There is no shortage of bad ideas making the rounds in DC, but every now and then a proposal comes along that is so illogical and/or opportunistic that one wonders how it could be seriously suggested. This week’s entry will discuss several ideas that seem to fall into this category. I. Rob Peter to pay Paul – As entitlement programs go, a paid family leave (PFL) program is politically attractive. Republicans may be inclined to support PFL because it’s pro-worker and pro-family. Democrats can see it as pro-female. And it’s reported that many other countries (not so wealthy as the United States) already provide this benefit for their workers, so surely it would be appropriate to provide a similar benefit here.
Just one little problem: given that existing entitlement programs are already fueling a developing fiscal crisis and will inevitably have to be cut back in some fashion, why in the world should the government create yet another entitlement program rather than leaving it up to the private sector to decide whether workers will receive paid family leave or not? Don’t count on finessing fiscal problem, part D, 3/5/18.
Spending for entitlement programs, e.g., Social Security & Medicare, has far outstripped initial estimates and now constitutes over half of the federal budget. There has been corresponding shrinkage in the funds available for traditional government functions (e.g., defense), which goes a long way towards explaining the growing reliance on budget deficits to "make ends meet."
But “where there’s a will there’s a way,” as the saying goes, and a funding scheme for PFL was suggested (with the backing of first daughter Ivanka Trump and GOP Senators Marco Rubio & Mike Lee) that would supposedly provide this benefit in a fiscally responsible manner by deferring Social Security retirement benefits for workers who receive current PFL benefits.
What could possibly go wrong? For one thing, it would take decades to claw back the money (which by the way would come out of the US Treasury initially because there is no money in the Social Security trust funds), whereas a fiscal meltdown is a relatively near-term threat. Also, the individuals concerned might well claim when the time came that they were being unfairly deprived of the retirement benefits that everyone else was receiving and forced to continue working longer than they wanted. Ibid.
Notwithstanding the force of such arguments, in our view, the PLF/Social Security proposal remains in play – one more example of the desire of our political leaders to keep the spending party going on the national credit card. And the numbers involved are substantial. Why using Social Security for paid family leave is a bad idea, Rachel Greszler, dailysignal.com, 7/19/18.
The proposal’s authors estimated that workers could receive two weeks of paid leave for every one week of delayed retirement benefits (a 2-to-1 ratio). However, The Heritage Foundation estimated that it would cost workers up to twice that (a 1-to-1 ratio), and the Urban Institute estimated that the cost would be four times as much (a 1-to-2 ratio).
Moreover, the American Action Forum estimated that it would add $226 billion in government debt between now and 2034, when the notional Social Security trust fund is slated to run dry. [And] that’s all if the proposal stays as limited as its authors envision. If the proposed paid family leave program follows the same path as every other entitlement benefit in the history of the United States, its costs would be exponentially higher.
II. Conceal the cost – It’s trendy to give credence to the manmade global warming theory, after all who wants to be accused of being out of touch with the messaging in our educational system, the media, etc. See, e.g., Climate change in the American mind, key findings, yale.edu, May 2017.
Selected results, expressed in percentages of Americans: 70% say global warming is happening; 58% say it’s “mostly human caused”; 35% say people in the US are being harmed “right now”; 7% say “humans can and will successfully reduce global warming.”
At the same time, there isn’t much evidence that this issue is high on the agendas of most Americans – despite the hyperbolic claims of some global warming alarmists. Gallup poll: no one believes “climate change” is America’s biggest problem, Thomas Williams, breitbart.com, 7/22/18.
Immigration 22%, dissatisfaction with government 17%, race relations/racism 7%, unifying the country 6% *** environment/pollution 2%.
Small wonder, therefore, that legislation to impose a statutory cap and trade plan fell short in 2009-10, after which the Obama administration gave up trying to work with Congress in favor of dubious administrative schemes for penalizing fossil fuel energy. SAFE to Congress: Bin the Clean Power Plan, 6/16/14.
