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If you’ve ever felt intimidated by the complexities of U.S. monetary policy and the financial system, you’re not alone. According to Steve Forbes, CEO of Forbes, Inc. and two-time candidate for Republican nominee, even neurophysicists and engineers are often perplexed by our country’s monetary system due to confusion propagated by the Federal Reserve. In his new book, Money: How the Destruction of the Dollar Threatens the Global Economy – and What We Can Do About It, Forbes and coauthor Elizabeth Ames try to remove the veil of confusion surrounding the U.S. monetary system, assessing the Fed’s role in the 2008 financial crisis and subsequent declining economic growth rates. The book, which has received praise from prominent policy experts, Ph.Ds., and CEOs, argues that fiat money and Fed interventionism have greatly weakened the U.S. monetary system and financial market. The authors suggest a return to the gold standard as a solution to this potentially disastrous problem that threatens the well-being of American citizens and the entire global economy.
Forbes explained the premise of his argument for a stable currency that is convertible to gold at a book forum hosted by the Cato Institute. He claimed that the government has a responsibility to “provide sound money” that is “unchanging in its value,” citing the Constitution and U.S. Monetary Commission of 1876, respectively. According to Forbes, a stable currency leads to less uncertainty, resulting in more economic freedom and prosperity. Conversely, fiat money, which is based entirely on trust in the government, increases uncertainty and the size of government, ultimately leading to economic volatility. The Fed’s ability to manipulate interest rates (which some economists refer to as “the price of money”) undermines that trust and disrupts communication in financial markets by corrupting price signals. For example, when the Fed lowers the Federal Funds Rate, it encourages risk-taking in unproductive entrepreneurial activities that waste resources and would not occur in a freer financial system. In contrast, artificially high rates inhibit productive investments, preventing future economic growth. This economic loss is difficult to grasp because it is impossible to miss products, technologies, and services that do not exist in present society. To illustrate his point, Forbes asked the audience to imagine a world without Apple products. If you didn’t get the picture before, it quickly became apparent. Forbes claimed that if the monetary system hadn’t been taken off the gold standard in 1971, the U.S. economy would be fifty percent larger than it is today.
Forbes’s coauthor Elizabeth Ames further explained how a fiat monetary system is a danger to democratic society and should be a bipartisan concern. As the Fed continuously increases the money supply and inflation skyrockets, the value of the dollar decreases, eroding citizens’ savings. A monetary system in which the currency is not fixed to a commodity can be arbitrarily increased, which effectively levies a tax on everyone. The link between effort and reward is severed as inflation destroys the wealth of citizens on fixed incomes, and artificially low rates benefit borrowers in the financial sector. Ames posited that while this pattern has widespread financial ramifications, it also impacts society on a social level, citing research that shows inflation has a stronger connection to crime than unemployment. Although the current fiat monetary system should be a matter of bipartisan concern, the monetary expansion that has occurred over the last forty years has actually led to increased political polarization and dissension in society.
After presenting their case against fiat monetary policy, Forbes and Ames provide a solution to our monetary woes, suggesting a return to the gold standard. They believe tying the dollar to gold will restore the trust and communication in the financial market that has been destroyed by unstable currency. They suggested gold is the ideal commodity to represent monetary value because it is flexible to maintain market needs, rare (but not too rare), convertible, durable, malleable, easy to transport, and maintains its intrinsic value, and argued that fixing the dollar to gold should be codified into law as an act of Congress. In their view, the measure would not result in a restriction of the money supply’s ability to expand, but rather a monetary system in which the supply of money accurately reflects the value of goods and services produced in society.
Forbes, who serves on the Boards of Directors for the National Taxpayers Union, has been a long-time supporter of comprehensive tax system reform. He has called for a move towards a simple, flat-rate income tax system. As our economy continues to suffer in the aftermath of the financial crisis, Forbes’s proposal to return to the gold standard offers policymakers a potential solution to the nation’s monetary troubles.
