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July 31, 2015

Another Controversial Arlington County Project?

The Arlington Sun Gazette's Scott McCaffrey reports this morning, according to the headline, that "Opponents could mount ballot fight against fire-station relocation."

McCaffrey goes on to report:

"Opponents of the controversial proposal to relocate Arlington’s Fire Station #8 may have come up with a way to stop it – using the ballot box.

"At a July 30 community forum where county fire officials affirmed their desire to move the station from Lee Highway about a mile north to Old Dominion Drive, one critic reminded the audience that while funds to plan the station’s move are in the government’s hands, those for construction costs are not yet available.

"Arlington officials could place funds for the $12 million project on a public-safety bond referendum that will go to voters in November 2016. If that is the case, those opposed to moving the fire station out of the Hall’s Hill neighborhood could mobilize to try and defeat the bond.

"Odds would be long: Arlington voters have not turned down any county bond referendum since 1979, and most referendums pass with 75 percent or more of the vote."

McCaffrey also reported:

"The Arlington County Republican Committee in mid-July affirmed a resolution calling on the county government to carve any project valued at more than $25 million to its own individual referendum. But even if such a policy were to be adopted, it might not apply to the fire station; officials estimate construction costs for a new station at $12 million, although adding in a new headquarters for the Office of Emergency Management could push the total cost closer to the $25 million threshold."

One Arlington County taxpayer who attended last night's meeting reports that at least 300 citizens attended, and filled almost the entire gym.

Arlington County has set-up a webpage for "Fire Station #8 Future Location." Included are a fact sheet, maps, an ongoing list of questions and answers, meeting materials, and response time data. The third meeting is currently scheduled for September 9, 2015 at Yorktown High School. Be sure to sign-up for the e-mail alerts, though.

Growls readers who are Arlington County taxpayers concerned about the relocation of Fire Station #8 are urged to write or call the Arlington County Board. Just click-on the link below:

  • Call the County Board office at (703) 228-3130.

And tell them ACTA sent you!

UPDATE (8/2/15): The Sun Gazette's Scott McCaffrey posted a second story regarding the relocation of fire station #8 with a headline saying, "Many in Hall’s Hill still disillusioned with plan to move Arlington fire station." Here's the first several paragraphs although the entire article should be read:

"Another heavily-attended community meeting left most attendees still angry over both a proposal to move Fire Station #8 out of the Hall’s Hill neighborhood, and the community-engagement process surrounding the plan.

"“Pitting communities against one another? That seems like an old tactic from 60 years ago,” said Marguarite Reed Gooden, among those leading opposition to the proposed station move.

"Gooden was among about 150 people who descended on Langston-Brown Community Center in the heart of the historically black Hall’s Hill community July 30, as county officials again tried to explain their reasons for proposing to move the station from their neighborhood.

"County officials say the process remains open and no decision has been made, but many residents are convinced that is not the case.

“Is this a done deal?” asked Frank Wilson, a neighborhood resident and the longest serving School Board member in county history."

July 30, 2015

GDP Growth, or the Worst Economic Recovery in 70 Years?

The Department of Commerce's Bureau of Economic Analysis released the 2nd quarter 2015 gross domestic product (GDP) statistics this morning.

CNBC posted a Reuters report of that news, which carried the following lede:

"U.S. economic growth accelerated in the second quarter as a pick up in consumer spending offset the drag from soft business spending on equipment, suggesting a steady momentum that could bring the Federal Reserve closer to hiking interest rates this year.

"Gross domestic product expanded at a 2.3 percent annual rate, the Commerce Department said on Thursday. First-quarter GDP, previously reported to have shrunk at a 0.2 percent pace, was revised up to show it rising at a 0.6 percent rate.

"The revision to first-quarter growth reflected steps taken by the government to refine the seasonal adjustment for some components of GDP, which economists said left residual seasonality in the data, as well as new source data."

A chart in the CNBC/Reuters report showed GDP changes for each quarter in 2013, 2014 and 2015 while the chart in the Washington Post report included the quarters for 2012.

Reports from Bloomberg, Fox News, and the Washington Post were similar.

An editorial posted this evening by Investor's Business Daily went one step further, however, by pointing out "the real story isn't found in these latest quarterly numbers. It's elsewhere in the report." They then continued:

"As it periodically does, the BEA revised previous years' GDP numbers, and what it found this time is that growth in almost every quarter since 2012 was weaker than it previously calculated.

"The result is that GDP growth from 2012 to 2014 was just 2%, not 2.3%. In dollar terms, the revisions cut more than $100 billion from the nation's economic pie.

"It also means that President Obama has presided over an economic recovery — now more than six years old — that is far worse than all the previous 10 stretching back 70 years. (emphasis added)

"Even President Bush's recovery from the 2001 recession — widely derided by Democrats and the press for being far too tepid — was stronger that Obama's. After 24 quarters, Obama's GDP is up a mere 13.3%. By this point in the Bush recovery, GDP had grown 18%.

"Looked at another way, if Obama's recovery had been merely average — that is, if it had kept pace with the average of the previous 10 — the nation's economy would be $2.07 trillion bigger.

"That works out to more than $17,000 in lost wealth per household thanks to Obama's subpar growth." (emphasis added)

The Wall Street Journal made much the same point in an editorial (beware WSJ paywall) with a subtitle saying, "New GDP revisions show the worst recovery in 70 years was even weaker." The WSJ's lede said:

"One measure of America’s lowered expectations is that so many economists cheered Thursday’s second quarter growth estimate of 2.3%. It’s a rebound from the first quarter slump! The consumer is resilient, net exports are up, the plow-horse marches on! All true, but those silver linings obscure the larger reality that six long years after the recession ended in June 2009 the American economy has become a slow-growth machine.

"That’s the story underscored by the annual government revisions in historical GDP that accompanied the second-quarter report. The news, which most Americans have long felt in slow-growing wages, is that the worst expansion in 70 years has been even weaker than we thought."

The following chart from the WSJ's report shows just how anemic the current economic recovery really is:

On the Jon Stewart's "The Daily Show" on Tuesday, July 21, 2015, President Obama said, "The economy, by every metric, is better than when I came into office." After going through several sets of economic statistics, the Tampa Bay Times' PolitiFact.com's "ruling" was "Mostly False," saying:

"Obama said, "The economy, by every metric, is better than when I came into office."

"That claim is too sweeping. Certain measures of wages and income, the poverty rate and the duration of unemployment are all worse now than they were when Obama "came into office."

"The statement contains an element of truth but ignores facts that would give a different impression, so we rate it Mostly False."

Enough said?

If you have a few minutes to spare, find out what your members of Congress are doing to build the base for an economic recovery that resembles the recoveries of the 1980's and 1990's than the current one.  We've provided contact information for members of Congress when we growled on July 24, 2015 and in our June 16, 2015 Growls.

And kudos to the editorials in both Investor's Business Daily and the Wall Street Journal.

UPDATE (8/1/15): At the American Enterprise Institute (AEI) blog, James Pethokoukis writes about alternative views of the anemic U.S. economy, and points out the most recent 10-year period is the first since 1945 without a single year of 3% growth. He also links to his weekly column.

July 29, 2015

Prosecution of White Collar Crime at 20-Year Low

A press release from Transaction Records Access Clearinghouse (TRAC) at Syracuse University today, tells us (HT Investigative Reporters & Editors listserv):

"The federal prosecution of individuals charged with white collar crimes is significantly lower than it was 20 years ago, according to thousands of case-by case records analyzed by Syracuse University's Transactional Records Access Clearinghouse (TRAC). Records obtained under the Freedom of Information Act show that the overall decline began under President Clinton, and indicate that for the full 2015 fiscal year under President Obama such prosecutions will be at their lowest level since 1995.

"As categorized by the Justice Department, white collar crime involves a wide range of actions such as health care fraud and the violation of tax, securities, federal procurement and other laws. The decline in such prosecutions does not necessarily indicate that white collar crime is on the wane but may reflect changing and sometimes unannounced enforcement priorities set by the executive branch and Congress.

"The records indicate that during the first nine months of FY 2015, the government brought 5,173 white collar crime prosecutions. If the monthly number of these kinds of cases continues at the same pace until the end of the current fiscal year on September 30, the total will be only 6,897 such matters, about one third (36.8%) fewer than twenty years ago."

