Tag Archives: United States Congress

Crucify! Crucify!

The EPA was directed to set standards for radi...

The EPA was directed to set standards for radioactive materials under Reorganization Plan No. 3 (Photo credit: Wikipedia)

I know we are still in the season of Easter but this is not an Easter story.  By now you’ve heard the news report of EPA Region 6 Administrator Al Armendariz’ remarks at a local Texas government officials meeting in 2010 where he used a crude analogy to describe his “philosophy of enforcement.”

“It was kind of like how the Romans used to conquer villages in the Mediterranean. They’d go in to a little Turkish town somewhere, they’d find the first five guys they saw, and they’d crucify them. And then, you know, that town was really easy to manage for the next few years. You make examples out of people who are in this case not complying with the law … and you hit them as hard as you can” — to act as a “deterrent” to others.”

Apologies have dutifully now been issued disclaiming these remarks and called them out as not reflecting the Administration’s policy on enforcement.  But the reason the video clip went viral is that it rings so true of what many have come to believe is, in fact, the Administration’s policy.

This comes on the heels of a unanimous Supreme Court Decision in Sackett v US EPA where the Court overturned an enforcement order of the EPA which sought to fine a couple thousands per day in civil penalties for the temerity of challenging an EPA decision that building a house on their own property was a violation of the Government’s wetlands policy.  The decision overturned longstanding precedent that enforcement orders must be challenged administratively before an action is taken to court.

The Regulatory Process is Not Serving the Public Interest

These examples are easy to focus on, but the bigger issue is the pervasive, creeping and creepy over reach of regulation that once just strangled the economy but now is being used to pursue a political agenda the Administration has been unable to get approved by the Congress.

There is a de facto war on fossil fuels being pursued by the EPA.  The rush of new regulations is focused on getting as much done in the first term as possible administratively, perhaps out of fear there may not be a second terms or that the Democrats will lose the Senate.

Congress is also to blame big time for this mess.  It writes laws that are vague or ill-considered and leaves it up to bureaucrats to define the details and sort out the problems.  The Code of Federal Regulations now consists of thousands of pages of rules bearing only a vague resemblance to their authorizing legislation.

We can do better than this:

  1. Require that rules must either be incorporated directly into legislation or proposed as a companion rulemaking by affected parties BEFORE Congress passes the law. Force the parties to work out their differences before the law is passed and embody the rules in the law.
  2. Require that EVERY regulation contain a sunset date of not more than 7 years.  The law and every rule adopted pursuant to it should expire unless it is reauthorized by Congress.  This requirement would be applicable to EVERY existing rule which should be subject to sunset review.
  3. Require that NO rule may be proposed without a cost benefit analysis based upon standard objective criteria applicable to all regulation for calculating cost and benefits.  No rule may be published if the results of the cost benefit analysis show that the costs outweigh the benefits.  The cost benefit study may be challenged as not meeting the standard objective criteria before an Administrative Law Judge to decide whether the rule meets the cost benefit test.
  4. Require that Congress much approve EVERY regulation imposing a cost of more than $100 million on an up or down vote to be taken within 90 days of submittal of the rule to Congress or else it is automatically rejected.

These steps would clarify that regulations are designed to cost effectively and fairly implement specific policies adopted by Congress.  It clarifies that rules are not a separate process for pursuing political agendas.  It levels the playing field giving business an equal opportunity in the rule making, enforcement and sunset review process with other interest groups.  It forces ALL SPECIAL INTERESTS to work out their differences BEFORE laws are passed and rules proposed or have those interests framed to be decided in an up or down vote for all to see.

The Debt Deal that Wasn’t!

GAO Chart Forecast Debt % to GDP

Image via Wikipedia

After all the headlines and wailing as the US marched like lemmings to the cliff over deficit spending, the last minute debt deal was passed off as a tough bargain that both sides hate.  Fitch and Moody’s reaffirmed the AAA credit rating and Congress went on to other business proud of its accomplishment.

After the adrenalin dissipated we’re learning more about the ‘real deal’ adopted—it’s not pretty.

