness f American companies. This means fewer jobs, and probably less tax revenue.

…the President’s plan reveals how out of touch Democrats are with the real world of tax competition. The U.S. already has one of the most punitive corporate tax regimes in the world and this tax increase would make that competitive disadvantage much worse, accelerating the very outsourcing of jobs that Mr. Obama says he wants to reverse. At issue is how the government taxes American firms that make money overseas. Under current tax law, American companies pay the corporate tax rate in the host country where the subsidiary is located and then pay the difference between the U.S. rate (35%) and the foreign rate when they bring profits back to the U.S. This is called deferral—i.e., the U.S. tax is deferred until the money comes back to these shores. Most countries do not tax the overseas profits of their domestic companies. Mr. Obama’s plan would apply the U.S. corporate tax on overseas profits as soon as they are earned. This is intended to discourage firms from moving operations out of the U.S. …Mr. Obama believes that by increasing the U.S. tax on overseas profits, some companies may be less likely to invest abroad in the first place. In some cases that will be true. But the more frequent result will be that U.S. companies lose business to foreign rivals, U.S. firms are bought by tax-advantaged foreign companies, and some U.S. multinational firms move their headquarters overseas. They can move to Ireland (where the corporate tax rate is 12.5%) or Germany or Taiwan, or dozens of countries with less hostile tax climates. We know this will happen because we’ve seen it before. The 1986 tax reform abolished deferral of foreign shipping income earned by U.S. controlled firms. No other country taxed foreign shipping income. Did this lead to more business for U.S. shippers? Precisely the opposite. According to a 2007 study in Tax Notes by former Joint Committee on Taxation director Ken Kies, “Over the 1985-2004 period, the U.S.-flag fleet declined from 737 to 412 vessels, causing U.S.-flag shipping capacity, measured in deadweight tonnage, to drop by more than 50%.” …Now the White House wants to repeat this experience with all U.S. companies. Two industries that would be most harmed would be financial services and technology, and their emphasis on human capital makes them especially able to pack up and move their operations abroad. CEO Steve Ballmer has warned that if the President’s plan is enacted, Microsoft would move facilities and jobs out of the U.S.

I’ve commented on this issue before, but I think the best explanation is in this video, which makes the key observation that American tax law may be able to discourage U.S. firms from building factories in other nations, but that simply means that companies from other countries will be able to take advantage of those opportunities.

A lot of Democrats, at least in private, admit that going after “deferral” is bad policy. But this makes the current proposal especially disgusting. People in the White House and on Capitol Hill know it will hurt jobs and reduce competitiveness, but they don’t care. Or at least they put political ambition before doing what’s right for the American people.

If they really cared, the would fix what’s wrong with the current system. A very effective way to encourage more jobs and investment in America is to lower the corporate tax rate, which is the point I made in the Center for Freedom and Prosperity’s first video.

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Time for Some IRS Bashing

Being a lazy procrastinator, I filed an extension April 15 and then waited until this weekend to do my tax return. This experience has reinforced my hatred and disdain for our corrupt and punitive tax system. I don’t even have a remotely complicated tax return, just a Cato salary and a few payments for articles and speeches on the income side, along with a standard set of itemized deductions for things like home mortgage interest.

But even dealing with a relatively simple tax return causes lots of angst and makes me long for a simple and fair flat tax. Actually, it makes me long for a limited government, as envisioned by our Founders, in which case we might not need any broad-based tax. And I suppose I shouldn’t blame the IRS. The real villains are the politicians who have spent the past 97 years turning the tax code into a monstrosity.

Now that I’m done venting, I suppose I should include some educational content. In honor of tax day for procrastinators, here are three videos on the flat tax, the IRS, and the global flat tax revolution.

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With Tax Increases Looming, CBO Does About-Face and Frets about Deficits and Debt

Like the swallows returning to Capistrano, the Congressional Budget Office follows a predictable pattern of endorsing policies that result in bigger government. During the debate about the so-called stimulus, for instance, CBO said more spending and higher deficits would be good for the economy. It then followed up that analysis by claiming that the faux stimulus worked even though millions of jobs were lost. Then, during the Obamacare debate, CBO actually claimed that a giant new entitlement program would reduce deficits. Now that tax increases are the main topic (because of the looming expiration of the 2001 and 2003 tax bills), CBO has done a 180-degree turn and has published a document discussing the negative consequences of too much deficits and debt.

…persistent deficits and continually mounting debt would have several negative economic consequences for the United States. Some of those consequences would arise gradually: A growing portion of people’s savings would go to purchase government debt rather than toward investments in productive capital goods such as factories and computers; that “crowding out” of investment would lead to lower output and incomes than would otherwise occur. …a growing level of federal debt would also increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget, and the government would thereby lose its ability to borrow at affordable rates. …If the United States encountered a fiscal crisis, the abrupt rise in interest rates would reflect investors’ fears that the government would renege on the terms of its existing debt or that it would increase the supply of money to finance its activities or pay creditors and thereby boost inflation.

At some point, even Republicans should be smart enough to figure out that this game is rigged. Then again, the GOP controlled Congress for a dozen years and failed to reform either CBO or its counterpart on the revenue side, the Joint Committee on Taxation (which is infamous for its assumption that tax policy has no impact on overall economic performance).