The press release then points to the full report, which provides information on "total filings and rankings for each federal district." The following chart comes from the report:

In looking at trends on the chart above, TRAC warns:

"The decline in federal white collar crime prosecutions does not necessarily indicate there has been a decline in white collar crime. Rather, it may reflect shifting enforcement policies by each of the administrations and the various agencies, the changing availabilities of essential staff and congressionally mandated alterations in the laws."

Perhaps more importantly than the 20-year trend chart above are Table 2 and Table 3 in the report, which provide a detailed look at the charges filed and top judicial districts, respectively.

Taxpayers interested in following the work of TRAC can obtain free monthly reports in "categories such as immigration, drugs, weapons and terrorism." In addition, "TRAC's reports also monitor selected government agencies such as the IRS, FBI, ATF and DHS. For the latest information on prosecutions and convictions through June 2015," visit this TRAC webpage.

The TRAC press release provides links where more detailed criminal information is available.

Just curious, but could any of the decline over the past few years be the result of chasing cops and "disparate impact," as suggested by a cyber-friend?

For the record, "TRAC is self-supporting and depends on foundation grants, individual contributions and subscription fees for the funding needed to obtain, analyze and publish the data we collect on the activities of the US Federal government."

Kudos to TRAC for their continuing efforts to provide the public with information about criminal enforcement. You can help support TRAC here.

Better yet, take a few minutes to learn what your members of Congress are doing about white collar crime. We've provided contact information for members of Congress when we growled on July 24, 2015 and in our June 16, 2015 Growls.

And tell them ACTA sent you.

July 28, 2015

National Health Spending Jumps 5.5% in 2014

In a column for tomorrow's Investor's Business Daily, John Merline writes, "After trending downward since 2002, national health spending jumped 5.5% in 2014 — the steepest climb in seven years — as ObamaCare's Medicaid expansion and insurance subsidies took effect, according to the latest data from the Centers for Medicare and Medicaid Services."

Merline continues, writing:

"Spending by the federal government jumped 10.1% last year, compared with 3.5% in the private sector, the report shows.

"The finding runs counter to repeated boasts by President Obama that ObamaCare had ushered in the lowest rate of health spending growth in decades.

"CMS data show that between 2002 and 2009, the annual growth rate in spending dropped steadily from 9.6% to 3.8%, where it hovered until last year. Credit for the slowdown was attributed to previous Medicare reforms, the rapid growth in "health savings account" type plans, and in more recent years the recession and slow economic recovery.

"The latest forecast projects that annual spending increases will average 5.8% over the next decade, which the report, published in the journal Health Affairs, attributes to "the Affordable Care Act's coverage expansions, faster economic growth, and population aging."
In conclusion, Merlines says, "The report also notes that by 2024, the government will account for 47% of national health spending, up from 40% in 2007."

Sounds like time again to crack open my well-worn copy of James Bacon's "Boomergeddon: How Runaway Deficits and the Age Wave Will Bankrupt the Federal Government and Devastate Retirement for Baby Boomers Unless We Act Now."

As Jim explains at his popular blog, Bacon's Rebellion, "Boomergeddon is the day investors stop buying U.S. Treasuries — the day the U.S. government goes into default, the global economy is thrown into turmoil, the American empire begins to crumble, and the social safety net starts to unravel. Buy the book here."

Here are two book reviews of "Boomergeddon." One at Financial Post by Jonathan Chevreau.  Here's a second by Rick Sincere.

July 27, 2015

CAGW Names July Porker of the Month

Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.

Citizens Against Government Waste (CAGW) announced today that they have "named Rep. Stephen Fincher (R-Tenn.) its July Porker of the Month for his efforts to resurrect the wasteful Export-Import (Ex-Im) Bank." CAGW justified their selection this way:

"The Ex-Im Bank is an independent government agency that was founded in 1934 to help encourage U.S. exports.  The bank provides taxpayer-backed direct loans, guarantees, and export credit insurance, which totaled $27.5 billion in fiscal year (FY) 2014.

"Rep. Fincher has a long and winding history with the bank.  Elected in 2010 as a Tea Party fiscal conservative, he voted against the bank in 2012.  But he now leads the coalition attempting to raise it from the dead. (emphasis added)

"Not only has Rep. Fincher flip-flopped, he has repeatedly made erroneous claims in defense of the bank.  In a July 15, 2015 speech on the floor of the House, Rep. Fincher claimed the bank, “supports about 200,000 jobs each year at no cost, let me repeat, no cost.”  That claim is often repeated by proponents of the bank.  However, a May 2014 Congressional Budget Office report found that when the fair value accounting method is used, Ex-Im Bank has an estimated 10-year cost of $2 billion.

"Rep. Fincher also defended his newfound support for Ex-Im as being about employment for small businesses.  “Back home in the district, it’s jobs, jobs, jobs,” Fincher said.  Once again, Rep. Fincher is pushing flawed arguments.  About two-thirds of the bank’s payouts went to only 10 businesses in 2013, some of which had profit margins in the hundreds of millions.  Stable, profitable companies such as Boeing, Caterpillar, Chevron, Dell, and Halliburton, have all received taxpayer support from the Ex-Im Bank despite having had no trouble securing private financing.

"The bank is also a haven for fraud.  A July 2014 review of Ex-Im Bank Office of Inspector General data by The Heritage Foundation found that between October 2007 and March 2014, there were 792 claims of fraud resulting in 124 investigations.  Since 2009, there have been 85 indictments for fraud, bribery, or other wrongdoing, with 48 criminal judgments issued.  That is among the many reasons why elimination of the Ex-Im Bank was included in Prime Cuts 2015.

"CAGW President Tom Schatz said, “CAGW was pleased when the Ex-Im Bank expired on June 30, 2015.  We had hoped Members of Congress who claimed to stand for fiscal discipline would follow through on their pledge to taxpayers, but Rep. Fincher has betrayed that commitment.  He campaigned one way and voted another way.  His efforts to resurrect the Ex-Im Bank should be defeated.”

CAGW's justification is fully documented; links provided in CAGW's announcement.

By the way, Rep. Fincher isn't alone in "flip-flopping" on the Ex-Im Bank. The Washington Post reported last Friday that President Obama is also a "flip-flopper," writing, "in a speech during Obama’s first presidential run in 2008, he called the bank 'little more than a fund for corporate welfare.'"

For the record, this once Tea Party conservative from Tennessee's 8th Congressional District has a score of 67% (D) from Conservative Review. The Tennessee House delegation includes three representatives with scores of 70% or higher (C and B).

Contact information for Rep. Fincher is available at Congress.gov. His office phone number on Capitol Hill is (202) 225-4714.

And kudos to Citizens Against Government Waste (CAGW) for their continuing efforts to ferret out waste, fraud, and abuse.

July 26, 2015

How High is Virginia's Gas Tax?

Do you know how much of the price you pay for a gallon of gasoline is composed of gas taxes -- federal and state?

At the Tax Foundation's Tax Policy Blog on Thursday, Colby Pastre talks about their weekly weekly tax map, which highlights state gas tax rates. The state taxes, by the way, are in addition to the federal gas tax of 18.4 cents per gallon. Pastre writes:

"This week’s tax map takes a look at state gasoline tax rates, using data from a recent report by the American Petroleum Institute (API). Pennsylvania has the highest rate of 51.60 cents per gallon (cpg), and is followed closely by New York (45.99 cpg), Hawaii (45.10 cpg), and California (42.35 cpg). On the other end of the spectrum, Alaska has the lowest rate at 12.25 cpg, but New Jersey (14.50 cpg) and South Carolina (16.75 cpg) aren’t far behind. These rates do not include the additional 18.40 cent federal excise tax.

"Gas taxes are generally used to fund transportation infrastructure maintenance and new projects. While gas taxes are not a perfect user fee like tolls, they are generally more favorable than other taxes because they better connect the users of roads with the costs of enjoying them. However, many states’ and the Federal government’s gas taxes are not adjusted for inflation and therefore do not respond to price changes. Over time, a nominal gas tax rate will decline in real terms, while the costs associated with funding roads will increase with inflation. This has been a contributing factor to the insolvency of the federal Highway Trust Fund, which runs out of funds at the end of this month. (link in the original)

"States vary in how they impose gas taxes. Some impose a cents per gallon excise; others impose motor fuel-specific wholesale or retail sales taxes or “rack taxes” based on average prices over a given period; and many impose environmental cleanup and other miscellaneous taxes atop the traditional gas tax. API’s methodology converts these disparate tax structures into an estimate of gas taxes expressed in cents per gallon to facilitate comparisons across states."

