Government Reform

Posted By: Andrew Moylan - December 15, 2011

An impossibly ridiculous program that has wasted millions of your tax dollars funding nanny state campaigns to pester you about health might finally be at death's door. The "Prevention and Public Health Fund" (which I warned about more than a year and a half ago when it had a different name and piles of cash from the "stimulus" bill) looks to finally face the ax at the hands of the House of Representatives when it votes tomorrow on the massive $1 trillion "megabus" appropriations bill.

H.R. 3671, the Consolidated Appropriations Act, takes aim at the PPHF and its funding of state- and local-level campaigns for higher taxes and stricter regulation on everything from soda to tobacco products. Though they are of course justified in the name of "public health," the PPHF-funded efforts have spent millions of hard-earned taxpayer dollars in support of a host of policies that raise costs and restrict availability for perfectly legal products while nagging people to exercise more and eat their Brussels sprouts. Kudos to House appropriators (you won't hear me saying that very often) for seeing fit to include language in the megabus to put an end to this insanity.

The "slippery slope" argument that is so frequently deployed in Washington isn't always accurate, but the PPHF is perhaps the best example that it not only exists but is even steeper and more slippery than we could have imagined. Decades ago when the anti-tobacco crusade really began in earnest, many limited-government advocates warned that it would only be a matter of time before government began trying to tax into extinction and restrict other products with which they were displeased. Those warnings are proving prescient now that many states and localities are fighting battles not just against so-called "sin" products like tobacco or alcohol, but on fatty foods, sugar-sweetened drinks, even SALT for God's sake! But the PPHF really takes the cake (as long as cake is still legal, that is) because in many cases, those dollars are handed out to lobbyists and PR firms to run glitzy ad campaigns to snuff out whatever products or behaviors Big Brother doesn't like. Tax dollars funding lobbyists who fight to raise your taxes! It's a spiral of stupidity.

Thankfully, House Leadership has seen that insanity for what it is and targeted it in the appropriations bill. Here's hoping that, whatever happens with the end-of-the-year appropriations fight, common sense prevails and the PPHF gets what it deserves: elimination. After all, if Congress can't cut a program this egregious, what can they cut?

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IRS Has Serious Internal Control Deficiencies, Says GAO

Posted By: Jeff Dircksen - November 15, 2011

A guest post from our good friend Tim Wise at ACTA.

The U.S. General Accountability Office (GAO) has completed its audit of the IRS's Fiscal Years 2011 and 2010 Financial Statements (summary, 1-page highlights and full report, both require Adobe). As the GAO reports, "IRS is a large and complex organization, posing unique operational and financial management challenges for its management. IRS employs over 100,000 people in its Washington, D.C., headquarters and over 700 offices in all 50 states and U.S. territories and in some U.S. embassies and consulates."

In the report highlights, GAO wrote that it found:

"In GAO's opinion, IRS's fiscal years 2011 and 2010 financial statements are fairly presented in all material respects. However, serious internal control and financial management systems deficiencies continued to make it necessary for IRS to use resource-intensive compensating processes to prepare its balance sheet. Because of these and other internal control, compliance, and system-related deficiencies, IRS did not, in GAO's opinion, maintain effective internal control over financial reporting as of September 30, 2011, and thus did not have reasonable assurance that losses and misstatements material to the financial statements would be prevented or detected and corrected timely."

While GAO said that "IRS continued to make strides in addressing its deficiencies in internal control," it also said:

"However, deficiencies remain concerning (1) material weaknesses in internal control over unpaid tax assessments and information security, (2) a significant deficiency in its internal control over tax refund disbursements, (3) a noncompliance with the law concerning the timely release of tax liens, and (4) financial management systems' lack of substantial compliance with FFMIA requirements . . . ."

GAO also points out that 182 recommendations remain "open" from its prior audits of IRS's financial statements. Here is how GAO reports that in more detail on page 14:

"We have reported on IRS's internal control weaknesses in prior audits and have provided IRS recommendations to address these and other less-significant issues. As of the date of this report, 182 recommendations related to our financial statement audits were still open, of which 10 relate to the material weakness in internal control over unpaid tax assessments, 105 relate to the material weakness in internal control over information security, and 9 relate to issues encompassed by the significant deficiency in internal control over tax refund disbursements. For more details on the material weaknesses and the significant deficiency identified as a result of our audit, see appendix I."

IRS's "management discussion and analysis" begins on page 23, which contains a great deal of informative data about the IRS, including a number of charts and tables. The financial statements begin on page 58.

HT Tax Prof Blog.

