68 Taxpayer Assistance Centers to close

Over the opposition of Taxpayer Advocate Nina Olson (background) and Senator Baucus, the IRS plans on closing 68 Taxpayer Assistance Centers (TACs). This has got to be seen as a blow to simplicity and fairness in terms of how the IRS conducts business. The ostensible reason is decent, to put more money into enforcement, which is in crisis. But the cost is unfortunate.

From BNA's Daily Tax Report (subscription required):

Rep. Major Owens (D-N.Y.) whose district includes a walk-in center slated for closing, said in an NTEU telephone news conference May 27 that the closures will be damaging. The Brooklyn center is "swamped" with questions from taxpayers, and many of its users are not computer-literate. He said he will be working to garner support for an amendment in an appropriations bill to block the cuts. At least two other congressmen have already opposed the closures. Reps.
Charles Rangel (D-N.Y.) and Ron Lewis ( R-Ky.) in an April 11 letter to Everson referred to the administration's proposed $134 million decrease in taxpayer services, noting the IRS Oversight Board recommended additional funding of $111 million instead of cuts.

The walk-in centers are crucial for helping people who don't have access to a personal accountant or tax attorney get a handle on their tax forms. "Everson" is IRS Commissioner Mark Everson, who got tagged as the spokesman for announcing the cuts. This situation immediately highlights one clear issue: the confusion associated with taxes. Millions use these centers. In all likelihood, if they are anything like the DMV (I'm imagining a mid-April crunch), folks don't get in a line because they want to. They get in line because they need assistance with the forms and can't afford, as millions of other Americans can, professional assistance. But there is pretty much broad agreement that the "tax help" industry has become too large. It wouldn't have sprung up without the demand.

The second issue, and Congressman Owens hits this, is the digital divide. In his statement, Everson says that more people are filing online. Unfortunately, that option is only possible for a fraction of the population. A spring 2004 Pew study showed that only 34% of adult Americans have internet access, with only 24% on high-speed. In other words, it's good that the IRS is paving the way for more online filing, but right now, it can only be part of the solution. And I'm sure that only a fraction of the 34% feel comfortable enough with the internet to shop, let alone file their taxes.

When corporations don't pay their fair share, on the federal or state level, and when people cheat on their taxes, the costs shift down onto honest taxpayers. Fairness requires that the IRS must be funded well enough to do its job properly. When it gets underfunded, like it has been, more loopholes get exploited and more taxes, personal and corporate, get evaded. The inflated rates (inflated to make up for lost revenue), get passed on to the rest of us, and that's not fair. The message is simple: tax evasion is not a victimless crime. It has a broad-based impact. Congress should do what it can to allow the IRS to enforce the laws that it sets for it, and to help honest taxpayers easily file their taxes. This funding cut is a step in the wrong direction. What's more, well-directed funding for enforcement and compliance aid, over time, would pay for itself in made up revenue. Who knows? If done well enough, it could even lead to broad-based rate reduction for everyone. Call it the "fairness dividend."

The Other Shoe Drops

Recently, in Colorado, Governor Owen has shown a certain level of willingness to work on much-needed TABOR reform with the legislature. Unfortunately, he's still doing his part to lead the assault on people who work for living.
Nathan Newman has the story.

Thinking Cyclically in Utah

With all the red ink states have seen in the past four years, it's sometimes hard to believe that there was a time when states had "surplus" revenues. But, of course, there was: in the late 1990s, states enjoyed short-term revenue surpluses driven largely by growth in personal income taxes, which in turn was driven by fast-growing capital gains. Lawmakers were quick to enact tax cuts that sent these surpluses right back to taxpayers, rather than socking these revenues away to help offset future shortfalls. These excessive tax cuts came back to haunt lawmakers in many states when the recent economic slowdown created budget shortfalls starting in 2001.

Now, it seems, the good times are back. Utah revenue forecasters see a surplus of over $100 million for the fiscal year ending in June. Not surprisingly, state leaders have ideas about what to do with this surplus. The pleasant surprise is that one of the three middle-aged white males who are running the show in Utah seems to have a very good handle on the situation. House Speaker Greg Curtis (R) says that "We've had some pretty lean years, and there are some things that probably ought to be looked at before we say tax cut." An article in the Deseret News has more:

After all, Curtis said, no one talked about raising taxes during the last few years when revenues were down. "We were not jumping out there and doing tax increases," he said. "This is all cyclical. We need to make sure we've addressed all the important issues."