Here's the Tax Foundation map showing gas taxes in the states:

 

If those numbers are too small to read, Virginia's excise, or gas, tax is 19.83 cents per gallon (cpg) plus 2.50 cpg for other state taxes/fees meaning Virginians are paying 22.33 cpg in state gas taxes. Adding in the 18.4 cpg for federal gas tax means that currently somewhere around 15% of the price of a gallon of gas in Virginia goes to the Tax Man, more than double the profit margins of most oil companies.

By the way, the API webpage includes information about diesel taxes and several interactive maps. Incidentally, the federal diesel tax is 24.4 cpg. So while those semi's going up and down I-95 are providing more wear and tear to the road surface, they're also paying an additional 6 cpg in taxes.

Kudos to the Tax Foundation for publishing tax information that keeps taxpayers "in the know."

July 25, 2015

GAO Says IRS Risks Unfairly Selecting Nonprofits for Audits

Stephen Dinan reported in yesterday's Washington Times that "IRS risks ‘unfair’ audits of nonprofits," based upon an audit and subsequent testimony by the General Accountability Office (GAO).

According to Dinan:

"The IRS’s process for picking which nonprofits it audits is so loose that it could be abused, with the potential for political targeting, the government’s chief watchdog said Thursday.

"Government Accountability Office investigators said the IRS doesn’t do a good enough job tracking audit decisions, and doesn’t rotate through the officers that make those decisions, leaving open a window for mischief.

"This increases the risk of unfair selection of organizations’ returns for examination,” the GAO investigators said in their report.

"Combined with the 2013 finding that the IRS unfairly targeted tea party groups for special scrutiny in their tax-exempt applications, Republicans said the report suggests a real danger to nonprofit groups."

Dinan also wrote in his Times article:

"Nonprofit groups apply for tax-exempt status at the beginning of their operations, which is when the IRS targeted tea party organizations for special scrutiny, the agency’s inspector general found. But as they operate, the nonprofits are supposed to file returns showing their activities comply with the law, and that’s where the audits, which are the subject of the new report, come in.

"“This report exposes a new and more egregious frontier of potential targeting in the agency’s audit selection process,” said House Ways and Means oversight subcommittee Chairman Peter Roskam, Illinois Republican. “If the agency wants to restore public confidence, the American people need to see concrete reforms to ensure that they will never again be targeted.”

"The IRS selected 1,144 groups for an examination in fiscal year 2014, the GAO said. That’s a tiny fraction of the universe of 1.6 million tax-exempt organizations."

Two GAO work products are pertinent to this Growls. The first is their 8-pages of testimony for the Thursday, July 23, hearing before the House Ways and Means Subcommittee on Oversight (GAO-15-753T, IRS Should Strengthen Internal Controls for Exempt Organization Selection). GAO provided two examples of internal control deficiencies:

  • "Staff could deviate from procedures for some selection processes without executive management approval."
  • "(Exempt Organization) management does not consistently monitor selection decisions."

GAO's July 23 testimony is based on their July 2015 audit (76 pages, GAO-15-514, Internal Controls for Exempt Organization Selection Should Be Strengthened). The report contains 10 recommendations for improving operations. The importance of handling tax exempt organizations in a fair and open process is explained in why GAO performed this study:

"IRS examines tax-exempt organizations to enforce their compliance with the tax code. Examinations can result in assessment of taxes or revocation of tax-exempt status, among other things.

"GAO was asked to review IRS’s criteria and processes for selecting exempt organizations for examination. This report (1) describes these processes and (2) assesses the adequacy of examination selection controls.

GAO reviewed IRS criteria, processes, and controls for selecting organizations for examination and spoke with IRS officials; assessed whether IRS controls followed Standards for Internal Control in the Federal Government; reviewed random probability samples from two populations of examination files; and conducted tests on populations and random probability samples from three databases used in EO examination selection to determine the adequacy of EO’s control implementation (for files closed in fiscal year 2014). GAO also conducted eight focus groups on internal controls topics with EO staff who conduct research or make examination selection decisions."

In addition, the subcommittee chairman's opening statement is here.

For the record, today is Day 807 of what came to be called an IRS Scandal. Paul Caron, publisher of the Tax Prof Blog has tracked all 807 days. On Day 1 (May 10, 2013), he wrote:

"After months of denying that the IRS has been targeting tea party groups for special scrutiny, Lois Lerner, Director of the IRS's Exempt Organizations Division, admitted that the IRS had been giving additional scrutiny to applications for tax-exempt status from goups with the "Tea Party" or "patriot" in their title. She denied there was any political motivation and blamed the practice on a low-level employee in Cincinnati."

There's hardly a day that goes by that there is not some news. According to Day 30, he "officially" started calling it a scandal on Day 7. Kudos to Paul Caron and the Tax Prof Blog for tracking the daily reporting of what must be the most complete history of this period in the history of Internal Revenue Service.

July 24, 2015

Federal Entitlement Program "to go bust in 2016"

Reporting at the Washington Examiner on Wednesday morning, Joseph Lawler writes, "The Social Security disability program will run out of money in late 2016, a report issued Wednesday by the Social Security and Medicare trustees warned."

Lawler continued his reporting:

"At that point, the 10.9 million beneficiaries of the program face an immediate 19 percent cut in benefits, unless Congress intervenes.

"The combined trust fund for the retirement and disability programs is projected to run out by 2034, a slight improvement from last year's estimate.

"The trust fund for Medicare hospital insurance will be depleted by 2030, unchanged from last year.

"The new figures were published Wednesday as part of the annual update on the programs' finances from the Social Security and Medicare trustees.

"Federal retirement programs face long-term fiscal problems largely because of demographics. Demographers expect that the number of retirees claiming Social Security benefits will rise from less than 50 million today to 71 million by the time the baby boomers are done retiring in 2029. The ranks of Medicare beneficiaries will grow from 56 million to 80 million.

"The more immediate deadline, however, relates to the disability program, which provides income security for disabled workers, widows and widowers, and children."

Earlier this year, Jason Fichtner, a senior research fellow at George Mason University's Mercatus Center  in Arlington, Virginia, and Jason Seligman, an assistant professor at Ohio State University, published a 'working paper' on reforms that could save the social security disability insurance program (March 5, 2015, "Saving Social Security Disability Insurance: Reforms within the Context of Holistic Social Security Reform"). Here''s the summary of their paper:

"The Social Security Disability Insurance (DI) program is running short of money. Under current projections, its trust fund will be exhausted by the end of 2016, causing an automatic benefit reduction of about 20 percent if no legislative action is taken—a significant financial shock for those on the disability rolls.

"To prevent these benefit cuts, some have proposed supplementing DI from the larger Social Security retirement trust fund. A new study published by the Mercatus Center at George Mason University argues, however, that policymakers should use this opportunity to adopt much-needed reforms of the Disability Insurance program. DI reform should (1) take account of the current retirement program and (2) not inhibit future retirement program reforms. This strategy has the potential to return DI to its original purpose—providing income support for those who cannot work due to permanent disability—while also putting the program on a path of fiscal sustainability."

Here's the lede from the Washington Post's report, posted yesterday:

"The annual check-up for Social Security is in, and one program looks more dire than the rest."

Note the picture accompanying the Post story of activists in front of the White House urging the expansion of Social Security. More delusion on the part of progressive liberals on the Left!

Additional reporting included:

  • Newsmax, where  their lede said, "Social Security’s Disability Insurance trust fund will run out of reserves next year without congressional action, trustees said, urging U.S. lawmakers to address the nation’s unsustainable entitlement programs."
  • The Wall Wall Street Journal's report included this: "Treasury Secretary Jacob Lew said the shortfall should be addressed by Congress by reallocating the share of payroll taxes that fund the disability-insurance trust fund and the much larger retirement-benefit reserves. The reallocation would leave both funds depleted by 2034, one year later than estimated in last year’s report. (beware the WSJ's paywall)

The Washington Times reported yesterday, "To stave off the cut, Rep. Xavier Becerra, California Democrat, proposed merging the two trust funds, using retirement money to cover the disability fund shortfall in the near term."