Thanks to Kelly Hastings for writing this summary.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Florida’s 19th Special House Election: A Budgetary Guide
In what some are calling a quiet election, there’s still a lot to be said. Though the challenges of taking drug tests have largely been replaced with who can help create the most jobs in the next five months, before the next election for the same office, Florida residents are asking the same questions of candidates as they did in Florida’s other recent special House election: What will you do in Washington, D.C.? Especially in the wake of their last Congressman, Trey Radel, who resigned after being arrested for possession of cocaine.
In just a couple of short months, three front runners have emerged to battle for the 19th District’s seat: businessman Curt Clawson (R), businesswoman and former political activist April Freeman (D), and former health worker Ray Netherwood (L). Each candidate offers different general solutions to America’s fiscal ills but details have yet to come out about how each would actually change the federal budget. However, by using a methodology similar to National Taxpayers Union Foundation’s (NTUF) BillTally project, taxpayers can see where the candidates stand on at least some of the spending issues. For this brief study, we took direct quotes and campaign materials of candidates and matched them with budget and legislative data to see exactly what the differences and similarities are.
Similar to the New Jersey Special Senate and Florida’s 13th Special House elections, details were few and far between. Even with the campaigns releasing economic plans and platform summaries, we’re still left asking what will they do if elected as the House of Representative’s newest member?
Check out the entire line-by-line analysis of all three candidates. As with NTUF’s other BillTally and campaign studies, only changes in current spending are recorded (similar to the Congressional Budget Office). The reports do not include changes in revenues or costs outside the federal government. Below are summaries of each candidates’ proposals.
Curt Clawson (R) has proposed two (out of 12) quantifiable policies that NTUF was able to score. Combined, they would decrease annual spending by $395.8 billion. The largest budget-influencing item that he supports would cap federal expenditures at 19 percent of GDP, which would be implemented using the “Penny Plan,” which would cut spending by one percent each year as long as the budget is not balanced.
April Freeman (D) has two (out of 12) policy items that NTUF could fiscally score. Together, they would increase spending by $20.203 billion each year for the next five years. Her largest quantifiable proposal would overhaul the immigration system.
Ray Netherwood (L) had one proposal that NTUF could identify. It would be to replace the current income-based tax system with a national sales tax, known as the Fair Tax. The measure would cut an average $19 billion in federal outlays for each of the next five years.
Normally, there would be some overlap between the candidates’ platforms. In the other Florida Special Election, the front runners supported increasing current spending by $180 million per year to delay a scheduled rate increase for the National Flood Insurance Program. That was not the case in this House race, although the three candidates were not asked similar questions when interviewed by the same source.
What does this mean for taxpayers and residents of the 19th District? It’s time for the campaigns to give Americans more details. While candidates are asking Floridians for their vote, taxpayers are asking for the roadmap of each candidate’s path to reach a better and expanding economy. As highlighted above and in the full report, the absence of budgetary facts and figures opens the possibility that all of the candidates could have much larger or smaller spending aspirations in mind. Clawson, Freeman, or Netherwood need only clarify their intentions with dollar figures to help complete this report and help educate Americans on important and pressing issues that we’re all facing.
Note: National Taxpayers Union Foundation is a 501(c)3 nonprofit organization. Our research efforts are intended only to educate Americans on how their tax dollars are being or will be spent by those in office, seeking office, or in appointed positions. For more information on NTUF go here.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Exposing wasteful spending is costly work and Kevin Downing, a former economist and data collector at the Department of Labor, is paying the price. In 1999 Mr. Downing raised a red flag over a project to re-organize the New York City Bureau of Labor Statistics office, including an expensive and superfluous complex in Mountainside New Jersey. Upon reporting what appeared to him as an obvious example of pork-barrel spending, Mr. Downing was immediately terminated from his position and his whistleblowing was made public knowledge on the Internet, resulting in damage to his career prospects. Employers continue to regularly cancel interviews.