This is great stuff. When surplus-laden states choose between tax cuts and increased spending, they often forget a critical third option: shoring up their rainy day funds. The cyclical nature of state tax revenues means that today's surplus is tomorrow's piggy bank. And Curtis clearly sees this. Of course, the other two guys who matter (Senate President John Valentine and Governor Jon Huntsman) have a more typical (and more myopic) take on things. Valentine sees this news as "a powerful argument for tax cuts." As for Gov. Huntsman, he was already advocating the repeal of the state's corporate income tax before the surplus news broke. Oddly, he advertised this plan as a revenue raiser, since the added economic development from corporate income tax repeal would counterbalance the direct foregone revenues. Maybe the surplus news will make him admit that tax cuts actually have a price tag...

Tax reform is squarely on the agenda in Utah, with a tax reform commission just getting underway and scheduled to meet throughout the summer. It will be interesting to see how these new fiscal developments shape the debate there. We'll have more on Utah's tax reform debate in the near future.

Criticism of Pawlenty's (lack of) Leadership

I just stumbled across this Op-Ed by a retired business owner from Minnetonka, MN. Speaking from experience, he makes light of the anti-tax threats often offered up by right-wing ideologues.

And this campus editorial board seems to have managed to parse the impenetrable code that is the Pawlenty revenue plan.

WI Committee Rejects Internet Sales Tax

The Wisconsin Joint Finance Committee rejected Governor Jim Doyle's proposal to add a 5% sales tax to "music, movies, books and art downloaded from the Internet." I'm sure they figured something out, but enforcing such a tax on the state level seems difficult.

The governor's office tried to make the point that local small businesses are disadvantaged because a customer must pay sales tax on goods that they purchase in a physical store. The idea of streamlining taxes to reduce interstate tax fighting is picking up steam.

This, however, strikes me as different. iTunes, for example provides a very different consumer experience from shopping in a record store. In other words, it makes sense that, say, Wisconsin on Minnesota or Iowa would want to work together to bring their sales tax structures into harmony, it is less clear that states should try to do the same with internet sales. With regard to bordering states, it seems like a good idea to me because that way businesses are on a more level playing-field to compete based on service and quality of product, and not what plot of land they occupy.

But, Jim Doyle wasn't completely out of line. He is correct in noting the change in the market environment and it's potential impact on his state's sales tax base (despite the previously mentioned differences, a good deal is still a good deal). Overtime, I can imagine that the prevalence of internet sales might lead more states to shift away from their reliance on a sales tax to bring in necessary revenue.

Furthermore, internet commerce, though kind of different, is not fundamentally different than "bricks and mortar" commerce, as this policy brief makes clear. So, the solution to this issue is a couple steps away. It seems like, in terms of taxes, the first move to level the playing-field between states. Once that's done, it will become possible to attempt to level the playing-field between mediums.

Update: This article from back in March provides some decent background.

It seems more and more like Doyle's motivation was right--a level playing field for businesses in his state--but he sort of stumbled out of the gate and proposed a policy that would be hard to enforce. Also, if you follow the link to the older article, you'll see that some legislators tried to score some cheap political points by claiming to support e-commerce. I'd argue that online retail would remain a very profitable business regardless of comparable sales tax enforcement. Online merchants would still save a lot on overhead and be able to pass the discounts on to their customers. Catalogue shopping, of course, existed long before the internet came along.

New Hampshire Poll

A new poll by the Becker Institute shows strong support for Governor Lynch's proposed cigarette tax hike. He aims to add 28 cents to the already existing 52 cent rate. 78% of respondents think that's a good way to balance the budget. His bill has already passed the General Court (house) and will probably be contentious in the state senate.

If it becomes law, this will be a good step towards revenue adequacy for New Hampshire.

International Edwards: The Two Englands?