In sum, if the costs of energy conservation/alternative energy programs are spelled out clearly, Americans won’t be very receptive to paying for them.
Currently, the Environmental Protection Agency is focused on rolling back some administrative decrees adopted under the previous administration, including the Clean Power Plan. And in recognition of the current political realities, global warming alarmists have been trying to come up with a Plan B that can attract bipartisan support.
Thus, the Citizens’ Climate Lobby (said to represent 100,000 grass roots members) has been supporting “a carbon fee-and-dividend” proposal, which differs from a carbon tax in that fees collected from CO2 emitters would be paid out to consumers instead of being banked by the Treasury. Whee, emitters have to pay – which will encourage them to change their ways – while consumers get their money back. And some big names are backing the concept. Climate change fighters turn to Republicans, John Siciliano, Washington Examiner, 6/19/18.
One of the plans being circulated is the “Carbon Dividends Plan” suggested by James A. Baker and George Schultz, former Treasury secretaries under former President Ronald Reagan and Richard Nixon, respectively. *** The Baker-Schultz plan, which is similar to the climate lobby’s fee-and-dividend idea, is being floated by the Climate Leadership Council, a coalition formed last year that includes a diverse array of founding members, from Exxon Mobil and Shell, to the Nature Conservancy and the late Nobel Prize-winning physicist Stephen Hawking.
The costs involved in collecting the fees and then distributing them would be considerable, and there might well be some issues about the amount of dividends to energy consumers (all individuals and businesses in the country). It’s not hard to imagine politicians on one side of the aisle or the other aiming for some sort of wealth redistribution result. And even if the process wasn’t abused in this respect, the net effect would be that emitters would offset the fees by raising prices so there wouldn’t be any real reason for them to change their business practices.
A variation on the theme is to impose a carbon tax (which would be far more efficient than attempting to regulate every source of carbon emissions, except that the existing regulations probably wouldn't be abolished) and then use the proceeds for subsidies to help alternative energy firms get up and running and also eliminate the federal gasoline tax. GOP will back carbon tax if tied to innovation, tech group predicts, John Siciliano, 6/25/18.
The Information Technology and Innovation Foundation issued the report on Monday, describing why Republicans and conservatives would get behind a tax on carbon dioxide emissions, because it's more efficient than federal regulations, places less stress on businesses and the economy, and makes the US a technological leader while increasing jobs. *** Eighty-four percent of registered voters, including 72 percent of Republicans and 68 percent of conservative Republicans, "support action to accelerate the development and use of clean energy," according to the report.
Under this approach, consumers would be paying real taxes. Subsidies to alternative energy firms would put government bureaucrats in the position of picking winners and losers, which is inherently troublesome as it spawns waste and corruption. And the most obvious goal of raising taxes would be ruled out, namely reducing and in time hopefully eliminating deficits. Bad as the “carbon fee-and-dividend” approach is, this tax-and-subsidy alternative would be far worse. Fortunately, indications are that it’s not going anywhere. Conservatives get ready to battle a GOP carbon tax bill, Josh Siegel, Washington Examiner, 7/23/18.
“There is a real interest in pretending this is a live issue, but it’s not,” Grover Norquist, the founder and president of Americans for Tax Reform, told the Washington Examiner. “What they do is say some Republicans like the idea of the carbon tax. But it will never ever happen. The Republican Party has made it very clear that they are overwhelmingly opposed to a carbon tax.”
III. Claim unrelated revenue – It would be hard to gainsay the desirability of appropriate maintenance for America’s national parks, but with discretionary spending under fire these days it’s not necessarily easy to come up with enough money through the normal budget process. As of 2017, the maintenance backlog stood at $18B for Interior Department facilities ($11.6B for the national parks alone). Then was born the genius idea of dedicating energy revenues from government lands to this purpose rather than ceding them to the Treasury.