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Chris Carey of JunketSleuth.com on "Speaking of Taxpayers"

Posted By: Douglas Kellogg - October 31, 2011

Junket Sleuth (JunketSleuth.com) is a website devoted to exposing government travel perks and expenses through Freedom of Information Act requests. The head of this journalistic effort is Christopher Carey, and he joined Pete and Doug on last week's "Speaking of Taxpayers."

Make sure to visit Junket Sleuth for more information, another round of new government travel spending revelations is coming soon.

Subscribe to NTU's podcast "Speaking of Taxpayers" via iTunes by clicking here.

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William Niskanen, RIP

Posted By: Andrew Moylan - October 27, 2011

I was very saddened to hear that William Niskanen, famed economist and Chairman of the Cato Institute, passed away yesterday at the age of 78. Bill was a giant in the limited-government movement and his contributions will live on for generations to come. His pioneering work in public choice economics, his turn as Chairman of President Reagan's Council of Economic Advisors, and his more recent role as a respected scholar at Cato all contributed mightily to shifts in economic thought and public perceptions of government. George Scoville wrote a nice piece at United Liberty documenting his lasting influence.

Unfortunately, I can't claim to have known Bill terribly well myself. Back when I graduated from the University of Michigan, I moved to Washington and began an internship at the Cato Institute during his tenure as Chairman. I can only recall running into him once (at a large organization like Cato interns don't often have occasion to work with the top brass) when we shared an elevator ride to the top floor. In my mind, he seemed about 6'5" and looked every bit the part of the brainy economist (a sentiment apparently shared by Cato's Randal O'Toole, as Bill was apparently less than 6' tall) and I was too intimidated to say more than an awkward "Hello."

The "his legacy will live on" stuff one hears after someone's death is often lionizing pablum, but not with Bill Niskanen. His work truly serves as the foundation upon which many of NTU's efforts are built. As but one specific example, our recent support of Representative Justin Amash's "Business Cycle Balanced Budget Amendment" is directly informed by Bill's work in identifying a better structure for fiscal limits.

He will truly be missed, and the thoughts and prayers of NTU are with the Niskanen family and our friends at the Cato Institute for their loss.

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Enough With the Procedural Hijinks, Focus on Pro-Growth Policies

Posted By: Brandon Greife - October 7, 2011

“Stunning,” wrote the Washington Examiner’s Phillip Klein. “Shocking,” said the Alexander Bolton in The Hill. “Procedural chaos,” as Manu Raju described it in Politico.

In political drama that Aaron Sorkin couldn’t have thought-up, Senate Majority Leader Harry Reid invoked the so-called “Nuclear Option” last night, using a simple majority vote to effectively rewrite the Senate rules to further tilt the playing field in favor of the majority party.

The Senate is a procedural mess that only a parliamentarian (or avid C-Span viewer) could appreciate, but I’ll attempt to break it down as simply as possible.

Under normal rules, if 60 Senators agree to invoke cloture in order to end a filibuster then 30 hours of debate is granted. During that time amendments may be considered if both sides agree or if 67 Senators vote in favor of a “motion to suspend the rules.”

This allows the Minority at least some procedural protection, especially important now that Leader Reid almost always “fills the tree” – meaning he shuts out the minority’s ability to offer amendments by filling all the open slots with inconsequential amendments from his own party.

Have I lost you yet?

Last night, Sen. Mitch McConnell, frustrated by his inability to secure any votes on Republican amendments, filed a “motion to suspend the rules.” It was doomed to fail, but at least it was a way to get Democrats’ opposition on record.

Then Leader Reid did something unprecedented. He filed a “point of order” that any motion to suspend would not be allowed after a filibuster was broken.

Now, I’ve probably lost you at this point, and at any rate I’m starting to confuse myself, so I’ll sum it up this way: By a simple majority vote Harry Reid broke with decades of Senate precedent in order to shut down the minority. Or as Allahpundit said more succinctly: “This is procedural esoteric and therefore it’s very confusing, but here’s the nutshell version: Reid’s finally lost his mind.”

For something as momentous as this, you’d at least think that Reid was sure in his procedural footing. You’d be wrong. After the vote Reid said, “Am I 100 percent confident that I’m right? No. But I feel pretty comfortable with what we’ve done.”

Such nonchalance when fundamentally toying with the rules of what has been dubbed “the world’s greatest deliberative body” is troubling at best, frightening at worst. Then again, it’s highly likely that Senator Reid will likely backtrack on this rule change, not because he knows it wouldn’t be enormously helpful in pushing through his agenda this term, but because the political winds may soon be blowing his party out of the majority, and Reid out of his spot as Majority Leader.

If only the Senate could set aside its political chicanery and procedural machinations and actually go about the business of passing pro-growth legislation perhaps we’d see at least a dash of hope in our economy. Then again if they did that, it would truly be “shocking” and “stunning.”

