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In Defense of the Sequester: Why Congress Should Honor Its Word
With the presidential election behind us, the political playing field shifts to the rapidly approaching“fiscal cliff”---the combination of automatic across-the-board spending cuts and the expiration of a whole host of tax cuts set to take effect Jan. 1, 2013 as a result of 2011’s Budget Control Act (BCA).
Last week, NTU was joined by 22 other organizations who share the goals of reduced spending and lower taxes, in sending a letter beseeching Congress to honor its commitment to cut the sequester’s $109 billion in spending and continue to stave off tax hikes.
With a 16 trillion dollar and growing national debt, it is absolutely imperative that Congress take sensible steps to reduce the nation’s spending, and the BCA’s $1.2 trillion in deficit reduction over the next 10 years is as good a place as any to begin that process. Although some argue that the cuts to defense would put the nation's national security at risk, it is worth noting that the requested reduction in military spending under the BCA is only 10%, or in dollar amounts equivalent to the defense budget of George W. Bush in 2007. Not exactly draconian, and still preserving plenty of revenue to ensure the U.S.'s safety is not jeopardized. However, NTU and the other signers left the door open to altering the ‘across the board’ approach to the sequester cuts and urge reductions to other parts of the budget.
The slightly lesser portion of the cuts under the BCA come from non-defense spending (examples include education, food inspections and air travel safety), which would sustain a mere 8% cut.
Equally as vital to putting the U.S. on a fiscally sustainable path is a continued commitment not to raise taxes, including preserving the Bush Tax Cuts for all income levels. Allowing these to expire would result in higher income taxes for 90 percent of the population, with the average household seeing their taxes rise an astounding $3,500 per year. Investors would also sustain a hike in the capitol gains tax and a higher dividend tax, among other alterations to the code whose net result is taxpayers being forced to fork over more of their earnings to Washington.
It is obvious to fiscal conservatives and taxpayer advocates that significant changes must be made in the way that Washington taxes and spends in order to return our nation to fiscal soundness. The hastily approaching “fiscal cliff” offers Congress an opportunity to begin the tough work of downsizing spending, while honoring commitments they have made to not raise taxes on families.
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The Late Edition: November 8, 2012
Today’s Taxpayer News!
Amity Shlaes, a view columnist for Bloomberg, highlights NTU tax findings to place Tuesday’s take hike ballot initiatives in historical context.
Vice president Joe Biden asserts that Tuesday’s presidential election results translate into an almost inescapable “mandate” to raise taxes on higher income Americans.
According to a recent article citing Tax Policy Center data, if the Bush Tax Cuts are allowed to expire at the end of this year a full 90% of households will see their taxes increase, with the average household seeing taxes raised an astounding $3,500 per year.0 Comments | Post a Comment | Sign up for NTU Action Alerts
As the 2012 election cycle comes to a close, we've witnessed record amounts of cash flowing in and out of political campaigns. Mitt Romney and Barack Obama have each raised over $1 billion, and recent figures show Romney has spent $777 million on campaign efforts, while Obama has spent over $887 million. It's been a record-breaking year for spending in Congressional races across the country as well.
Some lawmakers have proposed reforming the campaign system through public financing. NTUF identified two specific bills, introduced in the 112th Congress, that give taxpayers an indication of how those types of reforms might affect the budget.
H.R. 1404, the Fair Elections Now Act (and the Senate version, S. 750), would provide for public funding of congressional races. In order to qualify for that funding, candidates would have to raise a "large number of small contributions", limited to $100 each.
Part of the funding would include "media vouchers" to help offset the cost of running mass media advertisements, and would apply to primary & general election campaigns.
According to the Fair Elections Act website, "[t]he cost of Fair Elections for Senate races would be borne by a small fee on large government contractors and for House races would come from ten percent of revenues generated through the auction of unused broadcast spectrum." The bill's sponsors estimate the cost at "somewhere between $700 and $850 million per year."
For public funding of presidential campaigns, NTUF found S. 3312, the Presidential Funding Act. The bill would eliminate public funding for national party conventions - which amounts to millions of dollars - and increase public funding available for presidential campaign runs. According to the Congressional Record, similar legislation introduced in the 111th Congress - S. 3681 - carried an estimated cost of $1.1 billion over four years.