  1. The $917 billion in current year spending cuts to satisfy Republicans aren’t really spending ‘caps’ not spending cuts. It means that Congress agreed to modestly reduce the amount of the increase in debt ceiling they actually will spend to an ADDITIONAL $917 billion but even these limits are spread over 10 years and back loaded.  The Congressional Budget Office (CBO) estimates that $9.5 trillion in new debt will be needed 10 years to cover the spending expected and the net result of these “cuts” will be $7.1 trillion MORE DEBT by 2021.  The Bottom Line:  Only about $25 billion in actual cuts will be made is 2012 and $47 billion in 2013.  This is rounding error in the Federal budget.
  2. By Thanksgiving 2011 a Joint Committee of Congress is supposed to propose a second round of ‘cuts’ totaling $1.2 to $1.5 trillion to also be effective over ten years. If Congress fails to act then automatic across the broad cuts are to go into effect.  But the fine print tells us none of these cuts take effect until at least 2013 and nothing prevents a future Congress—say one safely re-elected—from changing these rules.  The Bottom Line:  This is how we got to $14 trillion in debt. Nothing in this debt deal is changing that or even seriously modifying the pace of deficit spending.

And the only reason the parties agreed to an up or down vote on the balanced budget amendment is that they know there is no prayer of getting the 2/3 vote in each house of Congress to pass it.

There is only one word to describe what has happened —-DISGUSTING!

US EPA and the Five Fictions

Spilled Milk Felon Escapes

US EPA Administrator Lisa Jackson made a rare appearance on Capitol Hill March 10th unable to avoid running the gauntlet any longer over growing criticisms of overreach by her agency.  She tried her best to deny the allegations and diffuse expected criticism by taking on the “five fictions” as she called them about EPA intent.

Those five fictions are that EPA seeks to:

  1. Impose a so-called “cow tax,” in which emissions from cows will be regulated.
  2. Regulate spilled milk under regulations for oil containment facilities
  3. Expand regulations on dust from farms
  4. Regulations blocking pesticides from drifting away from farms
  5. Impose limits on pollution from “nutrients” like fertilizer and animal manure.

Do you see a pattern here?  This was not the energy and utility crowd going after Ms Jackson.  It was not the coal or natural gas or oil lobby.  It was not truckers or auto manufacturers.

No!  Lisa let her agency step in the farm business and she is having a tough time getting it off her shoes. She did her best to deny that EPA was engaged in any of these ‘regulatory fictions’ but the facts were clear to the farmers, ranchers and their lobbyists who had successful beat back attempt to impose new rules in each of these areas.

They were only too happy to give the Republicans in Congress the ammunition to throw manure on the EPA attempts to go after them and make sure the stink sticks long enough to convince Ms Jackson to leave them alone.

How to have Happy Endings for ‘SOTU Dates’ in Congress

No, I’m not talking about disgraced Congressman Lee (R-NY) who resigned this week after a solicitous photo from Craigslist ‘exposed’ the 46 yr old married politician with his pants down.

Remember in the run-up to the president’s state of the union message the political buzz was that Democrats and Republicans were pairing up to sit together to show the American public their willingness to work together.  Of course, we were suspicious of this as a stunt by politicians who cannot resist the warmth of TV camera lights.

But will any of these dates produce a happy ending?

Gallup conducted a poll of voters asking what actions they most wanted Congress to take in 2011 testing the potential for compatibility of these dates. Given the politics of Capitol Hill the voters surveyed were clear about just how far they want their Congressional representatives to go on their next date.

The surprise in the voters answers suggest a ‘hook-up’ Democrats and Republicans in Congress on several key issues American public WANTS them to do.

Wipe that grin off your face and listen.  The constant bickering and sparing for political points turns off most Americans, but the eHarmony or match.com ‘dates’ from the SOTU stunt might actually blossom into a romance Americans would support if the partners focus on their measures of compatibility.

Here are the questions and answers from that poll:

QUESTION: I’m going to read a list of actions Congress could take this year. Please say whether you strongly favor, favor, oppose or strongly oppose Congress doing each of the following this year. How about –

Total % Favor Total % Oppose
Pass an energy bill that provides incentives for using solar and other alternative energy sources 83 15
Pass a bill to overhaul the federal tax code 76 14
Speed up the withdrawal of US troops from Afghanistan 72 25
Pass an energy bill that expands drilling and exploration for oil and gas 65 33
Approve a free-trade agreement with South Korea 53 35
Pass stronger gun control laws 49 50
Take steps to deny automatic citizenship to children born in the US whose parents are illegal immigrants 44 54
Pass a bill to give some illegal immigrants living in the US a path to legal status 43 55

Source: Gallup, based on polling on Jan 14-16, 2011.

See what I mean?