John Edwards is busy taking his message global this week. He is in England to help launch a new book by Labour Party economic advisor Patrick Diamond. The book, apparently, focuses on funding strategies for England's National Insurance program as well as the effectiveness and scope of child tax credits and the overall fairness of their tax system.

Update: Wait, actually Edwards and Diamond may have just been on the same campus for separate, unrelated events. At any rate, I'm sure the book is a good look at British public finance.

Open Letter to Senator Grassley

Dear Senator Grassley,

An article in today's New York times with the header "Repeal of Alternative Tax Gains a Top G.O.P. Backer," describes your position to repeal the Alternative Minimum Tax (AMT). I'm confused about why you'd advocate for this policy change and hopefully you can help clear a few things up for me.

As you must know, the tax was first enacted in 1969 as a type of alternative personal income tax. Basically, too many high income people were claiming too many federal deductions, exemptions, and credits. These wealthy Americans were able to reduce the amount they paid in taxes so much - that many of these high income individuals did not pay any taxes at all.

Congress established this alternative minimum tax to make the tax system more fair - to ensure that wealthier taxpayers could not get away with paying no taxes at all.

This is where your colleagues goofed a bit...they didn't index the AMT properly to make sure that year after year only wealthy people pay the tax. So now in 2005, we see that more and more middle income people are paying the AMT. This goof, combined with the 2001 & 2003 Bush Tax Cuts, means that even more middle class Americans are being forced to pay a tax that was never intended to impact them.

It's my understanding that instead of fixing the AMT (which would also mean lessening the tax burden on the middle class) you'd be in support of repealing the tax all together -- returning us to the pre-AMT world where the wealthiest Americans paid no income tax.

I can't close without saying that repealing the AMT would also be quite pricey. Estimates are that this tax cut would cost $600 billion by 2015.

I guess I'm just confused about two things:
1) Why "throw the baby out with the bath water" by repealing the AMT instead of simply fixing what's wrong?

2) In a time of war and enormous need - why pass another tax cut?

Best,
Kelly

PS - You might want to check out this latest analysis about the repeal of the AMT by Citizens for Tax Justice.

Tim Pawlenty (R - Minnesota) vs. Grover Norquist (R - K Street)

Grover Norquist, who is generally opposed to all things public, is pretty angry with Tim Pawlenty.

The sad thing about this is, that in proving that he is not "a pawn of the Taxpayers League" (the Minnesota state-level chapter of Norquist's Americans for Tax Reform), Pawlenty has not done much to solve his states financial shortfall. Instead, he's pushing a temporary-fix cigarette tax.

As this ITEP policy brief shows, taxing cigarettes is regressive and increasingly ineffective. Cigarette taxes make a larger impact on low-income workers than on their wealthier peers. Also (and this is arguably a good thing) cigarette taxes seem to reduce smoking. Taxes aside, smoking has been on the decline for the past few decades anyway. The problem there is that as smoking reduces, so does revenue from the new tax. All this means that the next governor of Minnesota--should the state follow Pawlenty's lead--will be left with a similar budget problem in a few years.

On Filibusters, Super Majorities, Judges and Taxes

Last night's deal by Senate "Moderates" averted the need for the Republicans to attempt the "nuclear option" or for Democrats to filibuster, at least today. I feel, though, that from the perspective of best practices for public policy, some key points got lost in the shuffle as Senators pondered the true meaning of Advise and Consent. First off, for years now, maybe since Roe vs. Wade, activists on both sides--particularly the far-right--have tended to view the court as a partisan body. The strategy has been to attempt to whip together five justices who are against abortion. Just like counting heads for a vote in the House. This has mightily confused a lot of people about what it means to be a good judge and what exactly the court does. The court did not help its case in 2000. It would have served the country well to have a full blown debate about what makes a good judge. There are a lot of issues at play with many of the judges in question, Janice Rogers Brown, William Pryor and Priscilla Owen, particularly with regards to labor, consumer and minority rights. But you don't hear a lot about it from the James Dobson-led gang of culture warriors. But that's not the thrust of what I mean to write about. Which brings us to point number two....