The initial reaction from the current minority party was mixed. While supporting park maintenance, some Democrats were concerned that the plan would be used as a wedge to seek approval for additional oil and gas leasing. Keep it in the ground! Democrats fight over [Secretary of Interior] Ryan Zinke’s plan to use energy revenue to fix national parks, Josh Siegel, Washington Examiner, 4/24/18.
“We are going to be incentivizing extraction of oil and gas,” Rep. Raul Grijalva of Arizona, the top Democrat on the House Natural Resources Committee, told the Washington Examiner. “I understand the desperation some Democrats feel as it pertains to the maintenance backlog, and I absolutely agree with them. I am willing to talk. But the premise of the plan is the more extraction, the more we take care of the backlog. And that's backwards.”
Last week, it was reported that the top Republican and top Democrat on the House Natural Resource Committee – Rep. Rob Bishop (R-UT) and Raul Grijalva (D-AZ) - had struck a deal on the issue. Instead of an up to $18B pot of money over 10 years, the new proposal would create a $6.5B pot over 5 years. And the funding would be based only on unallocated energy revenue that is already due to the federal government from leasing on public lands. Top House Republican and Democrat reach deal to use energy revenues to fix national parks, Josh Siegel, Washington Examiner, 7/24/18.
OK, so what? This certainly isn’t the only case in which designated revenues have been earmarked for a particular purpose. FICA taxes/Social Security program – gas taxes/ highways, bridges, etc. – filing or user fees/government agencies – etc. And where there is a clear connection involved between revenues and expenses, such a connection may be quite appropriate.
In the national park case, however, there doesn’t seem to be any basis for connecting the maintenance expenses to the energy leasing revenues. And if this kind of fiscal balkanization is allowed to go on, it will work against the efficient management of the overall fiscal equation (allocation of revenues to highest priority needs). Also, the optimal solution might be to raise user fees for the national parks rather than appropriating more money to maintain them.
Shame on the Trump administration for coming up with this revenue diversion scheme and on congressional members for partially going along with it. To be complete, however, some conservatives are less inclined to be sticklers about proper procedure than we are. Win-win-win: Fixing national parks, protecting taxpayer, producing energy, Washington Examiner, 7/29/18.
IV. Add to woes of the USPS – It’s been suggested that the US Postal Service needs to be run more like a business. They can’t continue to support the current organization with an eroding volume of business (due to internet competition), and one price increase after another will simply speed the volume decline. Time to consider some fundamental changes, including less frequent deliveries, consolidation of facilities, and sale of surplus real estate.
There aren’t any silver bullet solutions, but one of the fundamental problems is that the government hasn’t given the USPS management much running room. There’s more than one reason the Postal Service is losing money, Kevin Kosar, thehill.com, 1/12/18.
Laws and political pressures harry its every effort to reduce delivery frequency (presently mandated at six days per week) and shutter money-losing post offices. By law, the vast majority of all USPS positions are held by unionized federal employees who have robust job protections. The USPS’s ill-fated effort to install postal counters at Staples shows just how costly these protections can be – this consumer-friendly, low-cost initiative was struck down by the National Labor Relations Board because it dared to allow Staples employees to sell postage and receive parcels for shipment.
So would this be a good time for the USPS to start providing banking services to its customers? The junior senator from New York so recommended, but it’s not clear that the suggestion was aimed at reducing business losses. Sen. Kirsten Gillibrand May 2018 Porker of the Month, Citizens Against Government Waste.
On April 25, 2018, [Gillibrand] introduced S. 2755, the Postal Banking Act, which would force USPS to expand its operations into “financial services.” She called the postal service “a system that already works,” and said that expanding the failing agency is an “elegant solution.”
Here’s a wicked video (1:41) about the CAGW award. Enjoy!
# CAGW’s “porker of the month” videoclip was amusing. – College classmate
#Social Security taxes were raised earlier than needed, creating an apparent surplus in the trust fund. The proposal to tap this resource for a new entitlement program should be no surprise, even though the money has already been spent for other purposes. – SAFE director