On behalf of Mr. Downing, Representative Bill Pascrell, Jr. of the 8th District in New Jersey wrote a letter to the Department of Labor in hopes of highlighting his plight and protecting him from reprisals. Congressman Pascrell wrote:
“There is evidence to indicate that Mr. Downing’s termination was inappropriate because it was in retaliation for his communication with Congressional staff regarding what he believed to be waste and abuse resent in the Bureau of Labor Statistics.”
Incredibly, Pascrell’s efforts were initially ignored and eventually dismissed by the Department of Labor entirely. Allegedly, the Labor Department managers used Kevin as an example to warn union officials and employees of inevitable retaliation against future whistleblowers.
Given the circumstances, Mr. Downing’s job termination would at least raise some legitimate questions. Many in Congress would seem to agree as they recently passed the Whistleblower Protection Enhancement Act (WPEA) to attempt to protect federal employees in situations similar to Downing’s. Nonetheless, it was not passed in time to affect his specific case.
After over six years of costly legal battles, it was confirmed Kevin’s termination was a direct result of whistleblowing but the Federal Circuit Court of Appeals rejected his case because Kevin “did not disclose non-frivolous information.”
For Kevin Downing, the personal and financial consequences of exposing wasteful governmental spending have been devastating.
On the bright side, his case has brought more attention to the whistleblower issue. A Petition to re-instate Downing with all promotions, pay and benefits as well as payment of his legal expenses has been initiated on change.org for concerned taxpayers (including, of course, readers of this blog) who wish to express their solidarity.
If upstanding federal employees who risk their professional reputations to bring light to malfeasance are driven out of their positions without fair hearing or recourse, taxpayers stand to lose an important watchdog against waste – but worse, the growing mistrust in government would likely spread even further.0 Comments | Post a Comment | Sign up for NTU Action Alerts
This Congress is expecting to receive 4,291 reports from various government agencies. But a new feature in The Washington Post shows that lawmakers will actually read very few of them, if they are even written at all.
The story in The Post traces the long history of U.S. government reports, from the Mint’s annual update that began in 1792 to the 2000 law that required a briefing on the latest developments in dog and cat fur trading. Even in 1928, when there were only 303 reports to keep track of, legislators complained about the volume of reports they were sent every year.
Fast-forward a few decades and thousands of reporting requirements later, and many lawmakers and government employees have stopped reading and writing the reports altogether. Their inability to keep track of – let alone read and devote appropriate attention to – the reports is an instance of transparency and accountability gone awry, in that while many of the reports were intended to offer additional layers of oversight to government programs, they've become so numerous and overwhelming that the full benefits can simply become lost in the shuffle. One former staffer recounted to The Post how some of the thicker reports were literally used as doorstops, unread and disregarded.
The reporting carries a significant cost, both in man-hours and dollars. Although nobody can say for sure how much money is spent producing the reports each year, the last estimate made in 1993 projects it's somewhere in the neighborhood of $163 million. Combined with the fact that some of the reports are so narrowly focused (the Social Security Administration's report on printing operations) or outdated (The Post identified two required briefings on the long-since-dissolved Soviet Union), many in Washington are calling for an end to some of the more irrelevant or wasteful ones. In 2012, The White House compiled a list of 269 reports it wanted to eliminate; the House passed a bill recently that nixed 79 of them.
Although transparency and accountability are noble goals, the story in The Post shows that when it comes to government reporting requirements, there is a fine line between oversight and distraction.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Video: House Ways and Means Committee’s Tax Reform Goals
Today, the committee in charge of the Tax Code released a video on how the system doesn’t work and how they plan to fix it. The Republican-led body presents three solutions:
Though these are lofty goals for Congress, it's clear from recent legislation like the 2012 American Taxpayer Relief Act that making a meaningful impact on our Tax Code will require extensive reform. Almost everyone agrees that the system is “too complex, too confusing, and too costly” and that is precisely why having a plan makes sense. Still, identifying the problem is just the first step towards fixing it. U.S. businesses -- big and small -- deserve, a fair, effective, and efficient Tax Code and Washington is in the prime position to fix it.