  • Happy Ending # 1:  Renewable Energy + Drill, Baby, Drill. More than 85% favor creating incentives for solar and other clean energy sources on the one hand, but 65% also want the barriers removed for more domestic oil and gas exploration because we worry about energy security and believe keeping more of our money at home rather than spending it on imported oil is better for the country.  But don’t let China buy up all that new oil and gas we’re finding before we can use it for ourselves.
  • Happy Ending # 2: Pimp My Tax Code Till it Feels Good. If the parties got together to streamline the Federal Tax Code not only would they save us tons of frustration but a ton of money now spent gaming the tax system could be redeployed to useful, value-creating work.  Americans think we are falling behind because lobbyists have larded up and abused the tax system to intrude in our lives and choices.  Get your hand out of my pants pocket—unless you are serious about happy endings for all is the message.
  • Happy Ending #3: We are the Superpower Economic Champs—Keep it that way! There is only so much treasure we are willing to spend on a corrupt Afghan government—buy more drones and bomb the bad guys, but bring the troops home.  Meanwhile, quit pissing off our friends and allies like South Korea and approve the dang free trade agreement.  Besides we’re going to need South Korea to build all those new nuclear power plants before China reverse engineers all our technology.
  • Happy Ending #4:  Stay Away from Immigration, Gun Control and other Hot Button Issues. No happy ending is yet possible on these issues so don’t waste your time on them until after you fix the important big stuff above.

Isn’t dating fun?

Push the Regulatory Reset Button

President Barack Obama tried to seize the agenda from Republicans in Congress saying in an opinion piece in the Wall Street Journal that he would order a government-wide review of regulations to eliminate those that discourage job creation or weaken America’s economic competitiveness.

“It’s a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades,” the President said.

Congress should complement the President’s words backing them up with the following actions:

BALANCE OF INTERESTS TEST.  Congress should require that Federal agencies balance the health, safety, environment and the economic best interests of the nation in adopting any rules just as the President suggested only put it in law.  This would force agencies to consider all sides of an issue and propose a solution, based upon the preponderance of the evidence that represents a fair and reasonable balancing of the competing interests.

CONGRESSIONAL APPROVAL.  Congress should reclaim its legislative powers by requiring that every new Federal regulation be submitted to Congress for approval before it goes into effect and require a recorded up or down vote, no amendments or earmarks allow, on the rule within 90 days of submittal to affirm legislative intent or force it to be rewritten.

SUNSET ALL REGULATIONS.  Every regulation should be subjected to a continuing needs test by requiring Congressional re-authorization at least once every five years or the rule lapses.

If Congress and the Administration are serious about restoring confidence, easing the uncertainty over future regulations and encourage job creation these actions send a loud and clear message.

Redistricting Revenge of the Voters

By approving Proposition 20 assigning the independent California Redistricting Commission the authority to apportion Congressional as well as State Legislative District lines, the voters are sending a clear message—-the good old days are over for entrenched politicians of both parties.  Voters also changed the primary election rules so that the top two vote getters—no matter what party—advance to the general election ballot.

California’s 53-seat delegation in the US House of Representatives includes 34 Democrats and 19 Republicans, but the population estimates tell us that people are moving eastward in the state out of the Bay Area and Los Angeles to the Central Valley and Northern California. That population shift within the state could also have profound effects on district boundaries.  It seems highly likely that many of California’s entrenched Democrat legislators could feel the heat. In the 265 House races in California since districts were last redrawn, only two incumbents seeking re-election have been voted out.

For the first time in its 160 year history California will not gain a seat in Congress after this census because more people are moving out than moving into the Golden State.  This itself is a biting indictment of California’s current predicament and it exacerbates a range of policy and other problems ranging from the budget deficit, school funding and economic growth and jobs creation.

The Independent California Redistricting Commission is taking shape as the pool of candidates is winnowed down in a lottery like drawing.  Legislative leaders had an opportunity to exercise preemptory challenges in the first cut list, now the second draw has been completed by the state auditor, the final six commissioners will not be selected the same way by those chosen so far to complete the panel of 14.  The Redistricting Commission is expected to complete its work next summer.

Other things  legislators must worry about in 2012 include—-Florida voters also stripped the Legislature of the redistricting authority assigning it to an independent body and population estimates suggest Texas will pick up as many as 4 new Congressional seats at the expense of Northeast states like New York and Pennsylvania where the population is moving south and west.

Our election roadmap is changing dramatically because of the natural forces of demographics and migration but those changes are being amplified by action of the voters to make their legislative contests more competitive as a consequence of legislative reapportionment.

Social Security Futures

I stumbled across an interesting article in American Thinker about the dilemmas with social security.  It led me to a Congressional Budget Office analysis of the sufficiency of the funding for Social Security and the options for fixing the problem before the fund runs short.

The good news was there are indeed options to fix the Social Security problem—the bad news is we need for Congress and the President to pick one by 2016 when CBO estimates the Social Security fund will persistently pay out more than it takes in as we baby boomers retire.