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Are These Stories Examples of Washington Corruption? Well, if It Walks Like a Duck and Talks Like a Duck…

The “appearance of impropriety” is often considered the Washington standard for corruption and misbehavior. With that in mind, alarm bells began ringing in my head when I read this Washington Times report about Jacob Lew, Obama’s nominee to head the Office of Management and Budget. Why did Citigroup decide to hire a career DC political operator for $1.1 million? As a former political aide, lobbyist, lawyer, and political appointee, what particular talents did he have to justify that salary to manage an investment division? Did the presence of Lew (as well as other Washington insiders such as Robert Rubin) help Citigroup get a big bucket of money from taxpayers as part of the TARP bailout? Did Lew’s big $900K in 2009 have anything to do with the money the bank got from taxpayers? Is it a bit suspicious that he received his big windfall bonus four days after filing a financial disclosure? Read this blurb from the Washington Times and see if you can draw any conclusion other than this was a typical example of the sleazy relationship of big government and big business.

President Obama’s choice to be the government’s chief budget officer received a bonus of more than $900,000 from Citigroup Inc. last year — after the Wall Street firm for which he worked received a massive taxpayer bailout. The money was paid to Jacob Lew in January 2009, about two weeks before he joined the State Department as deputy secretary of state, according to a newly filed ethics form. The payout came on top of the already hefty $1.1 million Citigroup compensation package for 2008 that he reported last year. Administration officials and members of Congress last year expressed outrage that executives at other bailed-out firms, such as American International Group Inc., awarded bonuses to top executives. State Department officials at the time steadfastly refused to say if Mr. Lew received a post-bailout bonus from Citigroup in response to inquiries from The Washington Times. But Mr. Lew’s latest financial disclosure report, provided by the State Department on Wednesday, makes clear that he did receive a significant windfall. …The records show that Mr. Lew received the $944,578 payment four days after he filed his 2008 ethics disclosure.

Lest anyone think I’m being partisan, let’s now look at another story featuring Senator Richard Shelby. The Alabama Republican and his former aides have a nice incestuous relationship that means more campaign cash for him, lucrative fees for them, and lots of our tax dollars being diverted to moochers such as the state’s university system. Here are some of the sordid details.

Since 2008, Alabama Sen. Richard Shelby has steered more than $250 million in earmarks to beneficiaries whose lobbyists used to work in his Senate office — including millions for Alabama universities represented by a former top staffer. In a mix of revolving-door and campaign finance politics, the same organizations that have enjoyed Shelby’s earmarks have seen their lobbyists and employees contribute nearly $1 million to Shelby’s campaign and political action committee since 1999, according to federal records. …Shelby’s earmarking doesn’t appear to run afoul of Senate rules or federal ethics laws. But critics said his tactics are part of a Washington culture in which lawmakers direct money back home to narrow interests, which, in turn, hire well-connected lobbyists — often former congressional aides — who enjoy special access on Capitol Hill.

Some people think the answer to these stories is more ethics laws, corruption laws, and campaign-finance laws, but that’s like putting a band-aid on a compound fracture. Besides, it is quite likely that no laws were broken, either by Lew, Citigroup, Shelby, or his former aides. This is just the way Washington works, and the beneficiaries are the insiders who know how to milk the system. The only way to actually reduce both legal and illegal corruption in Washington is to shrink the size of government. The sleaze will not go away until politicians have less ability to steer our money to special interests – whether they are Wall Street Banks or Alabama universities. This video elaborates.

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Taxpayers vs. Bureaucrats, Part XX

There’s been a bit of buzz about a recent story in Politico revealing a huge increase in the number of congressional staff receiving six-figure salaries.  Some of the details are eye-openers, including a 39 percent increase in the past four years in the number of staffers earning at least $163,358:

Nearly 2,000 House of Representatives staffers pulled down six-figure salaries in 2009, including 43 staffers who earned the maximum $172,500 — or more than three times the median U.S. household income. …But while these top earners are a small percentage of the overall congressional work force, their numbers are growing at a rapid rate under the Democratic Congress. The number of staffers earning within the upper 3 percent of House salaries — currently $163,358 or more — has increased by nearly 39 percent in the past four years, according to LegiStorm data. …“These are people who could be making a lot more money in the private sector, but they choose to work here,” said Pelosi spokesman Brendan Daly, who also makes $172,500. …There are approximately 10,000 House staffers, including district office workers, according to the chief administrative officer.

Even though I’m a former Hill staffer, I’m certainly not going to defend these salaries (especially since I was nowhere near the top of the pay structure!). But excessive pay is actually a secondary problem. The real issue is the explosion in the number of staff. The image below, taken from a 1993 congressional report, shows the increase in the number of staff for each member of the House of Representatives. This doesn’t include, incidentally, the increase in committee staff and the growth in auxiliary institutions such as the Congressional Budget Office (the folks who just told us that a giant new entitlement program would reduce red ink).