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It's Been An Exciting Day in DC

Posted By: Jeff Dircksen - August 23, 2011

It's been an exciting day in DC. If you haven't heard, there was an earthquake. Then there was a piece in today's Wall Street Journal by Cass Sunstein, who is an administrator in OMB's Office of Information and Regulatory Affairs. He writes:

Last May, agencies released over two dozen preliminary plans, identifying reforms that will save billions of dollars. At the same time, agencies asked the public to evaluate the preliminary plans, identify new reforms, and participate in creating a 21st-century regulatory system that protects public health and safety while also promoting economic growth and job creation.

Today I can announce that agencies are releasing their final plans, including hundreds of initiatives that will reduce costs, simplify the system, and eliminate redundancy and inconsistency.

Here is one of the reforms that Mr. Sunstein announced today: "By the end of this year, the Internal Revenue Service will eliminate 55 million hours in annual paperwork burdens by consolidating reporting requirements and streamlining various tax forms."

I hope the streamlining hasn't brought us to this tax form.

(cybersalt.org)

Earthquakes. Regulatory reform. What's next? Warren Buffett writing a check to the Treasury Department because he wants to pay more taxes? These are certainly exciting times in DC.

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Mitch McConnell Proposed What?!?!

Posted By: Andrew Moylan - July 12, 2011

It's been a crazy week in Washington, but it just got substantially crazier. I'm sitting at my desk plugging away at some work when my email starts blowing up with details of a new debt ceiling plan being floated by Senator Mitch McConnell (R-KY), the Minority Leader. It's a doozy, but the basic breakdown is this: the President would be authorized to request from Congress three separate debt ceiling increases of between $700-$900 billion each. He would be required to submit a plan for an equivalent amount of spending reductions. Congress would then be given a chance to "veto" this package by voting on what's called a "Resolution of Disapproval." If that resolution failed, then the President would have his debt ceiling hike alongside a toothless set of spending reduction ideas. Even if the disapproval passed, he could then veto the resolution meaning that a two-thirds majority of Congress would have to override his veto in order to have the disapproval stand.

So what does that mean in reality? It means the President gets his debt ceiling increase, lock, stock, and barrel, unless a miracle occurs and two-thirds of Congress (AKA every Republican in the House and 50 Democrats along with every Republican in the Senate and 20 Democrats) engage in a sudden burst of bipartisanship and override his veto. True, the plan requires the President to submit a plan to reduce spending by an equivalent amount, but a plan isn't the same as actually cutting spending. Congress would have to actually incorporate those spending reductions into future bills, and the whole reason we have the debt ceiling impasse right now is that they can't agree on what spending reductions to include in future bills.

This is a point that appears to have been missed by some. There are otherwise-solid conservative legislators and activists who have said nice things about the plan because it appears to put the debt ceiling onus directly on the President. But, let me repeat, it does NOT force any cuts in spending. It contains nothing in the way of Congressional fast-track authority, the way several "spending commission" proposals that preceded the President's Fiscal Commission executive order did. Unless I'm missing something (which is always possible), I don't see a single thing that actually requires a spending cut, just a requirement that the President identify a list of spending cuts.

People smarter than I am have also raised real constitutional questions about this plan, as it essentially reverses the legislative process by allowing the President to propose something and Congress to veto that proposal. There is something of a precedent with the Congressional Review Act, which was established to allow Congress to modify or eliminate regulations proposed by executive agencies, but that's a much narrower case where Congress has delegated its legislative authorities relating to regulatory issues. This, on the other hand, strikes right at the heart of Congress' proper authority to determine levels of spending and borrowing as defined in Article I, Section 8 of the Constitution. It also bears a resemblance to the line-item veto debate of the 1990s, where a proposal was ruled unconstitutional because it allowed for the President to implement a set of policies not with Congress' APPROVAL, but simply by its lack of DISAPPROVAL.

Beyond all of the technical issues (which are substantial and important), it strikes me as a classic case of being worried about politics over policy. The reason this proposal was drafted in this way is because it would lay responsibility for raising the debt ceiling at the feet of the President. Of course, in shifting slightly more of the "blame" on to Obama (by the way, I think it can be argued that he already will bear most of the public responsibility for hiking the debt ceiling), it grants him a huge increase in the debt limit without including any kind of enforceable reforms to spending now or in the future. That might be a cutesy way to damage the President politically, but it's absolutely horrible if your actual goal in this whole debate is to address Washington's overspending problem.

The solution to our debt disaster is not some complicated form of legislative Jiu Jitsu, it's "Cut, Cap, and Balance." Cutting spending in the short-term will address our deficit, establishing a strong statutory spending cap will put us on a glide path to balance in the medium-term, and the passage and submission to the states of a strong Balanced Budget Amendment will provide a real long-term constraint on a Congress that has proven incapable of fiscal discipline.