Sheesh! Just what's needed -- a short-term fix. Do members of Congress ever fix anything?

Finally, here's the summary from the 7-page analysis from the non-partisan Committee for a Responsible Federal Budget:

"Today, the Social Security and Medicare Trustees released their annual reports on the financial health of the programs. Although these projections show some improvements relative to last year, they nonetheless show both programs continue to face large shortfalls that will grow over time. With regards to Social Security, the Trustees show that:

  • The Social Security Disability Insurance (DI) trust fund is on the brink of depletion, and is projected to be exhausted in late 2016 – just over a year from today. Absent legislation, beneficiaries in that program would face an immediate 19 percent across-the-board benefit cut.
  • On a combined basis, or assuming reallocation or interfund borrowing, the Old Age, Survivors, and Disability Insurance (OASDI) trust funds are projected to be exhausted in 2034. At that point, all beneficiaries would face an immediate 21 percent across-the-board benefit cut, which would grow to more than 27 percent by 2090.
  • Over 75 years, Social Security’s actuarial imbalance totals 2.68 percent of taxable payroll, or about 0.96 percent of GDP.
  • The gap between Social Security spending and revenues is projected to grow from 1.3 percent of payroll (0.46 percent of GDP) this year to 3.5 percent of payroll (1.26 percent of GDP) by 2040 and 4.7 percent of payroll (1.62 percent of GDP) by 2090.
  • Overall, this year’s report represents an improvement over last year’s, which showed a combined trust fund exhaustion date of 2033 (one year sooner) and a 75-year actuarial imbalance of 2.88 percent of payroll (0.20 percentage points higher).

"Although the projections have slightly improved, Social Security’s long-term outlook is fundamentally unchanged. The SSDI trust fund will be depleted next year, and the combined trust funds by the time today’s 48-year-olds reach the normal retirement age – or when today’s newest retirees turn 81.

"Policymakers must act quickly to put Social Security on a path toward solvency. As time goes on, it will be more difficult to secure the Social Security programs for current and future generations with thoughtful changes instead of abrupt benefit cuts or tax increases."

As most of the reporting about the trustee's report point out, action is needed by the Congress. So, for Growls readers, we are providing information so your can provide them with your feedback. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you.

July 23, 2015

A Thought on the Minimum Wage

"Many, if not most, people who are zealous advocates of minimum wage laws, for example, never check to see if these laws do more good by raising some workers' wages than harm by preventing many young and inexperienced workers from finding jobs.

"One of my own pieces of good fortune, when I left home at age 17, was that the unemployment rate for black 17-year-old males was in single digits that year -- for the last time. The minimum wage law was ten years old, and the wage specified in that law was now so low that it was irrelevant, after years of inflation. It was the same as if there were no minimum wage law.

"Liberals, of course, wanted the minimum wage raised, to keep up with inflation. The result was that, ten years later, the unemployment rate for black 17-year-old males was 27.5 percent -- and it has never been less than 20 percent in all the years since then.

"As the minimum wage kept getting raised, so did the unemployment rate for black 17-year-old males. In 1971 it was 33.4 percent -- and it has never been under 30 percent since then. It has often been over 40 percent and, occasionally, over 50 percent.

"But people who advocate minimum wage laws seldom show any interest in the actual consequences of such laws, which include many idle young males on the streets, which does no good for them or for their communities.”

~ Thomas Sowell

Source: His July 23, 2015 column, posted at Townhall.com.

July 22, 2015

Arlington County Board Squabbles Over Hiring County Auditor

Scott McCaffrey of the Arlington Sun Gazette reports this morning on the squabbling that occurred at the Arlington County Board's recessed meeting yesterday. According to McCaffrey:

"After an exchange testy even by recent County Board standards, board members voted 4-1 on July 21 to move forward with hiring an independent auditor who will report to them rather than the county manager.

"The move had been expected ever since the General Assembly earlier this year gave board members the power to create and fill the position.

"“We’re always working to get better – this is a step in the right direction,” said board member Libby Garvey, who supported the action.

Mr. McCaffrey also reported:

"While the result of the July 21 vote was preordained, getting to it involved heavy sparring between independent John Vihstadt, who supports hiring an auditor, and Democrat Walter Tejada, who has vigorously opposed it.

"Tejada complained that hiring an independent auditor was designed to sow a “culture of distrust of government,” pointing a finger at Republicans, and said Arlington had been in good hands having county staff and outside auditors keeping track of the books.

“This would imply a distrust . . . of county staff,” he said, calling the position “redundant” and “not needed.”

"Vihstadt, who has ties to the Republican Party but was elected as an independent, shot back, noting dryly that the measure was patroned by a Democrat (Del. Patrick Hope), signed into law by a Democrat (Gov. McAuliffe), supported by every Democrat in the Arlington delegation and passed unanimously by the General Assembly.

“I resent the fact, Mr. Tejada, your trying to make a partisan issue out of this,” Vihstadt said. “The fact is, [the proposal is] intended to strengthen and buttress confidence in Arlington government, not undermine it.”

"The proposal to create the new position has gotten under Tejada’s skin; he has waged a verbal battle against it for months. But he was playing defense: The County Board majority in support of it never wavered, and the proposal had the support of the Arlington County Civic Federation and Arlington Chamber of Commerce."

The Sun Gazette article also includes the following quote by your humble scribe:

"Tim Wise, president of the Arlington County Taxpayers Association – a group that has pressed for years for an independent auditor – said the county government’s action did not go far enough.

“If a ‘world-class community’ engenders $1 million bus stops, $1.2 million playgrounds and $1.5 million dog parks, then it seems the currently planned spending of $200,000 for internal auditing is insufficient,” Wise said."

As McCaffrey reported, we've growled frequently about the need for Arlington County to establish a professional, independent audit function. That would include proper staffing, which would require performing a risk analysis. A year ago -- in our May 10, 2014 Growls -- we asked who was looking out for the interests of Arlington County taxpayers, and pointed out that based upon staffing of Virginia state agencies and a "back-of-the-napkin" analysis, we estimated the need for a staff of 10 auditors.

Patricia Sullivan of the Washington Post also reported on the Board's "bickering" in a story posted Tuesday evening.

The county's press release about the County Board's action to move forward on the auditor recruitment is here. It includes two bullets:

  • Focus will be program and operational audits, efficiency and effectiveness of government
  • Annual workplan overseen by board-led Audit committee

Growls readers who support a stronger, fully-staffed County Auditor are urged to contact the Arlington County Board. You can reach the Board by clicking-on the link below, or call them:

  • Call the County Board office at (703) 228-3130

And tell them ACTA sent you.

July 21, 2015

Surprise, Congress Favors Spending Over Saving. It's True!

The newest issue of the National Taxpayers Union Foundation's "Taxpayers Tab" provides a snapshot of the first six months (through July 2, 2015) of the 114th Congress, noting that "Congress favors spending over saving."

Demian Brady et al provide the following background:

"Since 2008, ten different U.S. municipalities were forced to declare bankruptcy. One of the leading causes of these fiscal crises was inability to cover pension costs for public employees. Many states are also trying to figure out how to finance their unfunded pension obligations. Just this week, Puerto Rico managed to make a last minute payment on its bond debt and thus avoided default, but analysts are very concerned that the U.S. territory will be unable to meet future payments or cover its payroll costs.

"The U.S. government is not immune to such problems. On June 19 the Director of the Congressional Budget Office warned Congress, “The long-term outlook for the federal budget has worsened dramatically over the past several years.” Without major reforms going forward, deficits and debt will rise to unsustainable levels.

"On March 13, the level of publicly issued debt reached $18.1 trillion, just $25 million shy of the statutory limit. The amount has been frozen at that level for the past 15 weeks as the Department of the Treasury has implemented “extraordinary measures” in order to continue to finance its obligations. But as expenditures from the Treasury continue to exceed revenues into it, these measures will only last for so long.

< . . . >

"While it remains to be seen how this looming impasse will be resolved, there are measures in Congress that would reduce spending. Unfortunately, they are outnumbered by bills that would increase outlays."