It’s a chicken-and-egg issue whether this bloated congressional staff structure is a result of bigger government, or whether it contributes to bigger government. In either case, it would be a good idea to go back to the number of staff — and size of government — we had in the past.

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The American People Describe Congress – both Funny and True

Someboy sent me a link to this American Thinker article, which includes the following word cloud of a Pew Research Center poll on the “One word that best describes your impression of Congress.” Enjoy.

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Lies, Damned Lies, and CBO Estimates

Washington is buzzing with news that the Congressional Budget Office has a new cost estimate for the President’s proposal to further expand the federal government’s control over the healthcare system. The White House is doubtlessly pleased because the takeaway message, as blindly regurgitated by the Associated Press, is that a giant new entitlement program is going to “drive down red ink”:

The Congressional Budget Office estimated the legislation would reduce the federal deficit by $138 billion over its first 10 years, and continue to drive down the red ink thereafter. Democratic leaders said the deficit would be cut $1.2 trillion in the second decade – and Obama called it the biggest reduction since the 1990s, when President Bill Clinton put the federal budget on a path to surplus.

My Cato Institute colleague Michael Cannon already has explained that the cost estimate is fraudulent because of what it leaves out, so let me explain why it is fraudulent because of what it includes. The CBO has a very dismal track record of getting the numbers wrong (see first video below), in part because there is no attempt to measure how a bigger burden of government has negative macroeconomic effects, but also because the number crunchers do a poor job of measuring the degree to which people (recipients, healthcare providers, state and local politicians, etc) will modify their behavior to become eligible for other people’s money. The problem is compounded by similar mistakes for revenue estimates from the Joint Committee on Taxation, which (like CBO) makes no attempt to capture macroeconomic effects and has a less-than-stellar history of predicting behavioral responses (see second video below).

If the legislation passes, we will get more spending, more taxes, and more debt. Equally troubling, we will get more dependency. That’s good for Washington and bad for the country.

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Senate Healthcare Proposal is a Fiscal Fraud

The indispensable editorial page of the Wall Street Journal blasts the phony spending “cuts” that are supposed to offset some of the new spending in the Senate health care bill. Sadly, the Congressional Budget Office has compromised its independence to help the left foist a fiscal fraud on the nation:

Washington spent the week waiting for the Congressional Budget Office to roll in with its new cost estimates of the Senate health-care bill, and what a carnival. Behold: a new $829 billion entitlement that will subsidize insurance for tens of millions of people—and reduce deficits by $81 billion at the same time. In the next tent, see the mermaid and a two-headed cow. …The irony is that the CBO’s guesstimate exposes the fraudulence and fiscal sleight-of-hand underlying this whole exercise. Anyone who reads beyond the top-line numbers will find that the bill creates massive new spending commitments that will inevitably explode over time, and that this is “paid for” with huge tax increases plus phantom spending cuts that will never happen in practice. …Liberals are demanding heftier subsidies, and once people see the deal their neighbors are getting on “free” health care, they too will want in. Even CBO seems to find this unrealistic, noting “These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation.” Scratch “often.” Then there are the many budget gimmicks. Take the “failsafe budgeting mechanism” that would require automatic cuts in exchange spending if it increases the deficit. CBO expects 15% reductions in exchange subsidies each year from 2015 to 2018, even though the exchanges don’t open until 2014. That kind of re-gifting should have been laughed out of the committee room, but the ruse helps to move future spending off the current budget “score.” Mr. Baucus spends $10.9 billion to eliminate the scheduled Medicare cuts to physician payments—but only for next year. In 2011, he assumes they’ll be reduced by 25%, with even deeper cuts later. Congress has overridden this “sustainable growth rate” every year since 2003 and will continue to do so because deeper cuts in Medicare’s price controls will cause many doctors to quit the program. Fixing this alone would add $245 billion to the bill’s costs, according to an earlier CBO estimate. The Baucus bill also expands ailing Medicaid by $345 billion—even as it busts state budgets by imposing an additional $33 billion unfunded mandate. …the bill piles on new taxes, albeit on health-care businesses so the costs are hidden from customers. Insurance companies offering policies that cost more than $8,000 for individuals and $21,000 for families will pay $201 billion per a 40% excise tax, which will be passed down to all policy holders in higher premiums. Another $180 billion will hit the likes of drug and device makers, including $29 billion because companies won’t be allowed to deduct these “fees” from their corporate income taxes. Then there’s the $4 billion in penalty payments on those who don’t buy insurance because all of ObamaCare’s other new taxes and mandates have made it more expensive.

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Politicians Feather Their Own Nests

A story in Politico reveals that politicians are increasing the budget for Congress by 5.8 percent in the 2010 fiscal year. This is on top of a 10.9 percent funding increase from last year to this year. But the really disturbing number is that it will cost taxpayers $4.7 billion overall to keep the 535 politicians on Capitol Hill on the gravy train:

How and Why Government Spending Diminishes Economic Performance

In a new mini-documentary released by the Center for Freedom and Prosperity, I explain several of the ways that government spending hinders economic growth.

Feb 23, 2021 addendum: This screenshot from the video summarizes the various ways government spending can undermine prosperity.

Costs #1 and #2 apply to every penny in the budget, as explained in the video.

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