Important to note is that S. 3681 included a budgetary offset that would render the bill budget neutral; S. 3312 does not include any such offsets, which would result in new spending.
Combined, these two bills would amount to an annualized cost of $1.125 billion - a first year cost of $850 million, and $1.1 billion over 4 years.
NTUF found that Senate candidate Elizabeth Warren, running in Massachusetts, would support public financing reforms for federal elections. You can read the full analysis and compare her agenda to rival Scott Brown's here.
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The Numbers Behind President's Deficit Reduction Plan
Last week, I posted an article about the spending proposals that have been highlighted by the Obama re-election campaign on its website and in a policy brochure that was released to the media in late October. Dollar figures for his proposals were drawn from the Administration's budget and related legislation that has been scored and included in NTU Foundation's BillTally study.
As promised, here is a look at the President's deficit reduction plan.
In His Own Words
Here is how the Obama campaign has described the plan:
The paragraph above links to an image of a chart, that states, "Obama's Balanced Approach: More Than $4 Trillion in Deficit Reduction, After investing in jobs and economic growth including $2 trillion already enacted into law[.]"
The chart also lists the following 10-year deficit reduction totals:
This is as much detail as the campaign provides on its website, and it includes a mix of already enacted laws, current policy, new tax hikes, and new spending cuts. It also includes an estimate of the resulting reduced interest payments on the national debt.
In our candidate platform analyses, NTUF attempts to provide cost information on new proposals that affect outlays, and NTUF does not count any savings in interest on the debt that might result from program cuts. Instead, NTUF takes into account only the specific programmatic savings.
Previously Enacted Reductions
$1.78 trillion comes from "spending cuts already enacted." I assume that the bulk of this amount comes from the Budget Control Act that was enacted in August 2011. This law placed limits on spending through discretionary spending caps and includes provisions for additional spending cuts in the amount of $1.2 trillion over ten years. The remaining amounts probably include the $741 billion of direct spending cuts that were enacted in the Patient's Protection and Affordable Care Act. The largest cuts were to Medicare for fee-for-service payments and Medicare and Medicaid "disproportionate share hospital" payments to certain hospitals with a large share of low-income and uninsured patients.
The second item on the chart credits $850 billion from "savings from ending Iraq & Afghanistan wars." I'm not exactly sure how that number was calculated: The President's FY 2013 Budget requested $96.7 billion for what it labels "Overseas Contingency Operations," i.e., spending related to the military operations in Iraq and Afghanistan. The Budget also called for $44.2 billion per year for Fiscal Years 2014 to 2022 (Budget of the U.S. Government, Fiscal Year 2013, Summary Tables, page 239).
Moreover, this isn't new policy. All but a small force of troops were already removed from Iraq by early 2011. And in May, 2012, President Obama said, "Last year, we removed 10,000 U.S. troops from Afghanistan. Another 23,000 will leave by the end of the summer. After that, reductions will continue at a steady pace, with more and more of our troops coming home. And as our coalition agreed, by the end of 2014 the Afghans will be fully responsible for the security of their country."
New Proposals for Deficit Reduction
The largest amount comes from $1.9 trillion in new revenues: "Closing corporate loopholes and tax increases on high income earners." And remaining is $590 billion for "health & other mandatory initiatives" and $70 billion for "other." The campaign's website does not specify where these cuts would be made, but I assume this is a reference to the mandatory spending proposals introduced in the President's FY 2013 budget, and updated in the Fiscal Year 2013 Midsession Review: Budget of the U.S. Government (MSR).
The MSR notes, "… [T]o build on the work done to reduce health care costs through the Affordable Care Act, the President proposes $326 billion in additional reforms to Medicare, Medicaid, and other health programs over 10 years. Third, he puts forward $254 billion in additional mandatory savings over the next decade." These figures add up to $580 billion, in the ballpark of the campaign's figure.
The specific proposals are included, beginning on page 44, in Table S-10, Mandatory and Receipt Proposals. The table projects $237 billion in cuts to Medicare providers, $35 billion in savings from "structural reform," and $50 billion from enacting Medicaid reforms.