They link to a spreadsheet containing 308 House and 176 Senate bills, which they analyzed. Here are a few of their highlights:

  • The average annual cost of legislation scored in the Senate so far is $412 million per year. In the House, the average is about $603 million per year.
  • There have been far more savings bills scored in the House than in the Senate. In the House, there were 6.3 increase bills scored for every savings measure; in the Senate, there were 10.1 increases for every decrease.
  • Of the 17 savings bills scored in the Senate, 7 would cut spending by $1 billion or more per year. Meanwhile, 19 of the 42 savings scored in the House would cut the same amount.
  • The two most expensive bills in the House, H.R. 1000 and H.R. 2332, would increase federal spending by a total of $297.5 billion per year. That is more than twice the annual cost of all the increase bills scored in the Senate combined ($133 billion).

The graphic below, from the Taxpayers Tab, provides a snapshot of the findings through July 2:

If you are concerned about the seemingly cavalier attitude by members of Congress towards spending the taxes of hard-working Americans, take a few minutes to write to your favorite member of Congress. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you. And kudos to the National Taxpayers Union Foundation for continuing to shine a light on the spending habits of members of Congress.

July 20, 2015

A Thought on the Nation's Fiscal Outlook

"When is an improving fiscal situation not really an improving fiscal situation? When it’s the United States’ current one.

"That’s the lesson of the White House’s annual budget update, known as the Mid-Session Review, which was published Tuesday by the Office of Management and Budget (OMB). Data in the report show the federal government is on course to record a $455 billion budget deficit this year, which is $128 billion less than the Obama administration had projected six months ago. Expressed as a percentage of gross domestic product, this is even more impressive: it amounts to six-tenths of a percent of GDP that we were planning to borrow this year, but won’t have to borrow after all. Well over half of this unexpected deficit reduction is due to above-forecast tax revenue, generated by the economy’s continued growth. Given the report’s forecasts for next year, it is likely that, as a share of the economy, the budget deficit at the end of the Obama presidency will be three-quarters smaller than it was at the beginning. Not too shabby.

"Here’s the problem: This year’s progress is likely to get canceled out later on. The same White House report projects no real improvement in the long-term fiscal outlook, and indeed foresees a slight deterioration. In February, the OMB forecast that the public debt — the stock of accumulated annual deficits — would drift down from 75.3 percent of GDP this year to 73 percent by 2025. Now, however, the OMB sees public debt stuck at 74.6 percent in 2025. Though sustainable in the short run, no one can say for sure how long that level of debt will remain affordable; it is well above historical norms for the U.S. economy. It leaves the United States a narrower “fiscal space” to help cope with another recession, war or other emergency. And it represents the uncomfortably high base from which debt is expected to rise even more in the years after 2025, according to the Congressional Budget Office and other experts." (links in the original)

~ Editorial, Washington Post Editorial Board

Source: Washington Post editorial, posted July 18, 2015.

July 19, 2015

A Thought on Income Redistribution

"Americans did not become wealthy by redistributing income. They became wealthy by innovating, learning, and working hard. Most of the immigrants that came were unskilled. So, too, were the workers who came from the farms to industry. They began at the bottom, learned by doing on-the-job training, and earned higher wages. This model seems to be breaking down in our current economic climate.

"Politicians can promise to narrow the income gap. They can pass legislation that redistributes more. But they cannot permanently reduce the spread between the top and the rest unless they adopt policies that encourage growth, innovation, learning, and productivity. There is no other way."

~ Allan H. Meltzer, Distinguished Visiting Fellow, Hoover Institution

Source: Essay, entitled "The Follies of Income Redistribution," July 17, 2015, in Hoover's "Defining Ideas" series.

July 18, 2015

Virginia Slides to #12 in 2015 CNBC Business Ranking

On July 8, 2015, we growled about Virginia's fiscal condition, according to a study by George Mason University's Mercatus Center. According to the study, Virginia ranked #21, "just ahead of Colorado, Washington and Kansas, and just behind New Hampshire and Texas."

A few days earlier, on June 30, Katie Watson, of Watchdog.org's Virginia Bureau, reported that Virginia had slipped from #1 in 2011 to #12 in CNBC's 2015 "top states for business" rankings. CNBC ranked "all 50 states on more than 60 measures of competitiveness, developed with input from a broad and diverse array of business and policy experts, official government sources, the CNBC Global CFO Council and the states themselves." (HT Townhall.com)

According to CNBC:

"The Old Dominion is an old favorite of business, with friendly regulations. But job creation has slowed in recent years."

Watson's reporting included the following:

"It’s a consistent and concerning fall from grace that, experts say, has a lot to do with the commonwealth’s longtime reliance on the federal government for job creation and its discouraging business tax structure. The cost of doing business, infrastructure, cost of living and overall economy all dragged Virginia down in the rankings.

“We need to figure out what it is that’s standing in our way of growing the economy,” said Michael Thompson, president of the Thomas Jefferson Institute for Public Policy.

"Fifteen years ago, Thompson said, experts were pushing for Virginia to rely less on the federal government for job creation. But nothing has really changed since, Thompson said. Sequestration is now forcing the commonwealth to come to grips with the reality that so much of its booming business has relied on the public sector.

“We are creating jobs, we’re just not creating the private-sector, non-defense jobs as fast as we are losing federal jobs,” said Barry DuVal, president of the Virginia Chamber of Commerce."

Virginia needs to improve its tax structure, reports Watson:

"The one area where Virginia is succeeding, DuVal pointed out, is having a business-friendly climate, as the rankings noted.

"But perhaps the most important thing the commonwealth can do to improve its stance, DuVal and Thompson say, is to overhaul its tax structure.

"While some states — such as neighboring North Carolina — are lowering the taxes of doing business, Virginia has kept the status quo.

"Last year, the Tax Foundation gave the commonwealth a very middling ranking — 27th — for its business tax climate, largely due to relatively high individual income tax rates and unemployment tax rates. Compare that to North Carolina’s ranking of 16."

As we wrote on June 30, we encourage readers of Growls to learn what their favorite Delegate and Senator in the General Assembly are doing to improve the fiscal ranking and business climate of Virginia. Legislators representing Arlington County in the Virginia General Assembly include: Senators (Adam Ebbin, Barbara Favola, or Janet Howell) and Delegates (Rip Sullivan, Patrick Hope, Alfonso Lopez, or Rob Krupicka). Contact information for members of the General Assembly can be found here  -- use one of the "quick links" to locate the senator and delegate who represent you.

And tell them ACTA sent you!

July 17, 2015

Arlington County Starts Waste/Frand/Abuse Hotline

The Arlington Sun Gazette reported this morning that "Arlington County government’s new hotline for waste, fraud and abuse has been running for more than six week, but is not being swamped by county workers."

The Sun Gazette story goes on to report:

"Since its debut in late May through June 16, the hotline received four reports from the government workforce, county spokesman Mary Curtius said.

"The new hotline, run by an independent contractor and offering anonymity, if desired, to government workers, is part of an effort by the county government to improve transparency and accountability. It was among the improvements proposed by John Vihstadt during his two successful runs for County Board in 2014.

"The hotline, which accepts feedback either by phone or online, is not available to the public at large, but county officials have said they will consider implementing a reporting system for the public."

Thanks to the county for setting up the hotline, and kudos to John Vihstadt for proposing this tool of accountable government. Now, let's get this really going by setting up a hotline where the public can report waste, fraud, and abuse.

July 16, 2015

Fake ObamaCare Enrollees Signed-Up for Subsidies

In a front-page story in today's Washington Times, Tom Howell reported on a new report from the General Accountability Office (GAO, which found a "potential for fraud in ObamaCare subsidies."

Here's the lede according to Howell:

"Fake Obamacare enrollees were able to sign up for subsidized plans and to renew them for a second year, the government’s top watchdog reported Wednesday, exposing embarrassing holes and potential fraud in President Obama’s signature health care law.

"The Government Accountability Office said 11 out of 12 fictitious applications it filed as a test were approved for plans on HealthCare.gov last year and were to have been paid a total of $30,000 in taxpayer handouts. All 11 were able to re-enroll automatically in their plans for this year, too, meaning the administration didn’t weed them out in the second full year of the health care exchange operation."