It takes 60 votes to end a filibuster in the Senate. So, with the current rules in place, it takes a 60% majority to appoint a judge. Since judges get to stay on the bench for as long as they like, a certain amount of consensus on appointments is a good thing. Attempting to pick a judge despised by half of the Senate, perhaps, is not the best way to serve the American people. If legislation turns out poorly, the people can electorally punish the legislators who passed it by replacing them with new ones who can reverse, modify, or completely change past laws and spending priorities. Not so with judges. It seems to me that we ought to acknowledge the difference somehow. I don't think it's bad thing to have a higher threshold for decisions that are inherently less amendable. As William Saletan points out over at Slate many politicians, even federal Republicans, cherry-pick issues on which to support simple majority rule. Their ought to be some sort of rubric for deciding when 50%+1 will work, and when some greater level of support will be required to elect, appoint, decree, proclaim or legislate.

Yesterday I wrote about how in Minnesota, Governor Tim Pawlenty wants to give 20% of property owners the power to spur special elections aimed at blocking revenue increases. While this measure would be particularly absurd, should it stick, several states require a supermajority to increase taxes--and in a few cases, to pass the budget at all.

To wit, Arizona, California, Nevada, Oregon and South Dakota require a two-thirds majority to increase revenue. Delaware, Kentucky, Louisiana and Mississippi take three-fifths. And Arkansas and Oklahoma require three-quarters.

Some might consider these provisions to be upholding the "tyranny of the minority." After all, most substantial legislation does not pass unanimously. 20% or 33% of any legislature or population will surely find cause to disagree with their neighbors and peers on many issues. Certainly, if the Federal Government had the same budget rules as these states, we would not frequently pass a national budget.

I have frequently found myself displeased with legislation in recent years, but if the talk is to be about process and not outcome, we must define when a supermajority is fair, and when it is best to keep our majorities simple. Continuing down the road of ad hoc, jury-rigged parliamentary order is a sure way to make most citizens tune politics out, and that is just about never the best path towards responsive government.

Feeling Minnesota

As promised, I'm following up on last Friday's post about the tax debate in Minnesota. There's little new to report in the way of faith-based support for the progressive DFL plan supported by State Senator Larry Pogemiller, but there is a bundle of coverage in the Star Tribune.

Here is an article that outlines the debate and the key players, Pogemiller and anti-tax Republican State Rep. Phil Krinkie. Here's a key passage that caught my eye about Krinkie's plan:

The tax bill he has produced contains no major increases in state sales or income taxes. It features deep cuts in a property tax refund program for renters and a "turbocharged truth-in-taxation" measure that gives extra clout to property owners who want to challenge local spending increases. Critics say it's part of an overall budget that's mean-spirited and further diminishes Minnesota's traditionally generous public sector. Krinkie contends that it's responsible and provides a significant increase in revenue in the next budget period.

What gets me here is the way that he pits renters directly against property owners. Often, it seems like the two biggest issues that drive state-level tax reform is education funding and property tax relief. A major challenge for legislators working on reducing the impact of property taxes is to make sure that renters (who generally tilt toward the low- and middle-income end of things, compared to home owners) see some kind of relief. Often, when property taxes are reduced, landlords see all the benefits and don't pass any savings on to their tenants. In Minnesota, they address that issue with a refund program. Reducing that program will make the tax code more regressive--placing more of the burden on people with less income. To further skew matters in favor of the wealthy, Krinkie also is proposing to require ballot referendums among property owners to raise local revenue. That's right, as I understand it, here's how it works (though, I'm a bit late to the story): the town council passes a spending measure. Then property owners get to vote on it. If so much as 20% vote "nea" it fails. That's right. An 80% majority would lose a vote. In any case, so after the property owners vote and 20% say "nea" then a special ballot referendum election must be called so that all the town's voters can have a say. These election would be pretty expensive to run, but the bigger issue is that the Republican budget plan in Minnesota calls for hiking taxes on renters, even while it disenfranchises them from part of the (slighty superfluous, if not gimmicky, proposed) process.

Minnesota Citizens for Tax Justice have done a lot of work explaining the scope of recent cuts and a plan to raise a bit more revenue. They are also working to get the word out about the real face of funding shortages.