“In calendar year 2010, Social Security’s outlays will exceed tax revenues (that is, the trust funds’ receipts excluding interest) for the first time since the enactment of the Social Security Amendments of 1983. Over the next few years, the Congressional Budget Office (CBO) projects, the program’s tax revenues will be approximately equal to its outlays.

However, as more of the baby-boom generation (that is, people born between 1946 and 1964) enters retirement, outlays will increase relative to the size of the economy, whereas tax revenues will remain at an almost constant share of the economy.

Starting in 2016, CBO projects, outlays as scheduled under current law will regularly exceed

tax revenues. CBO projects that the DI trust fund will be exhausted in 2018 and that the OASI trust fund will be exhausted in 2042. Once a trust fund’s balance has fallen to zero and current revenues are insufficient to cover the benefits that are specified in law, a program will be unable to pay full benefits without changes in law.”  —CBO 2010 Analysis of Social Security

So what?

So it turns out there are options to close the revenue gap for Social Security payments and some options are more onerous than others.  The options chart above from that American Thinker article suggests that the fastest, easiest fix would be to index Social Security payments to prices rather than prices and earnings growth.  Like the article I thought that was how Social Security worked anyway.

2011 Taxes Remain in Limbo

In my email this morning was this message from Charles Schwab about their take on what Congress might do with tax rates:

 

2011 Taxes Remain in Limbo
Michael T. Townsend
Vice President, Legislative and Regulatory Affairs, Charles Schwab & Co., Inc.
September 29, 2010

Key points

  • Unless Congress takes action, most Americans will see their taxes rise next year.
  • We handicap the likely outcomes of the tax debate.
  • Helpful information for all investors and taxpayers.

Congress returned to Washington in mid-September with relatively few “must do” items on its list. But the one topping that list is a biggie: dealing with impending tax increases that could affect virtually every American.

The Bush-era tax cuts enacted in 2001 and 2003 are set to expire at the end of 2010. If Congress does not act, most Americans will see a tax increase in 2011 as income-tax rates rise, taxes on capital gains and dividends increase, and the estate tax—currently at zero—returns in a big way.

The deadline isn’t a surprise to lawmakers—it’s been looming for years. However, as the calendar turned from summer to fall, there was little indication that a solution was coming anytime soon. Congress will wait until it convenes after November’s mid-term elections in a “lame duck” session to resolve the tax conundrum.

Here’s our analysis of the likely outcomes of the tax debate, and the political hurdles that must be overcome to reach agreement.

First possibility: Congress does nothing
Odds: 10%
Under current law, all of the tax cuts are set to expire December 31, 2010, with rates reverting (in most cases) to their pre-2001 levels. The 10% bracket would disappear completely, and the other tax brackets would rise (see chart below). In addition, the per-child tax credit would fall from $1,000 to $500, and the “marriage penalty”—married couples filing jointly getting a smaller deduction than if they filed separately—would return.

Capital gains taxes would increase from 15% to 20% for all taxpayers, and dividends would be taxed as ordinary income. The estate tax, which was eliminated at the beginning of 2010, would return at a rate of up to 55% on estates valued at more than $1 million.

If Congress can’t agree on an alternative proposal, the old tax provisions would be restored on January 1, 2011. In the pre-election atmosphere, this worst-case scenario will be a popular talking point on the campaign trail, as candidates from both parties point the finger of blame at each other for possible tax increases in 2011.

Realistically, however, once the election is over, it seems highly unlikely that lawmakers will let taxes go up for nearly everyone, particularly given the economy’s continuing struggles. Serious negotiations on a compromise solution will take place shortly after the election.

And even in the unlikely event that the current Congress does nothing, expect the new Congress to act in early 2011 to implement some sort of fix that’s retroactive to the beginning of the year.

Second possibility: Congress approves President Obama’s proposal
Odds: 30%
President Barack Obama has stuck with his long-standing position of allowing taxes to go up only on individuals earning more than $200,000 and couples earning more than $250,000. Under his plan, only the top two tax brackets would increase: The 33% bracket would return to 36%, and the 35% bracket would go back to 39.6%.

In addition, the president has called for taxes on dividends and capital gains to increase from 15% to 20% for filers in those top two tax brackets only. Most filers would see the rate remain at 15%, while the lowest tax bracket would continue to have 0% tax rate on capital gains and dividends.

Finally, President Obama recommends that the estate tax be made permanent at a 45% rate on estates valued at more than $3.5 million ($7 million for couples).

