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The Impact of Past Government "Shutdowns"
Posted By: Curtis Kalin - 09/30/13

The federal government officially runs out of funding at midnight tonight.  While a good amount of attention will be devoted to political blame, it’s helpful to understand what a shutdown really means and what will actually happen in its wake.

First, the name, “shutdown” is not entirely accurate.  The situation can more cogently be described as a funding gap.  Between which one stream of funding ends before another is approved.  The drastic nature of these once normal bureaucratic snafus were exacerbated in 1980 when President Carter’s new Attorney General, Benjamin Civiletti issued a couple legal opinions interpreting the obscure 1884 Antideficiency Act: One saying the work of government cannot continue through a funding gap, and another modifier saying that only essential government services and personnel could legally remain working.  To allow non-essential government employees to work without being paid meant they would be “illegal volunteers”. 

After the consequences of funding gaps became clear, politics gradually asserted itself.  Throughout the end of Carter’s term and on through the Reagan and Bush terms, temporary shutdowns of anywhere between one and five days were commonplace and were precipitated by an outside political issue.  The gap and the subsequent standoff between President Clinton and House Speaker Newt Gingrich in 1995, which dragged on 21 days, holds the modern record.  Due to the political backlash that engulfed Washington in the months following the ’95 shutdown, America has not seen such an event since. 

Another note about the term “shutdown”: Civiletti’s second legal opinion allowing “essential” workers to remain on the job means many impactful government services will continue.  Medicare and Medicaid reimbursements will not stop.  Social Security checks will continue to be mailed. There is also a current statute stating that military personnel will continue to accrue pay which will be reimbursed after funding is restored.  However, the term “essential” does not apply to national parks, zoos, and museums like the Smithsonian.  They will close if there is a funding gap. 

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Learning the Cost of Lois Lerner's Pension
Posted By: Pete Sepp - 09/30/13

Even before she retired last week, scandalized IRS official Lois Lerner’s compensation was already attracting attention.  While on administrative leave, federal rules allowed her to keep collecting a salary, one that reportedly totaled $177,000. So it was no surprise when speculation arose over how much Lerner could collect in federal pension benefits.

Unfortunately, that speculation, which initially projected a benefit of over $50,000, might be off by about half … and in the wrong direction. National Taxpayers Union calculations show that Lerner could qualify for a starting pension at the annual equivalent of as much as $102,600, and up to $3.96 million over her lifetime.

The individual retirement choices of federal employees are not a matter of public record. However, precisely because NTU has been denied this information in the past (specifically pertaining to Members of Congress), we’ve developed the most accurate method available to provide solid estimates of how much federal employees can collect.

And now, the caveats for Lerner. NTU assumed she:

1) Joined the Civil Service Retirement System (CSRS) from the very beginning of her federal employment, and left the IRS with 34 years of service in various posts;

2) Had a “high-three” average salary of $177,000;

3) Opted for a reduction in her current benefits so that her spouse could receive part of the pension after she died;

4) Receives annual Cost of Living Adjustments of 3 percent; this is the level that CSRS’s own actuaries have employed when projecting future liabilities for the system;

5) Lives to the age of 87 years, which is the average age of death for a female who is currently age 62 under standard mortality tables used by the life insurance industry.

Some may wish to quibble with these assumptions, but even under other scenarios, Lerner’s retirement benefit could be quite generous. Want to assume she joined CSRS after she left the judicial branch, and signed on with the Federal Election Commission in 1981? The annualized benefit would drop … to $96,200, and the lifetime total to $3.7 million. Want to be ghoulish, and project a lifespan of 80 years instead of 87? The lifetime amount would be less … but still a considerable $2.57 million. Or, suppose she decided to leave CSRS and transfer into the newer Federal Employees Retirement System (FERS) when offered the chance during one of the “open seasons.” The pension benefit would be significantly smaller, just under $60,000 annualized to start. However, with FERS, she would also participate in and be eligible for Social Security benefits, and could take advantage of a government salary match of up to 5 percent through the Federal Thrift Savings Plan, which works like a 401(K) defined contribution arrangement. In the end, her FERS package could still be quite lucrative.

But didn’t Lerner pay into to her pension plan out of her own salary? Yes, though the contribution rate during Lerner’s career was generally 7 percent. As we have noted with lawmakers’ pensions, taxpayers pick up the lion’s share of a typical lifetime CSRS retirement payout.

According to media reports, prior to her decision in favor of voluntarily retiring Lerner was in danger of being removed from her job due to findings from an IRS inquiry board citing “neglect of duties” and mismanagement. But to taxpayers, this latest sordid episode in the history of the tax agency has but one lesson: any way it’s sliced, they’re the ones left to bleed.