For those unfamiliar with how ObamaCare works, Howell provides the following details:

"HealthCare.gov is a federal insurance portal that serves 37 states without their own health care exchanges. As of June, the administration counted 10.2 million paying customers in the Obamacare marketplace. About 8.7 million received tax credits, and 6.4 million of them used the federal portal.

"The subsidies are paid directly to insurers to cover costs, and taxpayers are required to square up the details in their tax filings."

In the one-page "highlights" of the GAO report, they explained the rationale for their audit (Report No. GAO-15-702T, includes access to full report):

"PPACA provides for the establishment of health-insurance exchanges, or marketplaces, where consumers can compare and select private health-insurance plans. The act also expands the availability of subsidized health-care coverage. The Congressional Budget Office estimates the cost of subsidies and related spending under the act at $28 billion for fiscal year 2015. PPACA requires verification of applicant information to determine eligibility for enrollment or subsidies.

"GAO was asked to examine controls for application and enrollment for coverage through the federal Marketplace. This testimony describes (1) the results of GAO's undercover testing of the Marketplace's eligibility and enrollment controls, including opportunities for potential enrollment fraud, for the act's first open-enrollment period; and (2) additional undercover testing in which GAO sought in-person application assistance.

"This statement is based on GAO undercover testing of the Marketplace application, enrollment, and eligibility-verification controls using 18 fictitious identities. GAO submitted or attempted to submit applications through the Marketplace in several states by telephone, online, and in-person. Details of the target areas are not disclosed, to protect GAO's undercover identities. GAO's tests were intended to identify potential control issues and inform possible further work. The results, while illustrative, cannot be generalized to the full population of applicants or enrollees. GAO provided details to CMS for comment, and made technical changes as appropriate."

If you are concerned about the seemingly cavalier attitude the administration has taken in building Healthcae.gov, take a few minutes to write to your favorite member of Congress. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you.

July 15, 2015

A Thought on the Concept of Tax Expenditures

"The tax expenditure concept posits that an income tax is composed of two distinct elements. The first element consists of structural provisions necessary to implement a normal income tax .... The second element consists of the special preferences found in every income tax. These provisions, often called tax incentives or tax subsi- dies, are departures from the normal tax structure and are designed to favor a particular industry, activity, or class of persons.”

~ Stanley S. Surrey and Paul R. McDaniel

Source: page 127, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

July 14, 2015

Arlington County Board Moving Forward . . . Slowly

The online Arlington Sun Gazette reported this morning the Arlington County Board is set to move forward in the selection of an independent County Auditor who will report directly to the Board.

Here is what the Sun Gazette is reporting:

"Arlington County Board members on July 21 are slated to direct acting County Manager Mark Schwartz to move forward with recruitment and hiring of an independent county auditor, who will work with county staff but ultimately will be responsible to directly to board members.

"The General Assembly earlier this year gave County Board members the authority to employ an auditor. Previously, the board was only allowed to hire the county manager, county attorney and clerk to the board.

"Board members have allocated $200,000 for costs associated with starting up the office and hiring the auditor, with the hope that savings identified by the new staff member could offset future costs.

"Under direction expected to be approved July 21, Schwartz will be tasked with starting the recruitment process within 30 days. While county officials will do the initial screening of candidates, all County Board members will be able to review applications and participate in interviews, if they desire. The final selection will rest with the board."

As noted by the Sun Gazette, the Board will consider a "charge" for the independent County Auditor in the afternoon of its Tuesday, July 21, recessed meeting. The charge begins:

"In furtherance of both the County Manager and the County Board’s commitment to strengthening County operations and ensuring that public funds are utilized in a responsible, efficient and transparent manner, the County Board hereby directs the County Manager as follows:

"The new independent County Auditor function will be created in parallel fashion alongside the existing Internal Audit function within the Department of Management and Finance (DMF) in a dual office approach that reflects complementary functions in both core financial audits and program / operational audits."

The charge goes on to say the County Auditor will be overseen by an Audit Committee with the current internal audit function in the Department of Management and Finance (DM&F) continuing continue with its existing staff of 1.5 FTE,  The two audit functions are expected to "collaborate and cooperate." The Audit Committee will include two Board members, the County Manager or Deputy, and the DM&F director.

We have growled loud and often, as has the Arlington County Civic Federation, about the need to  set up a professional and fully-staffed internal audit function, most recently here. Search for additional Growls by using "internal audit" at our search facility.

Obviously, we are pleased the County Board has finally started the process of filling the County Auditor position albeit slow as molasses the process has been.

However, in the view of your humble scribe, there are at least three things wrong with the current plan. The first is the bifurcation of the internal audit function between the County Auditor and DM&F. It's neither efficient or economical, and will prove to be ineffective. Second, with '1.0 FTE here and 1.5 FTE there,' even if supplemented with consulting staff, the functions are understaffed. It's hard to be the proverbial "junkyard dog" when you're only bringing 2.5 FTE to the fight.  In a previous Growls, we did a 'back of the envelope' estimate of the need for about 10 FTE, a number that would include the Schools' internal auditor, when compared to the internal audit organizations of Virginia state agencies. And third, the Audit Committee should include one or two citizen members, preferably someone with a professional audit background, so there is transparency with county taxpayers.

Growls readers who are Arlington County taxpayers who are concerned about the  need for a professional and fully-staffed internal audit function are urged to write or call the Arlington County Board. Just click-on the link below:

  • Call the County Board office at (703) 228-3130.

And tell them ACTA sent you!

July 13, 2015

Nation Collects Record $2.4 Trillion in Taxes, Still Runs Deficit

At CNS News today, Terry Jeffrey reports the federal government has collected a record $2.45 trillion through June of the current FY 2015, primarily from the individual income tax -- or $16.451 per worker. Nevertheless, the federal government is running a deficit of $313 billion.

Jeffrey continues with the details:

"That equaled approximately $16,451 for every person in the country who had either a full-time or part-time job in June.

"It is also up about $178,156,270,000 in constant 2015 dollars from the $2,268,763,730,000 in revenue (in inflation-adjusted 2015 dollars) that the Treasury raked in during the first nine months of fiscal 2014.

"Despite the record tax revenues of $2,446,920,000,000 in the first nine months of this fiscal year, the government spent $2,760,301,000,000 during those nine months, and, thus, ran up a deficit of $313,381,000,000 during the period.

"According to the Bureau of Labor Statistics, total seasonally adjusted employment in the United States in June (including both full and part-time workers) was 148,739,000. That means that the federal tax haul so far this fiscal year has equaled $16,451 for every person in the United States with a job."

The 36-page Monthly Treasury Statement through June 2015 can be found here. The Treasury Department's Bureau of the Fiscal Services' webpage, where you can find previous issues of the MTS, is available here.

If you do not know what your Members of Congress are doing to bring the national debt under control, we urge you to find out. You can contact your Member by using the information we provided in yesterday's Growls, immediately below.

When writing to a Member of Congress, tell them ACTA sent you.

July 12, 2015

Is U.S. Debt Really Headed to 103% of GDP, from 74%?

Keith Hall, director of the Congressional Budget Office (CBO) testified before the Senate's Committee on Homeland Security and Governmental Affairs last week. His 14-page testimony, "Understanding the Long-term Budget Outlook" can be found here. A video of the hearing and member statements are available at this committee webpage.

His testimony got virtually no coverage from the mainstream media, based on a search at Google News. At CNS News, however, Terry Jeffrey reported extensively on Hall's testimony, writing:

"To simply contain the debt at the high historical level where it currently sits—74 percent of GDP--would require either significant increases in federal tax revenue or decreases in non-interest federal spending (or a combination of the two).

"Historically, U.S. government debt held by the public, measured as a percentage of GDP, hit its peak in 1945 and 1946, when it was 104 percent and 106 percent of GDP respectively.

"In 2015, the CBO estimates that the U.S. government debt held by the public will be 74 percent of GDP. That is higher than the 69-percent-of-GDP debt the U.S. government had in 1943—the second year after Pearl Harbor.

"By 2039, CBO projects, the debt held by the public will increase to 101 percent of GDP and by 2040 to 103 percent GDP. At that point, Hall told the Senate Homeland Security and Governmental Affairs Committee, the “debt would still be on an upward path relative to the size of the economy.”