One local city manager has connected the dots nationwide, and sees the Pawlenty gimmick as part of a larger web of politicians chickening out in the face of a powerful right-wing advocacy group. The funny thing is, if recent history can act as a guide, it just might be good politics, in addition to policy, to it stick to 'em.

Archbishop Harry Flynn Makes His Stand

In Minnesota, Archbishop Harry Flynn of the St. Paul and Minneapolis Archdiocese, has come out in favor of a fair, progressive tax increase and is urging Governor Tim Pawlenty to reconsider his pledge to veto the bill.
He had this to say about the budget:

It is a moral statement … A just and equitable increase in income taxes, based upon each individual's ability to pay, will provide additional revenues to our state to better meet the needs of our brothers and sisters who are facing serious economic hardships.

He is promising a prolonged effort to address issues of economic justice in Minnesota. Obviously, religious leaders advocating for the poor is nothing new, but given the recent climate and post-November '04 discussion of "values voters," etc, Flynn's voice is a welcome addition to the debate.

It is great to hear somebody talking about a holistic approach to caring for each other, and also specifically drawing the line between taxes and services. Nobody wants to pay more taxes than they need to, but some things are worth the investment. Too many politicians go out of their way to create an artificial disconnect between the debate over taxes, on the one hand, and the debate over vital programs on the other.

I recommend reading both articles linked to above, Flynn has a lot to say. I'm going to follow this story next week.

Oklahoma Op-Ed

In today's Oklahoman, ITEP's Casey Cabalquinto has an Op-Ed that demonstrates how Republican claims about a regressive tax cut likely to be passed by lawmakers in that state this week are deceptive.

Casey, who in contrast with the writer of the "counterpoint" Op-Ed that appears along side his actually analyzed the legislation in question and addresses it, first demonstrates the problems with the current idea and then goes on to offer a better alternative. Here's an excerpt:

The state House of Representatives has passed a bill that would cut the top income-tax rate from 6.65 percent to 6.25 percent. The bill's sponsor, Rep. Kevin Calvey, claimed in The Oklahoman on April 20 ("Save some $$$ for taxpayers," Opinion) that this income tax cut "will help anyone making more than $10,000 a year." This sounds like a great deal, but it's just not true.

For example, a married family with two children would have to earn $27,000 before they'd see a dime in tax cuts under the Calvey plan. And even for single Oklahoma workers, the tax cut would kick in at $13,000, not $10,000.

Of course, a few wealthy Oklahomans would do quite well under the Calvey plan. The richest 5 percent of income earners would get almost half the tax cut, and the very wealthiest 1 percent would see a tax cut averaging almost $1,700. But the poorest 60 percent of Oklahomans would see a tax cut averaging just $9 -- and more than half of all state residents would get nothing at all from this plan. This is especially worrisome because the tax system is tilted heavily against the poorest Oklahomans.

....

The good news is that if a $58 million tax cut is deemed affordable -- a very big "if," according to many advocacy groups -- there are plenty of other ways in which lawmakers could provide more meaningful tax relief to working families. Cutting income taxes on the working poor would be a start. Low- and middle-income Oklahoma families use a "standard deduction" that acts as a no-tax floor. In Oklahoma, this deduction is limited to $2,000 -- smaller than the standard deduction allowed by most other states and the federal government, and
much smaller than the itemized deductions typically claimed by wealthier Oklahomans. Increasing the standard deduction would provide a bigger "bang for the buck" than the Calvey plan for most Oklahomans currently paying income taxes.

Postcard from Reality

In today's Post, Dana Milbank reports on a joint briefing held by the Heritage Foundation and Brookings Institution to warn about the growing deficit and oncoming "crunch." Scholars from both places agree that a combination of tax increases and spending cuts will be needed to address the problem.

Bob McIntyre wrote about this situation back in March, saying:

Counting interest paid on the bonds held by Social Security, about a fifth of non–Social Security taxes paid this year will go to interest payments. Unless Bush’s mistakes are reversed, interest will devour 30 percent of our non–Social Security taxes by 2015 -- and this frightening trend will continue to accelerate
thereafter. As any-one who’s ever run up a credit-card bill knows, interest means paying for past spending. It’s never pleasant, and at some point it can become impossible.