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The Late Edition: September 30, 2013
Posted By: Curtis Kalin - 09/30/13

Tweet tutoring: The Food and Drug Administration is paying over $182,000 of taxpayer money to an outside group for the expressed purpose of “better understanding” their social media. The agency is currently far behind other agencies in the number of Facebook “likes” and Twitter “mentions”. Read more at the Washington Free Beacon.

Paycheck hypocrisy: An Illinois judge ruled that members of the general assembly will indeed get their taxpayer funded paychecks after Illinois Gov. Pat Quinn forced members of the state legislature to forfeit their salaries until they solved the state’s unfunded pension liability crisis. On top of that, the back pay will have to come with interest.  The Herald Review has more details.

Paper waste: The staff of Florida Rep. Alan Grayson used a bit of their time on the job to pull a prank on a fellow employee.  A member of Rep. Grayson’s district office staff posted a picture of a chair wrapped I toilet paper and a note admitting the deed on an office phone on Facebook.  Presumably, all of this occurred during business hours. Bizpac Review has more.

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The Late Edition September 26, 2013
Posted By: Curtis Kalin - 09/26/13

Today’s Taxpayer News!

Astro-ads: The state of Tennessee allowed Volkswagen to use $266,000 of taxpayer money to paint a giant advertisement on the roof of their Chattanooga plant.  A VW spokesman defended the ad saying, “The sign ‘makes it clear that VW is at home in America.’” The Tennessee Watchdog has more details.

Robo-dog:  This November, the Defense Advanced Research Projects Agency is prepared to hand over a giant robotic dog to Marines for field tests.  Nicknamed the “Big Dog”, its stated purpose is to carry heavy gear in war zones.  The total cost and the feasibility of the prototype are both unknown.  Read more at DefenseTech.

Money Stix: The city of Nashville has approved a project that would construct a number of tall, colorful sticks in front of their Music City Center.  Tentatively named “Stix”, the art is said to be “inspired by Native American themes and colors” and will cost taxpayers $750,000.  Read more at The Tennessean.

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The Late Edition: September 25, 2013
Posted By: Curtis Kalin - 09/25/13

Today’s Taxpayer News!

Radio Silence: The inspector general for the Department of Homeland Security reported that DHS has allowed over 8,000 pieces of radio equipment to sit idle in warehouses for over a year.  The original cost of the equipment was $28 million.  Read more at the Washington Times.

Failure to launch: NASA’s inspector general has detailed the agency’s spending of $43 million on 33 facilities that went underutilized in 2011.  More information on this story can be viewed at the Las Vegas Guardian Express.

Hip-Hop Care: The state of Oregon’s insurance exchange has budgeted $20 million for outreach plans.  The result of this spending has been a series of music videos and quirky ads.  All of this, despite Cover Oregon’s $16 million budget shortfall. Read more at the Weekly Standard.

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States' Dependence on Federal Spending: Historically High
Posted By: Michael Tasselmyer - 09/24/13

Whenever the national economy takes a turn for the worse, states' tax revenues tend to fall, and policymakers at the federal and state levels often try to fill the budgetary gaps with an influx of federal tax dollars. These sorts of "stimulus" measures are pitched as ways to keep important public services operating until the economy recovers. In 2009, the President's signature stimulus bill -- the American Recovery and Reinvestment Act (ARRA) -- pumped massive amounts of public dollars into states' coffers, which went towards infrastructure construction, teacher and emergency personnel payrolls, and other projects.

This budgetary trick isn't new. What is unique when it comes to states' budgets in recent years, however, is just how much they depend on federal funding. According to new research from the Pew Charitable Trusts' Fiscal Federalism Initiative, more than 1 out of every 3 dollars states spend comes from a federal fund or grant. Even in past recessions -- indicated by the grey shading in the chart below -- that ratio tended to hover closer to 1:4.

statefedspending

Source: Pew Charitable Trusts

In the wake of sequestration, these findings mean that some states will undoubtedly be sitting a little closer to the edges of their seats as Congress begins another round of contentious debate on the budget and how it might avoid a government shutdown. States in the national capital region such as Maryland and Virginia will obviously be affected by any reduction in federal spending: more than 20 percent of the area's GDP consists of federal spending.

However, there are also some states that are more geographically removed from Washington but still have plenty of skin in the game -- in Kentucky and New Mexico, 35 percent of GDP comes in the form of federal spending, and there are 6 states total that depend on D.C. for more than 30 percent of their economic productivity. The Washington Post has a helpful breakdown of some of these figures here.

There are some signs of improvement: as the economy (slowly) recovers, states' tax revenues have steadily begun to increase. However, economists seem to agree that those numbers are heavily influenced by higher tax rates overall, such as recent rate increases in California.

For more on Pew's study, including plenty of helpful charts and deeper statistics, take a look at their Fiscal Federalism Initiative here.

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The Late Edition: September 23, 2013
Posted By: Curtis Kalin - 09/23/13

Today’s Taxpayer News!