Senate Democratic leaders put forward legislation that mirrors the president’s proposal in late September. However, several key Democrats have publicly expressed concern about raising taxes on anyone given current economic conditions. It doesn’t appear right now that the necessary super-majority of 60 votes in the Senate (where Democrats currently hold a 59-41 majority) is attainable. That could change after the election.

Third possibility: Congress extends all the tax cuts for one or two years
Odds: 50%
The outcome that appears most likely—though far from certain—is that Congress simply extends all of the tax cuts for one or two years. Republicans would unanimously support such a proposal, and several Democrats have signaled their support for the idea. If faced with a choice between letting the tax cuts expire and extending all of them for a year or two, most observers think Congress would choose the latter.

The big stumbling blocks are the budget deficit and an obscure rule governing budgetary items. Extending all of the tax cuts, even for just a year or two, would increase the budget deficit, which is already approaching $1.5 trillion. Many lawmakers are deeply concerned that the massive debt the United States is compiling is creating a hole that may be almost impossible to escape.

Further, under rules known as “pay as you go,” any tax cut must be offset with either spending cuts or tax increases. There are a number of exceptions, including one for income-tax rates for taxpayers with income up to $250,000 ($200,000 for single individuals).

Also, keeping the capital gains and dividends tax rate at 15% would technically require Congress to find approximately $100 billion in offsets, which seems unlikely in the current environment. Congress could just ignore the “pay-go” requirement, but some Democrats are reluctant to do so, since it was they who pushed for this new statutory requirement at the beginning of 2009.

Potential income tax rates for 2011

If Congress extends current law Obama proposal If Congress does not act
10% 10% 15%
15% 15% 15%
25% 25% 28%
28% 28% 31%
33% 36% 36%
35% 39.6% 39.6%

 
Fourth possibility: Some other compromise emerges
Odds: 10%
None of the three options described above yet enjoys broad support. That may change in the weeks ahead, but it also leaves the door open for another proposal to be put forward to resolve the issue.

Some lawmakers have proposed letting the estate tax return to where it was in 2001, while preserving the other tax cuts. Others have proposed dealing just with income tax rates, while allowing the capital gains rate to return to 20% for everyone and dividends to be treated as ordinary income. Other proposals could emerge. At this point, though, the three scenarios outlined above are the main players.

The final complicating factor is the election itself. Republicans are widely expected to make significant gains in both the House of Representatives and the Senate, narrowing the current large margins and possibly even taking control of one or both chambers.

While newly elected members will not take office until January, the lame-duck session looming in November and December is likely to include a number of lawmakers who have lost their seats. Freed from political repercussions, these members could vote in unpredictable ways.

There are numerous moving parts to the tax endgame, and it remains very difficult to predict the outcome. We’ll continue to provide updates as developments warrant.

Did the GOP ‘Pledge for America’ Wimp Out?

“It’s a mealy-mouthed sop to the tea party movement that is rife with platitudes and little on substance, I have yet to see one person who is wholly impressed with it.”Andrew Ian Dodge, Maine state coordinator for the Tea Party Patriots.

That’s the consequence of raising expectations that the GOP has learned its lesson in the wilderness after being turned out of office four years ago.  But while the TEA party movement is energizing the election process on both sides of the aisle, the Republicans have been thumped in their recent round of primaries because the independents who largely make up the TEA party movement just don’t believe many of these entrenched incumbents in reds states any more than they do the Democrats in blue states.

So the Pledge for America was designed to lay out a manifesto for what the GOP would do if voters just gave them another change.  But instead of rolling out the Young Guns who symbolize the future of the party the GOP had John Boehner, the House minority leader—and would be speaker of the house—do the talking.

Click!

That was the sound of channel surfing as viewers and voters switched to something else.  And then the comedians moved in with the ice picks to lay waste to the public relations gimmick.  “Your fresh new ideas, sound slightly – I’m sorry, did I say slightly? – sound EXACTLY like your old ones,” said Jon Stewart slicing the GOP into minced meat.

This is not overconfidence by the Republicans that a landslide election result is already in the bag.  This is worse—it is the voters’ worst fears that there really is NO DIFFERENCE between old donkeys and old elephants.  That is why the TEA party has momentum.

So what should the GOP do?

Start fresh and dump the GOP leaders in Congress just like the Dems will surely do. Pass the leadership to the new generation of Young Guns with fresh ideas and a closer to Main Street sense of the public mood.   Then republish the Pledge after fixing the missing or lame elements to demonstrate they mean business.  The tea party contract calls for a balanced budget, repeal of the health care law, tax reform, an end to earmarks and a rejection of a cap and trade energy plan.  That would be a good place for the GOP to say “ Me too!”