Category: Government

Congress is turning tricks again

Good news from Congress: we no longer need think that pressure from constituents or logic might influence them into some notion of sanity. Hooray! Just think of all the time we’ll save that would normally be spent bitching about how irresponsible they are. Again, hooray!

The House passed three separate tax cuts yesterday and plans to approve a fourth today, trimming the federal revenue by $94.5 billion over five years — nearly double the budget savings that Republicans muscled through the House last month.

GOP leaders portray the tax bills — for the hurricane-ravaged Gulf Coast, affluent investors, U.S. troops serving in Iraq and taxpayers who otherwise would be hit by the alternative minimum tax — as vital to keeping the economy rolling.

“Our economic policies have done the trick,” said Rep. Deborah Pryce (R-Ohio). “We are in the middle of one of the strongest economies this country has ever seen.”

In order: qualified yes, qualified yes, qualified yes, and absolutely. It might be surprising that I’d offer a qualified yes or absolutely to all proposals, yet still insist that it’s bad news. Allow me to explain.

Hurricane Katrina ravaged the Gulf Coast. A friend who visited New Orleans recently on business returned with a clear understanding that the devastation is far worse than it appears on television. Something must be done. But I don’t trust Congress to do it correctly, especially when its idiocy got us into the situation where only the Federal government could fix the problem. Destroy market forces (insurance, flood walls, etc.) that would make population and business decisions more in line with the inherent risk in the Gulf Coast and a federal response is all that’s left. My reservation stems from that. Congress doesn’t get to take credit for fixing a problem it created. Also, handing out gifts tax breaks to businesses, only to exclude less-favored, “sinful” businesses, is an awful form of central planning. Let the people of New Orleans decide. But I understand that goes against every belief Congress currently holds. In the end, a qualified yes because we have little choice.

Next, concerning affluent investors. I’ve already addressed this, so I won’t go much further with the issue. Congress needs to stop thinking in terms of poor vs. rich and start thinking in terms of smart economic policy and stupid economic policy. We’re nowhere close to smart policy, but this is a small step. I don’t pretend that this is being done for the right reasons, though, so it gets a qualified yes.

Next, U.S. troops serving in Iraq. I don’t have much information on this tax break, but it “would extend a provision allowing members of the military to use their combat pay to claim the earned income credit.” Fine. At a cost of $153 million, it’s a blip in our fiscal health. It’s qualified because it’s probably more to promote a warm fuzzy feeling of helping our troops. If I gave it a no, I’d probably be unpatriotic. I wouldn’t want that. Merry Christmas!

Finally, the Alternative Minimum Tax is a travesty. Anything that reduces its impact is a bonus. Congress should abolish it immediately. No member has the brains to that, so I’ll settle for this. It doesn’t change the reality that an indiscriminate tax on taxpayers who have no intention of evading taxes (illegally), without any sense behind it, is wrong. And the rich paying their fair share is obscene. Just one more soak the rich policy, which is not soaking the not-really-rich. Get rid of it. This is a small positive step.

None of that changes my original idea that this is bad news from Congress. Cutting taxes by almost $100 billion is wonderful, but without an equal or greater reduction in spending, the deficit will grow. It’s insanity and this doesn’t make me think differently:

“By cutting taxes, you grow the economy, and you generate an enhanced flow of revenues to the Treasury,” said Rep. David Dreier (R-Calif.), chairman of the House Rules Committee.

I like that argument as much as anyone, but it’s not generating an enhanced flow of revenues to the Treasury I’m interested in. I want more money left with the people who earn it. The government should get what it needs, not what it wants. Does anyone believe that Rep. Dreier intends to use that enhanced revenue only on necessary, appropriate expenditures? Our tax policies should be adjusted to meet that criteria, while spending according to the revenue we’re generating, not what we hope to generate through more targeted central planning. Congress doesn’t understand that, even though it’s simple. Cut taxes. Cut spending. Reduce the government’s size and reach.

My MacGyver theory of government

Mr. Doughnut here. When I wrote Wednesday’s flat tax post, I mistakenly thought that point # 5 was obviously ridiculous. I misunderestimated that point. “The rich benefit more from government than the poor, so the rich should pay more for those services” is buried deep, and probably latched on like a parasite, in many minds. Since it’s not, I’ll address it here. I think it’ll be more efficient for me to reply to this comment directly rather than starting from the beginning. Consider:

I guess a snarky answer comes in handy when one doesn’t have a logical one. Is the notion that poor people are getting all those big welfare checks, while rich people are out there making money with no help from anyone? Get real. Clearly the rich benefit more from our stable system than the poor do. They (or at least, some of them) also make the system possible, which is why we’re talking about taxing them a couple of percentage points higher, rather than confiscating all their money.