Jeffrey added the following reporting:

“Mainly because of the aging of the population and rising health care costs, the extended baseline projections show revenues that fall well short of spending over the long term, producing a substantial imbalance in the federal budget,” Hall said in his written testimony.

“As a result, budget deficits are projected to rise steadily and, by 2040, to raise federal debt held by the public to a percentage of GDP seen at only one previous time in U.S. history—the final year of World War II and the following year,” he said.

“Moreover,” he said, “debt would still be on an upward path relative to the size of the economy. Consequently, the policy changes needed to reduce debt to any given amount would become larger and larger over time. The rising debt could not be sustained indefinitely; the government’s creditors would eventually begin to doubt its ability to cut spending or raise revenues by enough to pay its debt obligations, forcing the government to pay much higher interest rates to borrow money.”

"Eventually, the nation would face a crisis—with wary investors demanding “much higher interest” rates to buy U.S. government debt.

“How long the nation could sustain such growth in federal debt is impossible to predict with any confidence,’ testified Hall. “At some point, investors would begin to doubt the government’s willingness or ability to meet its debt obligations, requiring it to pay much higher interest costs in order to continue borrowing money.

“Such a fiscal crisis would present policymakers with extremely difficult choices and would probably have a substantial negative impact on the country,” he said."

Jeffrey included the following graph in his report, which comes from the CBO director's testimony:

In covering the release of the CBO's 132-page 2015 Long-Term Budget Outlook last month, Matthew Heller of CFO magazine focused on the options open to members of Congress in order to bring the national debt under control:

"To keep the federal debt-to-GDP ratio at its current level, Congress would have to increase revenues by 6% or cut spending by 5.5% from levels under current laws in each of the next 15 years, the report said. In 2016, that would translate into about a $210 billion reduction in the deficit.

“To put the federal budget on a sustainable path for the long term, lawmakers would have to make major changes to tax policies, spending policies, or both,” the CBO said in the first major report under new, Republican-appointed director Keith Hall.

"Without such changes, the CBO warned, the large federal debt would result in lower economic output and higher interest rates and those “macroeconomic effects would, in turn, feed back into the budget, leading to lower federal revenues and higher interest payments on the debt.”

The release of the CBO's 132-page report received slightly more coverage. It included reporting by Rebecca Shabad of The Hill, which covers Congressional news. Her reporting included:

"Federal spending on Social Security, Medicare, Medicaid, the Children’s Health Insurance Program and ObamaCare's insurance subsidies is expected to skyrocket by 2040 to a level more than twice the average over the last 50 years, the CBO warned.

“The harmful effects that such large debt would have on the economy would worsen the budget outlook,” the report said. “At some point, investors would begin to doubt the government’s willingness or ability to meet its debt obligations, requiring it to pay much higher interest costs in order to continue borrowing money.”

"The CBO said this could lead to a “fiscal crisis” that would present Congress with “extremely difficult choices.”

Two related Growls include September 24, 2010 which we titled "Lurching Towards Doom," and December 21, 2010, which we titled "On the Rood to Boomergeddon."

If you are concerned about the national debt, take a few minutes to write to your favorite member of Congress. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you.

July 10, 2015

A Thought about Taxes and Incentives

"Raising taxes encourages taxpayers to shift, hide, and underreport income . . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation."

~ Kurt Hauser

Source: page 17, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

July 09, 2015

ObamaCare Will Increasingly Add to Nation's Tax Burden

A chart in the Heritage Foundation's  Federal Budget in Pictures series explicitly addresses the "coming barrage of tax hikes under ObamaCare.

Heritage explains the basis for the chart this way:

"Obamacare imposes numerous tax hikes, which total nearly $800 billion over 10 years. Obamacare's higher tax rates on income and investment will slow economic growth, leaving hard-working Americans and businesses worse off."

Given the foregoing explanation, here is the chart:

So, if you are concerned the current economic growth of between 2.0 -- 2.5% is too slow, wait a year or two, and the growth will likely be even slower.  Growls readers are urged to share their thoughts about economic growth with their favorite member of Congress. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you.

July 08, 2015

What is the State of Virginia's Fiscal Condition?

The Tax Foundation's Jared Walczak asks, at it's Tax Policy blog yesterday, if taxpayers know whether their state's fiscal affairs are in order, acknowledging, "It’s not an easy question to answer, in part because the question can mean so many different things."

According to Walczak, the question could mean any one of five things, including:

  1. Can the state pay its current bills? (cash solvency)
  2. Will annual revenues be sufficient to cover budgeted expenditures? (budget solvency)
  3. Are the state’s long-term liabilities—think bonds and loans—sustainable? (long-run solvency)
  4. How much room is there to raise additional revenue should the need arise? (service-level solvency)
  5. Can the state meet its pension and health care obligations? (trust fund solvency)

Walczak sources his post to a study by Eileen Norcross, senior research fellow at the Mercatus Center, which "just came out with an invaluable comparative analysis, Ranking the States by Fiscal Condition." Here's the abstract from Norcross' ranking of the states; the entire study prints to 65 pages:

"Based on the fiscal year 2013 Comprehensive Annual Financial Reports of the 50 states, this study ranks states’ fiscal solvency using 14 metrics that assess whether the states can meet their short-term bills and long-term obligations. State finances are analyzed according to five dimensions of solvency: cash, budget, long-run, service-level, and trust fund. These five dimensions are combined to produce an overall ranking of state fiscal solvency."

The top five states were Alaska, North Dakota, South Dakota, Nebraska, and Florida. And if you've been closely following the news the past year or so, the bottom five states will come as no surprise. They are: Illinois, New Jersey, Massachusetts, Connecticut, and New York. The bottom five states have a common theme, according to Norcross:

"High deficits and debt obligations in the forms of unfunded pensions and health care benefits continue to drive each state into fiscal peril. Each holds tens, if not hundreds, of billions of dollars in unfunded liabilities—constituting a significant risk to taxpayers in both the short and the long term."

Virginia ranks #21 in Norcross' ranking of state fiscal conditions, just ahead of Colorado, Washington and Kansas, and just behind New Hampshire and Texas. Virginia ranked from 5th to 30th in the various categories used to compile the overall #21 ranking. These include:

  • Cash solvency -- 30th
  • Budget solvency -- 29th
  • Long-run solvency -- 27th
  • Service-level solvency -- 5th
  • Trust fund solvency -- 15th

In introducing Ms. Norcross' study, Mercatus points out the following risks:

"With new spending commitments for Medicaid and growing long-term obligations for pensions and health care benefits, states must be ever vigilant to consider both the short- and long-term consequences of policy decisions. Understanding how each state is performing in regard to a vari­ety of fiscal indicators can help state policymakers as they make these decisions.

"A closer analysis of the individual metrics behind the ranking shows how each state’s fiscal condi­tion should be assessed. Notably, nearly all states have unfunded pension liabilities that are large relative to state personal income, indicating that all states need to take a closer look at their unfunded pensions, which represent a significant portion of each state’s economy. Another finan­cial crisis could mean serious trouble for many states that are otherwise fiscally stable."

In closing his Tax Policy blog post, Walczak writes:

"The whole publication is worth reading, as Norcross does an excellent job of breaking down different components of state fiscal health and putting data behind each indicator. Those chiefly interested in topline findings may wish to check out the executive summary and the maps illustrating key findings.

"These measures matter. As Norcross writes, “Even states that appear to be fiscally robust—perhaps owing to large amounts of cash on hand or revenue streams from natural resources—must take stock of their long-term fiscal health before making future public policy decisions."

Kudos to Jared Walczak for bringing this study to our attention. And more importantly, kudos to Eileen Norcross for her research of the fiscal conditions of the states.

Readers of Growls are encouraged to ask their favorite Delegate and Senator in the General Assembly to learn what those legislators did to improve the fiscal ranking of Virginia in Mercatus' annual rankings. These are the legislators representing Arlington County in the Virginia General Assembly: Senators (Adam Ebbin, Barbara Favola, or Janet Howell) and Delegates (Rip Sullivan, Patrick Hope, Alfonso Lopez, or Rob Krupicka). Contact information for members of the General Assembly can be found here  -- use one of the "quick links" to locate the senator and delegate who represent you.