It is hard to ferret out what could be included under the $70 billion in savings listed as "other." My guess is that about $30 billion of this would be from savings in agricultural producer subsidies. The complete list of taxes, reductions, and fee increases are available in Table S-10 of the MSR.
A lot of analysts have questioned how the President's deficit reduction plan adds up. With the lack of specificity, it has been difficult to figure out exactly what he is talking about. I am assuming that the campaign was looking for nice round figures to highlight and that those figures are rooted in the Administration's proposed budget.
Despite this $4 trillion deficit reduction plan, the President's own latest budget projection in the MSR shows outlays exceeding receipts in each year over the next decade. And this includes perhaps rosy economic estimates that forecast an average annual growth of GDP by 3.14 percent. Without that growth, the amount of tax receipts will be lower than the Administration currently expects. In that event, the persistent spending problem will loom even larger.
See here for a detailed list of the President's spending proposals.
See here for a round up of the campaign platform studies conducted by NTUF this year, including Mitt Romney's agenda.2 Comments | Post a Comment | Sign up for NTU Action Alerts
The Spending Proposals in Obama's Agenda for a Possible 2nd Term
Over the course of this election season, NTUF has completed several candidate agenda analyses. In the course of our research, we look for any spending-related issues and policies that candidates are promising to work on if elected. After conducting these studies over several election cycles now, we've found that incumbent politicians running for re-election or a new seat will often highlight their record rather than what they intend to do. President Obama had been facing criticism for this, even though he did highlight a number of issues on his campaign website. He eventually put out a pamphlet with some additional policy proposals. NTUF has not analyzed an incumbent President's agenda because his Administration is responsible for putting out a detailed budget with plans and projections for a ten-year period. The latest budget projections were released in the Fiscal Year 2013 Midsession Review: Budget of the U.S. Government.
Given the questions about his possible second term agenda, I took a look at the spending proposals that Obama has highlighted on his campaign website and in the new pamphlet. With one exception, these are all proposals that the President has previously introduced in his budget. The one item I hadn't heard from the Administration before is a call to open up areas of the Arctic Ocean for oil exploration and development.
Below are the highlights and, where possible, annualized cost estimates for the President's campaign issues. The estimates either came from the Administration's own budget documents or Congressional Budget Office estimates for related legislation that has been scored in NTUF's BillTally program. BillTally tracks the cost of bills sponsored or cosponsored by each Member of Congress. A more detailed document, including links to the President's quotations and to the sources for all of the cost estimates, is available here. A look at the President's "deficit reduction plan" will follow in a separate blog post. [Update: an attempt to track down the numbers in the "$4 trillion deficit reduction plan" is available here.]
Economy, Transportation, and Infrastructure:
Education, Science, and Research:
Energy, Agriculture, and the Environment:
Homeland Security and Law Enforcement:
See here for complete documentation and sources.1 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: October 24, 2012
Today’s Taxpayer News!
NTU’s Pete Sepp weighs in on the various proposals for altering state income taxes depending upon who wins the Presidential election on November 6th.
The Daily Finance has the scoop on an array of new taxes associated with the implementation of ObamaCare, two of which will take place within the next few months.
NTUF crunched the numbers on the two Wisconsin Senate candidates’ spending proposals, finding an astounding $1.3 trillion separates Tammy Baldwin from Tommy Thompson.0 Comments | Post a Comment | Sign up for NTU Action Alerts
In the Fight Over Defense Cuts, Taxpayers Are the Real Losers
When it comes to defense, much of the rhetoric surrounding this issue, both in the Virginia senate race where defense contractors are a major source of employment for citizens of the state, and in the Presidential race, has focused on the potential effects of pending sequester cuts that will take $55 billion off the top of the current $562 baseline budget on January 3.
Unfortunately, by focusing solely on potential job losses (sincerely unfortunate though they would be), the larger more serious problem of the entrenched military-industrial complex, that a departing President Eisenhower so famously warned us about, and the enormous waste associated with the bloated Pentagon bureaucracy has been largely ignored.