Not so Affordable Care Act: A new report by CMS says that Obamacare will increase overall healthcare spending by a whopping $621 billion, a cost taxpayers will have to front.  Read more at Heritage.

Ineligible receivers: An audit of Tennessee’s state health plan shows taxpayers lost $1.5 million due to officials failing to recognize a number of ineligible citizens who are participating in the program.  Watchdog.org has more.

To the dogs: The city of Nashville has spent $30,000 on waste bags for dog refuse. Although, the metro area is attempting to find more cost effective solutions. Find out the details at Fox17.

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Obamacare Delay: What It Would Mean for Taxpayers
Posted By: Michael Tasselmyer - 09/20/13

Tab Insert

As the deadline for many of the requirements in the Patient Protection and Affordable Care Act (ACA) approaches, new reports of unforeseen costs and regulatory complexities have come to light with seemingly increasing frequency. As Congress debates key provisions of the budget, many have called for a full or partial repeal of the ACA, and the White House itself recently delayed requirements for companies with more than 50 full-time employees to offer health coverage (or contribute to insurance exchange funds).

In this week's edition of the Taxpayer's Tab, NTUF examined a bill by Congressman Todd Young (R-IN) and Senator Daniel Coats (R-IN) that would affirm the White House's decision as law, as well as delay the Act's individual mandate for another year. The legislators' bills -- H.R. 2668 & S. 1488, respectively -- would postpone outlays scheduled to go towards new Medicaid funding, health exchange subsidies, and other administrative measures that the Congressional Budget Office estimated would amount to $28 billion in savings over the 2014-2018 timeframe.

Also featured this week:

  • Most Expensive: H.R. 3016, the Jobs for Urban Sustainability and Training in America Act of 2013, was introduced by Rep. George Miller (D-CA) and would fund job training & economic development programs in certain large cities with high unemployment. It would increase federal outlays by $50 billion over the next five years (or $10 billion annually).
  • Most Friended: Constitution Day was observed on Tuesday, September 17, marking the 226th anniversary of the U.S. Constitution's adoption. Earlier this year, senators Tom Coburn (R-OK) and Rand Paul (R-KY) introduced S. 1404, the Enumerated Powers Act, which would require all Congressional Acts, reports, resolutions, and amendments to clearly state the Constitutional authority by which it could be considered. The bill would not affect federal spending.
  • Wildcard: Senator Jeff Merkley (D-OR) introduced S. 1501, the Job Creation through Energy Efficient Manufacturing, to fund a federal grant program dedicated to expanding states' energy efficiency programs. It would increase federal spending by $250 million over five years, or $50 million annually.

For more on these bills & the latest on all things NTUF, check out the Tab online here. You can sign up for future updates via email, as well.

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The Late Edition: September 20, 2013
Posted By: Curtis Kalin - 09/20/13


Today’s Taxpayer News!

Fisker fail: The Department of Energy announced that it will auction off its remaining loan to the now closed electric vehicle manufacturer Fisker Automotive.  The outstanding loan totals $168 million.  This is the second DOE backed company to go bust.  Read more in the Detroit News.

Metro malaise: The Washington DC metro system, which is already subsidized by the taxpayers, is in the process of building another line which will likely increase the per-trip cost for riders significantly, while “leaving riders and taxpayers around the region to pay the bill.” Read more in the Washington City Paper.

Food stamp fraud: A federal indictment was handed down against 10 Baltimore area business owners after they allegedly used food stamp debit cards to defraud the taxpayers.  The fraud totaled nearly $7 million. Read more details in The Baltimore Sun.

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Seven Sound Principles for Internet Sales Taxation
Posted By: Brandon Arnold - 09/20/13

Earlier this week, the House Judiciary Committee released seven very solid principles that should guide Congress as it considers the taxation of goods purchased on the Internet. Unlike the severely flawed Marketplace Fairness Act (MFA), which was passed by the Senate earlier this year, the outline offered by Chairman Bob Goodlatte (R-VA) and Subcommittee on Regulatory Reform, Commercial and Antitrust Law Chairman Spencer Bachus (R-AL), respects both the concerns of taxpayers and the sovereignty of states.

Their principles would keep taxes low, level the playing field for all businesses, preserve interstate tax competition, prevent out-of-state tax collectors from unaccountably auditing and harassing businesses and individuals, simplify the collection and remittance processes to minimize or eliminate compliance costs, and maintain an appropriate balance of power between state governments and the federal government. Based on these precepts, the many defects of MFA (that NTU has often highlighted) should disqualify it from further consideration.

If Congress chooses to advance Internet sales tax legislation, strict adherence to these principles would protect taxpayers from unfair and unconstitutional taxes, as well as from predatory, out-of-state tax collectors.  NTU, on behalf of our 362,000 members, applauds Chairmen Goodlatte and Bachus for their thoughtful efforts.

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