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What Does Economic Freedom Look Like?

Posted By: Dan Barrett - June 28, 2011

Pundits can talk your ear off about what they think, politicians can endlessly tell you how their plans will fix things, and professors can give you their views on what they feel is necessary. Luckily there are real numbers to compare these groups, and their claims, with reality. Economic indicators and statistics can be manipulated to fit arguments and talking points but you’ll always find similarities. Factors such as GDP (Gross Domestic Product) and average income always has the US on the positive side of the scale, while countries like North Korea almost always fall on the failing, or at best struggling, side of global economic comparisons. The difference? Americans can do what they wish, when they want, and in a way they so choose. North Koreas are told how to act, what to say, and even how to think. Americans have significantly more freedoms than, say, North Koreans. This has been our publicized “secret to success.” Here’s hoping more people understand that the more thick the U.S. Code gets with minute instructions and limits to how we handle our money, and thereby our ideas and rights, the thinner our achievements will be in long-term economic development and happiness.

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The "S" Doesn't Stand for Security

Posted By: Jeff Dircksen - June 23, 2011

In case you didn't know the "S" in IRS stands for service not security. A recent report from the Treasury Inspector General for Tax Administration indicates that the IRS could certainly use a healthy dose of security. As Robert W. Wood writes at Forbes.com, "I recently asked if your IRS data is at risk. I suggested it might not be, but I didn’t tell you to start worrying. Now I’m not so sure."

Here's a very disturbing finding: "100% of IRS Databases TIGTA tested are vulnerable to hackers." At least it's not more than 100 percent. Fortunately, I suppose, "IRS has agreed with TIGTA’s recommendations and is taking steps to develop strategies to deal with these issues." Given that hackers have hit Sony, the U.S. Senate, and the CIA recently, does anyone think that the IRS will develop and implement its strategic plan in time to prevent the loss of taxpayer data?

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Is House Leadership Trying to Kill a BBA?

Posted By: Andrew Moylan - June 9, 2011

The fix is in, my friends. Speculation on Capitol Hill runs rampant that House Leadership is actively undermining the prospects for passage of a Balanced Budget Amendment to our Constitution, effectively eliminating the most powerful tool we have to enforce budgeting discipline into the future. While all 47 Senate Republicans co-sponsored a strong BBA that included a spending limit and a supermajority threshold for tax increases, House Leadership has been either ambivalent or subtly hostile towards real structural budget reform. In interviews, House Speaker John Boehner (R-OH) has said he isn't interested in "gimmicks," which many regarded as a backhanded comment about a BBA or a statutory spending cap.

This bad-mouthing seems to be working. The National Journal surveyed Members of Congress about what they expected from a debt ceiling agreement and only 39% of Republicans thought a BBA would be a part of the deal. For some perspective a recent poll found that 81% of Republican voters support a BBA, so I think it's safe to say that elected Rs appear to not be reflecting the will of their constituents very well.

And now word is leaking that Republican House leaders seem to be rushing through a BBA not in order to actually pass it, but to give it a speedy euthanasia and get it out of their hair. Just this morning, I received an email from a House staffer who said "Leadership is planning on bringing H.J. Res. 1 to the floor for a vote sometime over the next two weeks to delegitimize the BBA and separate it from the debt ceiling vote."

H.J. Res. 1 is the version of a BBA that was sped through a House Judiciary Committee markup last Friday with little notice. NTU has been advocating for a BBA for 40 years and I was one of just three people invited to personally testify in its favor at a House Judiciary Subcommittee on the Constitution hearing last month, yet I heard NOTHING about the proposed markup until the morning it was occurring. That's not how a leadership team that's trying to build support for something operates, it's how you try to sneak something through quickly without a lot of scrutiny.

What's so peculiar about this turn of events is that a BBA is not some controversial too-conservative provision toxic to moderate Members' reelection prospects. This isn't, for example, Medicare reform, where dozens of Republican members had to swallow hard and cast the right vote in support knowing that Democrats would demagogue the issue mercilessly. Simply stated, NOBODY will have to "walk the plank" to vote for a BBA knowing that attack ads await them on the other side. It's a rare combination of good politics AND good policy, yet some Republicans are trying to kill it.

The next few weeks will tell you all you need to know about whether or not Republican leaders actually heard the message that was sent last November. Rushing a Balanced Budget Amendment through without allowing grassroots BBA supporters across the country to weigh in and build support would be a pretty clear indication of their true colors. If leaders in the House of Representatives schedule a vote on the Balanced Budget Amendment in the month of June, I'd consider it the equivalent of a big middle finger to the millions of fiscal conservatives who helped create the majority they now enjoy.

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