And tell them ACTA sent you!

UPDATE (7/13/15): A Richmond Times-Dispatch editorial today notes in part:

"Virginia has a reputation for good fiscal management that it has, for the most part, earned — though part of what makes the commonwealth look so good is that other states often look so bad. Cross-state comparisons might offer imperfect guides, but they can be useful. And a recent one by the Mercatus Center at George Mason University should give state leaders pause."

If only it would!

July 07, 2015

Dependence on Government Assitance Programs Grows

Ali Meyer of the Washington Free Beacon reported today that one in five Americans now participate in a government assistance program. Actually, the rate is 21.3%.

She introduced her reporting by writing:

“Approximately 52.2 million (or 21.3 percent) people in the U.S. participated in major means-tested government assistance programs each month in 2012,” according to the Census Bureau’s report.

"Means-tested programs include Medicaid, the Supplemental Nutrition Assistance Program (SNAP), otherwise known as food stamps, Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), and General Assistance (GA).

"The number of beneficiaries of these means-tested programs has increased significantly over the last decade. According to the Census, in 2004 there were nearly 42 million monthly recipients of these programs. Between that year and 2012, monthly participation increased by 24.9 percent."

Her reporting included the following chart:

If the nation's politically elite are doing anything to get the economy moving, it would be hard to tell.  And it's not as if we haven't growled about the economy and the need for economic growth. See here and here.

July 06, 2015

Progressive Income Tax. Tool of the Welfare State?

At the Investor's Business Daily website this evening, Terry Jones provides a short history of the progressive income tax, reminding us the nation "thrived" during the nation's first 124 years when there was no income tax. The progressive income tax will be 102 years old on October 3, 2015.

Jones next pointed to this January 2015 Gallup poll, which showed:

"According to the Jan. 5-8 poll, 63% of Americans this year are dissatisfied with the amount Americans pay in taxes. In a follow-up question, most of this group -- equivalent to 46% of all Americans -- say they would like to see Americans pay less in taxes. Hardly any -- 4% -- would prefer they pay more. An additional 13% are dissatisfied with what Americans pay in taxes, but aren't specific about how it should change.

"The 46% who currently want taxes decreased is notably higher than what Gallup has found since 2012. It is only exceeded by the 51% recorded in mid-January 2003, a week after President George W. Bush proposed extending certain 2001 tax cuts and implementing new ones, measures that ultimately became known as the 2003 Bush tax cuts. Gallup did not ask this satisfaction question about taxes from 2009-2011."

Gallup also points out that "Democrats' views (are) at odds with Independents and Republicans," saying:

"While only 5% of Democrats believe Americans' taxes should be increased, the largest segment, 47%, is satisfied with what Americans pay, while about a third, 31%, think they should pay less. In contrast, the largest segment of independents (46%) and a robust majority of Republicans (61%) are dissatisfied and believe taxes should be decreased."

He provides a brief history of the progressive or graduated income tax, pointing out that "Article I, Section 2 of the Constitution later forbade an income tax per se and required only a uniform tax to be applied "among the several states" based on their populations." He also includes Chief Justice's 1819 admonition, "'The power to tax, . . . involves the power to destroy."

He also reminds us of the role that Karl Marx plays in our progressive or graduated income tax, writing:

"Several decades later, an obscure German political philosopher named Karl Marx showed he understood what Marshall meant. In 1848, he made a progressive tax on income one of his 10 essentials for fomenting communist revolution. It would later became a key part of the socialist and progressive movements in the U.S."

Jones then touches all the historical data points until President Wilson's signing of the Revenue Act on October 3, 1913, and then writes:

"When the tax was first enacted, proponents promised that it would remain low and that only a few wealthy people would have to deal with it. And at first, that was true, with the wealthy paying a top rate of just 7%. The tax form itself was a mere two pages, and the entire tax code was 400 pages. Some of the new revenue, moreover, provided relief in the form of lower tariffs. (emphasis added)

"In retrospect, however, 1913 can be seen as the year the camel first poked its nose under the tent. In just four years, the top income-tax rate soared above 70%, and rules, exceptions, exemptions and loopholes began to multiply.

"'The worst thing,' economist Dan Mitchell said on the occasion of the income tax's 100th birthday in 2013, 'is that the income tax enabled the modern welfare state.' And indeed, the tax became a gusher of revenue, taking money from the private sector and directing it at a relentlessly growing federal government."

He ends his historical op-ed by writing:

"Today's system, most experts agree, is cumbersome, inefficient and unfair in the way it treats people differently. The income tax itself, with its 77,000 pages of myriad rules, rates and exclusions, is a confusing mess. Its progressiveness, moreover, discriminates against hard work and entrepreneurialism.

"It also serves another function: as a handy bludgeon against political foes, and a source of taxpayer-funded largesse for political friends."

Your humble scribe is rereading parts of William Voegeli's book, "Never Enough: America's Limitless Welfare State." Voegeli uses numerous charts to document the welfare state's relentless growth. Without the 16th Amendment and its accompanying progressive income tax, it is doubtful that even progressives, aka liberals, could conceive of a sufficient number of government programs to soak-up more revenue than was provided through a top rate of 7%.

Kudos to Terry Jones and Investor's Business Daily for publishing the Viewpoint about the progressive income tax.

And it you think you are paying too much in federal income taxes, scroll down, or visit our June 27, 2015 Growls, and write to any or all of your members of Congress.

July 02, 2015

Many Virginia State Agencies Don't Track Federal Grants

Investigative reporter Kathryn Watson of Watchdog.org's Virginia Bureau reported last week on an audit by Virginia's Auditor of Public Account (VAPA) that shows (HT Townhall.com):

"Virginia does a haphazard job of monitoring federal tax dollars it passes along to local groups, and the state auditor’s office says that needs to change."

Watson continues her reporting, writing:

"Each year, about $2.5 billion federal tax dollars travel through Virginia state coffers and into the hands of local governments, nonprofit organizations and even some for-profit organizations.

"That amounts to somewhere around $300 for every man, woman and child in the commonwealth, but it’s hard to say where all of it’s going, or if it’s being used properly. It’s the middleman — the state agencies — that are responsible for tracking the audits of those dollars, and some aren’t doing their job, according to a new audit from Virginia’s Auditor of Public Accounts.

"Of the 16 middleman state agencies studied, three haven’t kept any tabs on the final recipients of federal tax dollars. Only three checked the federal award amounts against audited statements.

“The commonwealth of Virginia is not fulfilling all of its responsibilities as a pass-through entity,” the report found. “There were several sub-recipients who unknowing to the commonwealth did not appear to meet the audit requirements…”

"Comprehensive Services for At-Risk Youth and Families, the Virginia Department of Veterans Services, and Virginia Information Technologies Agency all failed to track federal dollars they handed off, the audit finds. State auditors didn’t study where the dollars went, so it’s impossible to tell whether they were used properly."

Watson also reported the responses of state agencies to the VAPA audit as well as another VAPA audit, which "pointed out the General Assembly has done nothing in 15 years to hold accountable the hundreds of local government-created “supervisory” entities that control hundreds of millions of taxpayer dollars." Read the remainder of her report here.

One wonders if any of the current members of Arlington County's delegation in the Virginia General Assembly have patroned legislation to hold those "local government-created 'supervisory' entities accountable for the millions of taxpayer monies entrusted to them, as described in the previous paragraph, rather than patroning legislation to satisfy special interests. Members of Arlington's delegation are:

Senate of Virginia

  • 30th District -- Adam P. Ebbin (D)
  • 31st District -- Barbara A. Favola (D
  • 32nd District -- Janet D. Howell (D)

House of Delegates

  • 45th District -- Rob Krupicka (D)
  • 47th District -- Patrick A. Hope (D)
  • 48th District -- R. C. “Rip” Sullivan (D)
  • 49th District -- Alfonso H. Lopez (D)

Growls readers are urged to communicate their concerns with members of the Arlington delegation. Contact information for members of the General Assembly can be found here  -- use one of the "quick links" to locate the senator and delegate who represent your district. And tell them ACTA sent you!

Kudos to the Franklin Center for Government & Public Integrity for its support of Watchdog.org. The Franklin Center is a non-profit organization that promotes a well-informed electorate and a more transparent government.