I was aiming for exasperation more than snark, but where I may have failed in that, it was not from a lack of logic. I don’t think the poor are getting big welfare checks and I don’t think rich people are making money with no help. But that still doesn’t mean the rich benefit more from our centrally planned stable system. And how is what amounts to little more than a use tax justified as a rational, progressive income tax? I don’t buy that argument, but if I did, I wouldn’t support it that way. But on to the logical answer, devoid of snark.

Anyone who’s paying attention to what I’m writing about the flat tax should understand that I also support governmental reform. It’s why I so thoroughly reject the revenue-neutral nonsense bantered about in this discussion. There are things the federal government does now that it shouldn’t do. While tasked with perpetuating the public good, we’ve somehow managed to include every crumb of American life as part of the national sphere. Our kids need education? The federal government can help. Our kids need a drug-free life? The federal government can help. Our kids need digital television? The federal government can help. But how? How is the government helping when kids still fail out of school, kids still do drugs, and kids will watch television, whether it’s digital or analog? We’ve migrated local and state tasks to the federal government, in a long-building abandonment of federalism. Now that it’s virtually complete, rather than admit our mistakes and fix the system, we perpetuate the notion that the rich get the most from the nanny state. Even if that’s true, the system is flawed.

But what should the government do? That’s the important question, and one which the commenter seems to almost get at. Consider:

I make a great living in the securities industry, for example. If it were not for government regulation of the securities markets, there would be no public trust in the markets and thus no money-making opportunities. Not to mention that our entire financial system relies upon government backing of our currency. Not to mention that our government negotiates trade arrangements with foreign countries that make our industries possible in innumerable ways.

Securities industry regulation is a viable public good, but who benefits? Just Wall Street people? Corporate CEOs? Doesn’t the public trust in the markets extend down as far into society as individuals wishs to take it? Consider the poor who won’t trust even their neighborhood bank, choosing to store their life’s savings in cash hidden in their house. Do they not have to pay for the public trust built into the securities industry by government regulation? Do those individuals have an external, rich vs. poor barrier that excludes them from participation, a barrier that is not in their mind? Of course not. If I buy a gym membership and never use it, do I get a refund or a discount?

I’ve read arguments that police protect more wealth and assets for the rich, so the rich should pay more. Carrying the idea further, the military could be said to do the same. Both police and military are a public good, for which everyone should pay, but is there a reasonable truth in the rich/poor divide on this? Of course not. As much as security forces protect wealth and assets, they protect the ability to earn and accumulate wealth and assets. It’s not tangible, but it’s a legitimate function. If I have to call the police because my house gets burglarized, do I get a refund? As much as securities regulation builds trust, security builds trust in the system. Anyone, rich or poor, can take advantage of that trust and strive for wealth.

A basic idea of our government is that the federal government serves everyone equally. “One man, one vote” and all that craziness. Is the issue federal under the Constitution, serving the public good, or is it left to the states, where communities can decide what’s best for them? (Think generous welfare without work instead of censorship, unmentioned versus protected by the Constitution.) We’re in the process of deciding that that Constitutional question is quaint and irrelevant for the touchy-feely goals we want but the Constitution never meant to convey. Hard work matters. Skill matters. Intelligence matters. I happen to believe that everyone can make something out of what they’ve got in life. Those who pretend that the rich must prop up the poor seem cynical and condescending about the poor to me. I came from a humble background, devoid of monetary wealth, yet I’ve managed to build a little for myself. I’m working to build a lot. I don’t want to support a government that rewards the opposite.

Yet, somehow I’m wrong on logic. When I say that we should remove non-federal issues from the federal government, pushing them down to the states where the represented are closer to those making the decisions, it isn’t clear that progressive taxes are unfair and unnecessary. The commenter, in ignoring what I’ve clearly included in other posts about the flat tax, transitions to this bit of logic to support his opinion that I’m wrong:

But put that aside. The real reason for a progressive tax system is that if someone has to pay a few extra dollars, the rich can give them up with less pain than the poor. Again, people talk as though there’s a 90% tax on the highest tax bracket, or as though there’s no incentive for rich people to make more money since taxes soak it all up. Of course there’s plenty of incentive to get rich under our current system, which is why so many people keep trying to do it. We’re talking about a difference of a few percentage points, an amount that is only meaningful to those who are barely scraping by.

I’ve never suggested hosing those who can’t afford it, going so far as to explain how to avoid doing so, but again I’m devoid of logic. I mocked the idea that progressive taxes are touted because “the rich can afford it”, but “the rich can give them up with less pain than the poor” is different? Right. It doesn’t make sense to me, either.