The interest on our debt is a key factor in our annual deficits. This 2001 Citizens for Tax Justice analysis shows, among other things, how reducing or increasing the deficit creates a compound effect on the ongoing deficit or surplus. In other words, good practices one year lead to easier practices the next, whereas bad decisions one year make the problem much worse the next. With that in mind, the analysis helps to explain how reduced spending, increased taxes, and the accompanying reduction in interest payments on our debt turned the Reagan Deficit into the Clinton Surplus.

Another report by Citizens for Tax Justice, this one from 2003, shows the unprecedented levels of post-war era deficit spending by the Reagan, George H.W. Bush, and George W. Bush administrations. And of course, every one of those borrowed dollars spent represents a compounded problem being handed on to future governments and future generations.

Bush has been adding to this problem from both sides, with his irresponsible tax cuts, but also with dramatic, well-documented, spending increases. Non-defense, discretionary spending has risen dramatically, even as the government copes with increased Homeland Security and Defense costs.

Tax the Big Mac?

Amazingly, today the British Government takes a look at Detroit Mayor Kwame Kilpatrick's potential plan to add a 2% sales tax to fast food, in addition to the 6% meals tax that already applies to Detroit restaurants.
Now, one quick thing about the report. It claims on first that

The move is expected to raise around $17 million a year, though this will not fill the city's $300 million budget deficit.

But also that

The Mayor has yet to define what constitutes a fast food restaurant. However, his spokesperson said that it is likely to include any outlet where food is purchased in advance.

It seems like those two statements could be mutually exclusive. How can a mayor estimate how much a tax will raise without knowing how broad the base will be, particularly if the rate is already defined?

But even so, the idea of placing a "sin tax" on fast food is thought provoking. Should a city (or state) treat unhealthy food the same way it treats cigarettes? According to some it can be sort of addictive. It has an enormously bad impact on people's health. Is the tax code a good means to try and improve people's health? I'm not sure. This tax will certainly fall onto relatively lower income citizens, so it is a regressive revenue source. It will also almost certainly diminish over time. People eat fast food because it is cheap. If the price goes up, some folks will swap their Whopper for a healthier lunch. So the tax base will shrink, and Detroit will still have a large deficit.

Is this even a good way of improving public health? There are lots of ways to get your hands on junk food. The quest for an unbalanced diet is, after all, a much more varied endeavor than the desire to smoke cigarettes.

Another Take on the New Zealand Carbon Tax

TomPaine.com takes another look at the New Zealand Carbon Tax, arguing that it is a good way of rewarding environmentally sound businesses and shifting the tax burden away from small businesses and on to large polluters. This seems to me like an alternative approach to polluter-pays clean up laws (like, say, for MTBE) that our Congress has been reluctant to pass. The writer of the TP piece sees that way the tax is structured as similar to a carbon market, where companies can buy allowances for pollution, but also where the total sum of allowances is capped. This comparison is drawn mainly because a company in New Zealand, under the new law, can renegotiate its Carbon Tax rate with the government if it can show that it is actually maintaining environmentally sustainable practices.

From the Where do all of our tax dollars go anyway? Department

In Oklahoma, we learn, via Think Progress, via Atrios, that the means to fund body armor for the troops serving in Iraq and Aghanistan has fallen to vanity plates. On the one hand, you've got to sort of admire Rep. Kiesel's desire to do something. On the other, you've got to be pretty discouraged that it came to this. In a period when we watch states and the federal government cut taxes for the wealthiest Americans with such tenacity, using all means--estates, capital gains, dividends--this is clear example of how reckless our book-keeping has become. It should never take vanity plates to give soldiers the equipment that they need.

Jerry Kilgore: What me govern?

Jerry Kilgore, the Republican candidate for Governor of Virginia, has pulled an astonishingly cowardly stunt.

He has no qualms about using the power of the executive to enact all sorts of things--though the details he provides are blessedly spare--he does have a problem being associated with the cost of the various programs he'd like to enact.

He proposes putting any tax increases on a ballot referendum. Here's the thing, like most candidates running for state-level office, he talks a big game on reducing property taxes. He talks about building schools. He talks about building roads. None of these are bad goals, but neither are any of them free.