Here’s hoping that Congress can come together to relieve all taxpayers of the dread and stress of the current Tax Code (a system that has been changed “4,400 times over ten years” by both parties).
For more information on how complex our tax system is, check out NTU’s 2013 Tax Complexity study, which will be updated later this year. NTU Foundation also surveyed folks which tax system the U.S. should change to during our annual Milton Friedman Legacy Day event.
How would you change the Tax Code? Streamline the current system? Completely replace it? Leave a comment down below!0 Comments | Post a Comment | Sign up for NTU Action Alerts
NTU and USPIRG have released a new "Toward Common Ground" report with over $500 billion in savings proposals people from both sides of the aisle can support. Plus, a special chat with our fall interns, Tara Riggs and Curtis Kalin, and the Outrage of the Week!0 Comments | Post a Comment | Sign up for NTU Action Alerts
As Congress continues to play budgetary chicken, prolonging the government shutdown, another debate is brewing that might or might not be fixed with a budget deal: the debt ceiling. The last time we came close to the federal borrowing limit, Congress pushed through the Budget Control Act, which put in place budget caps in exchange for an increase in how much debt the government can issue. However, BCA lacked any real entitlement reform and taxpayers are again looking at a divided and dysfunctional Congress as the debt ceiling deadline ticks down to zero. If the ceiling is not raised, the U.S. could default on our debt, sending shockwaves through the global economy. However, it might be the jump start that the U.S. needs to bring about true reforms and fiscal sanity.
To supplement this week's Taxpayer's Tab, NTUF compiled some information so that folks can get a read on where the government is at on the debt and how we got in this position (hint: entitlements).
Do you think the U.S. should raise the debt ceiling? If not, how would you get the country's finances back in order (especially because a default would likely lower our credit rating)?0 Comments | Post a Comment | Sign up for NTU Action Alerts
Today’s Taxpayer News!
Shutdown web pages: In what may have been the final pre-government shutdown act by the National Park Service and the Department of Agriculture, the departments used their time to come up with new web site splash pages saying their website was to be inaccessible during a “shutdown”. More details on the Daily Caller.
Dependant disaster: A Philadelphia County is reeling after the revelation that employees had been committing insurance fraud on a massive scale for over 20 years. The officials were packing their taxpayer funded insurance plans with ineligible dependants, and pocketing the money. The total loss was estimated at $200,000. More details at Phillyburbs.
Duplicate waste: North Carolina’s New Hannover County government is advocating a significant investment in recycling centers. The issue is private companies have already invested about $60 million into landfills and recycling in and around the community. Read more at the Star New Online.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Below is the final NTUF infographic on Presidential Perks. Today's focuses on George W. Bush, who has spent $7.1 million of public money (so far) in six years. Like the other Chief Executives, there is no overall cost figure for Secret Service protection and the numbers are based on budgetary requests of the General Services Administration.
Be sure to check out the other Presidents' retirement costs and be on the lookout for more retirement analysis from NTU Foundation!
A summary of what former Presidents is available in an edition of The Taxpayer's Tab.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Bill Clinton's Federal Retirement Benefits, an Infographic
How much do you think that former Presidents get from taxpayers each year? Bill Clinton gets an average $1.09 million and that's not including his Secret Service protection or any trips that might come up (like state funerals or any international negotiations that he might be a part of). In this week's third infographic, NTU Foundation took a look at exactly what Clinton spends his retirement perks on and how that compares to the other three former Commanders-In-Chief.
Like our other infographics and a recent edition of The Taxpayer's Tab, we used the budgetary requests from the General Services Administration, which is the agency in charge of disbursing the Presidents' benefits. However, the requests do not necessarily translate to actual spending. GSA does not release the actual figures of how much Presidents really cost taxpayers each year. This is the most complete information that is publicly available.
Do you think that former Presidents need public dollars? Should something be cut or increased? Let us know in the comments!0 Comments | Post a Comment | Sign up for NTU Action Alerts