If you need a friend, get a dog.

Last week, The Washington Post ran an article about a woman arrested for DUI in D.C. The story indicates that she failed a field sobriety test according to the arresting officer, even though her blood alcohol content registered at .03. The District has a zero tolerance law, which gives police leeway to declare a driver impaired even below the .08 legal limit. The remaining details of the case aren’t the point I’m leading to, but an explanation might help. Kip at A Stitch in Haste had the most unique, and ultimately compelling, argument concerning the case. Consider:

But if your complaint is that DUI laws deprive you of your supposed constitutional right to have “just two beers” or “just one glass” and then hurl a multi-ton slab of metal down public roads at lethal speeds, then you have exceeded the threshold of logic and are no longer driving while libertarian.

Perhaps I’m biased because I don’t drink, but that makes sense to me. That doesn’t mean everyone who has one drink and then drives will (or should) be arrested, just that the person is altering the situation against himself. There are others on the road who are 0% impaired by alcohol. Don’t like it? Don’t drink and drive. So, I think Kip’s right, even though .03 is less than .08. But I digress.

My point is that some commenters jumped on Kip regarding his defense of the District. I posted this comment in response to some of the more incredulous individuals.

The article does go on to mention a side effect of the law. Ms. Bolton now spends her evenings out in Virginia. The experiment of zero tolerance is having a foreseeable effect. Should the residents of the District decide this is unacceptable, they can vote for officials who will change the laws.

It seems it didn’t even take that long for local government officials to act. Consider:

The D.C. Council yesterday overwhelmingly passed emergency legislation to clarify the city’s policy on drunken driving.

In a 9-3 vote, the council passed a bill stating that anyone with a blood alcohol level under .05 is not presumed to be under the influence. Those with a blood alcohol level between .05 and .08 are presumed to be neither drunk nor sober.

The bill now goes to Mayor Anthony A. Williams, who has criticized the legislation as being hastily written and potentially damaging to the District’s drunken-driving laws.

Mr. Williams said he will review the legislation over the next 10 days before deciding whether to sign or veto it.

“I wanted to keep our law so that people who want to come into D.C. to partake responsibly in the vitality of our city can do so,” said council member Carol Schwartz, the at-large Republican who introduced the bill.

You may applaud me now.

Seriously, this is how government works. I’m cynical about government like everyone else, but I’m not so cynical that I think it can’t change. We get the government we deserve when we don’t hold our elected officials accountable. Put pressure on them, whether through newspaper articles, telephone calls, or blogging, and disagreeable policies can change. I still don’t have a significant issue with the original law, but it’s encouraging to see that government isn’t a kingdom, unresponsive to the governed. Representative government works.

Even in D.C.

Impaled by “Borrow and Spend”

I decided a few days ago to write about the debt madness gripping President Bush and Congress, planning to explain how servicing the increasing national debt will crush us economically as the growing interest payments overwhelm our ability to pay for government with reasonable taxes. MSNBC beat me to it.

The cost of hocking ourselves to the eyeballs shows up in the line of the federal budget that says how much interest we’re paying. Interest will run about $350 billion in the current fiscal year, according to projections by the nonpartisan Congressional Budget Office. It rises to $385 billion next year, $426 billion the year after and so on. This is without Katrina. Just the interest on Katrina-call it 4 percent on $200 billion-is $8 billion a year. While $8 billion is trivial in a world of $2 trillion federal budgets, it’s still $40 billion over five years. That’s more than the aforementioned $35 billion of social-spending cuts would save.

Anyone who’s ever gotten himself into credit card debt understands the basic principal behind this. Borrow a little money and the interest payments are wasteful but manageable. Borrow a little more and the trouble begins. Fail to increase income or reduce expenses and the growing interest payments become a snowball. I did this in college and it took me a decade to dig out of it. The difference between me and the federal government is that I acknowledged my recklessness and adjusted.

Remember, President Clinton and Congress balanced the budget in the mid-1990s (with help from the Social Security Trust Fraud Fund, but rigged and balanced is better than rigged and deficit). Then the electorate gave complete control to one party (the “fiscal conservatives”, no less) and the budget flailed about, spitting out money without burning its own fat or gobbling any new funds to meet the demand. Under President Clinton, tax increases enabled the balancing. I don’t support tax increases now, and even if anyone in power did, it’s not going to happen. That leaves cost-cutting. Every time Congress votes for more pork and every time the president signs that pork, know that there are real consequences. And those consequences grow every year.