For years, NTU has maintained a steady drum beat against costly, wasteful, and all too often unnecessary projects and programs. These include the risky and highly experimental IIB version of the Standard Missile-3, the costly Medium Extended Air Defense System, the superfluous F-35 joint strike fighter engine, the unreliable V-22 Osprey, and the similarly beleaguered F-35B aircraft - just to name a few!
At a time of record spending and debt, with tough cuts looming just over the horizon, it can be hard to understand why programs with obvious, severe flaws that make little budgetary or strategic sense aren’t simply discontinued. This article from CNN, “Army to Congress: Thanks, but no Tanks,” articulates just how wasteful some defense spending can be, and just how hard it is to change:
CNN was allowed rare access to what amounts to a parking lot for more than 2,000 M-1 Abrams tanks. Here, about an hour's drive north of Reno, Nevada, the tanks have been collecting dust in the hot California desert because of a tiff between the Army and Congress.
The U.S. has more than enough combat tanks in the field to meet the nation's defense needs - so there's no sense in making repairs to these now, the Army's chief of staff Gen. Raymond T. Odierno told Congress earlier this year.
If the Pentagon holds off repairing, refurbishing or making new tanks for three years until new technologies are developed, the Army says it can save taxpayers as much as $3 billion.
But guess which group of civilians isn't inclined to agree with the generals on this point?
To be exact, 173 House members - Democrats and Republicans - sent a letter April 20 to Defense Secretary Leon Panetta, urging him to continue supporting their decision to produce more tanks.
That's right. Lawmakers who frequently and loudly proclaim that presidents should listen to generals when it comes to battlefield decisions are refusing to take its own advice.
You need to read the whole thing. The article goes on to describe the toxic combination of deep-seated special interests, campaign donations, and jobs that are spread out through as many congressional districts as possible for maximum influence. As former NTU staff member Andrew Moylan put it back in July:
The Defense Appropriations bill before the House this week spends $3.1 billion more than was even requested by military leaders. When you're outspending the wishes of budget-hungry bureaucrats, that's a serious problem.
It’s clear that despite the obvious problems and even more obvious opportunities to save money without negatively impacting our national security, there’s a serious lack of political will to enact the real reforms that are so urgently needed.
Sadly, when big government and big business collude in this manner it’s the taxpayers who end up on the hook for things like the 2,000 tanks gathering dust in the desert. And while it’s true that halting the pointless production of ever more unwanted tanks and other machines will mean a loss of jobs, what the candidates aren’t talking about it the increased prosperity that can flourish in other areas when funds aren’t so dramatically misallocated. Cutting spending means less borrowing and debt, decreasing the enormous drag on our economy. If taxpayers don’t have to shell out for a fighter jet engine we don’t need, that’s money that will still do enormous economic good, that has untold potential.
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Pentagon's Bad Bookkeeping Helps GAO Scoop Ig Noble Prize
Each year, the creative people at Improbable Research honor “achievements that first make people laugh, and then make them think” by awarding the Ig Nobel Prize in fields such as physics, fluid dynamics, peace, and chemistry to name a few. While denizens of DC might not be familiar with the great work of Rouslan Krechetnikov and Hans Mayor, who finally unlocked the secret as to why coffee spills when walking, many will recognize the winner of this year’s prize in Literature: the U.S. Government General Accountability Office (GAO).
Founded in 1921 by the Budget and Accountability Act, it is the role of the GAO to investigate “how the federal government spends taxpayer dollars.” To this end it conducts audits, examines the performance of programs, and keeps an eye on our growing debt. As the number crunchers in Congress it is surprising that they would be so honored for their work in literature.
The winning piece, published in May, is called “Actions Needed to Evaluate the Impact of Efforts to Estimate Costs of Reports and Studies.” If that gripping title isn’t enough to make you pick up the report immediately for a quick read, the piece was summarized thusly for the Ig Noble Awards:
The US Government General Accountability Office, for issuing a report about reports about reports that recommends the preparation of a report about the report about reports about reports.
It would be easy to dismiss this as yet another reason why we can’t have nice things – because the government spends time and taxpayer money on reports about reports about reports. But a quick glance at the summary reveals a far more sobering side to the funny report. Everyone loves a good report about a report about a report, but the underlying story is about how poorly the Department of Defense (DOD) estimates costs by deviating from the accounting standards published by the GAO and using inconsistent practices that can miss the full scope of DOD costs. GAO points out that not only are costs going unaccounted for, but also DOD cost estimates are lacking when it comes to documentation and accuracy.
With defense spending at the center of sequestration discussions and serious belt tightening needed across the board to halt our out of control spending, it is disconcerting to find that this budgetary third rail can’t even begin to get its books in order. It is unjustifiable that when defense spending consumes 25% of the federal budget of government spending, the DOD can’t say exactly where that money is going.
The Ig Nobel award points less to any dysfunction on the part of bureaucrats at GAO than it does to the extreme bookkeeping ineptitude at DOD that necessitated the report in the first place. In light of looming cuts and repeated failed attempts to root out waste at the Pentagon, Sens. Coburn (R-OK) and Manchin (D-WV) have introduced S. 3487, the Audit the Pentagon Act.
Writing in the Washington Examiner, Coburn explains:
Auditing the Pentagon is critically important not just because it is the law but also because our ignorance of how we spend defense dollars undermines our national security. When the Pentagon can't tell Congress -- or itself -- how it is spending money, high-priority defense programs face cuts along with low-priority programs, the exact situation in which we find ourselves today under sequestration. In short, this bill helps the Pentagon to help itself. For instance, the United States Marine Corps did a study in which the corps found that "for each $1 spent on financial improvement, an estimated $2.77 in value was created for the warfighter." A thorough financial audit, done correctly, will free up existing resources for national security.
DoD's inability to pass an audit has potentially wasted billions and undermined our readiness and morale. For example, as Sen. Manchin has noted, while DoD is considering laying off service members, the Pentagon overspent $8 billion -- almost half of NASA's budget -- on information technology programs that are failing in part because DoD's books are such a mess. This would be enough money for more than 15,000 active-duty troops.
Some of the more egregious wastes of taxpayer funds at DOD such as microbreweries and an iPhone app for monitoring caffeine intake are themselves deserving of Ig Nobel prizes. CBS reports:
Pentagon dollars also funded studies that concluded:
- Men are perceived as more muscular if they're holding a gun, instead of tools.
- New Yorkers and Californians use different regional slang on Twitter.
- The first prehistoric bird probably had black feathers.
- The same basketball teams will always dominate March Madness.
Though the Ig Nobel award ultimately lampoons the extremely serious lack of financial accountability at the Pentagon, on the bright side according to a summary of this year’s prize winners and ceremony, GAO did not send a representative to the ceremony last week at Harvard University, thus saving taxpayers money. Had it been the Pentagon receiving an award for any of their wasteful studies, it would no doubt have involved a full report on The Curse of the Bambino and a flyover.1 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: September 12, 2012
Today’s Taxpayers News!
A number of Democrats in the House and Senate appear willing to work with Republicans in order to formulate a plan for debt reduction through friendlier tax structures. But will the President be willing to compromise as well?
Hundreds of groups which represent business, including the U.S. Chamber of Commerce and the National Federation of Independent Business, sent a letter to President Obama and Congress. The Groups beseeched lawmakers to address the fiscal realities that lay before us and work to avoid the sequester and its assortment of tax hikes and spending cuts.0 Comments | Post a Comment | Sign up for NTU Action Alerts
The Late Edition: September 11, 2012
Today’s Taxpayers News!
NTU’s Pete Sepp wrote a piece for The Hill commending the Senate Appropriations Committee’s decision to direct funding towards the SM-3 missile defense program known as Block IB. This program would be ready for use earlier than the second option, Block IIB; and is a less costly, but proven, option.
On November 6th Californians will vote on a ballot measure, “Proposition 30”, which would increase sales taxes by one-fourth of a cent and add a surcharge to those with incomes exceeding $250,000 a year.
Asserting that California’s fiscal recovery is imperative in order for the rest of the nation to pull out of the economic downturn, the US Chamber of Commerce has revealed its California Jobs and Growth Agenda; which offers the Golden State real solutions for balancing its budget and revitalizing its economy.
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