If he is so enamored of "small d" democratic processes for taxes, why not apply the same methods to all aspects of budgeting? Want to build a new off ramp on the highway? How about an election? Hire some new state troopers? Put it on the ballot!

His proposal amounts to political grandstanding, which is nothing new for this campaign, but for anyone who cares about responsible government, it's a big insult. Just another example of a politician who wants to distance himself from tough choices.

If I Were Bitter...

I would take note of New Zealand's recent passage of a "carbon tax" on fossil fuel production and use. I would contrast this bold (if regressive) move with the recent behavior of the US Congress on the energy bill, which amounts to using billions of dollars in tax breaks for oil and gas producers to encourage more conventional fossil fuel production.

I would then get profoundly depressed, because Congress is so far away from taking positive steps on this issue that pretty much all we can do until 2008 is to sit around and read about how quickly the polar ice caps are melting. I would continue to get depressed, because Elizabeth Kolbert has just wrapped up a big three-parter in the New Yorker about exactly this topic.

But I'm not bitter. Even if Congress and the Administration sit on their hands until doomsday, there's plenty we can do. We can follow Daryl Hannah's brave lead and drive cars powered by vegetable oil. Jesus f***ing christ.

Wait- I guess maybe I am bitter...

Talk is Cheap

Chuck Hagel, who is running for the 2008 Republican Presidential Nomination, had this to say about the deficits that the Bush White House and GOP-controlled Congress of happily racked up these past few years: "That's not the Republican Party I joined. I think we're coming loose from our moorings."
That, you know, might be true. It's one thing to say that at a "Politics and Eggs" breakfast in the Granite State. It's quite another thing to put taxpayer dollars where is mouth is, which Hagel was terminally unwilling to do last week when he voted to pass the budget and increase the federal deficit by several hundred billion dollars in upcoming years.

Selling Out The Future

Literally.
From David Broder's column this morning:

What does the budget do for Social Security? It transfers the roughly $150 billion "surplus" in Social Security taxes over this year's Social Security payments to help pay the bills for this year's government spending and to finance the additional $106 billion in tax cuts the president wants to hand out.

Congress has, in effect, taken out a mortgage that it has no intention of paying down on one of our most crucial, effective programs. But that, I guess, is what "reformers" want to see anyway.

Lowry on Progressive Indexing

Rich Lowry's latest National Review column on the politics of progressive indexing accuses Democrats of being disingenuous in their opposition to the President's proposal for progressive price indexing of Social Security. A few people have pointed out inadequacies in Lowry's argument . (See Yglesias and Maxspeak, for example.)

Lowry's column does contain some real whoppers, as these guys point out. But there's one charge he makes that, I think, sticks: the argument that "the last thing [Democrats] want the public to know is that Social Security is a glorified welfare program, and the more a worker pays in now, the less, on a percentage basis, he gets later." He's saying that Dems oppose Bush's plan to make the benefit structure even more progressive simply because such a change would make the (currently hidden) progressivity of the system more painfully obvious, which would diminish public support for the program. Leaving aside the question of whether the system would actually be "more progressive" under price indexing (Dean Baker and others seem pretty convinced that it won't), I think it's absolutely true that Dems are afraid to make the system a worse deal for upper-income taxpayers. Social Security is, in fact, a superficially universal program rather than an explicitly means-tested one, because FDR wanted to create a plan that could get something approaching universal support. I can't think of anyone who's defending the current program who is making a straight-up argument about how progressive the benefit structure ought to be.

So here's the question: am I right in thinking that (1) supporters of Social Security are, and have been, very hush-hush about the true distributional impact of Social Security under current law, and (2) if we did have an honest debate over what the distributional impact of Soc Sec ought to be, public support for the current approach would go down?

What makes a Republican vote against the budget?

Why did the dissenting 15 jump ship and vote against the GOP budget? It seems like Charlie Bass, Mike Castle, and Virgil Goode did it because of ANWR. Sherwood Boehlert may have cast his "nea" vote on behalf of NASA, or it could have been Medicaid, or family farms. Mark Green, who has announced that he is running for Governor of Wisconsin, may have cast his vote to prevent increasing his state's Medicaid bill. And it goes on like that.

If any readers can find a Republican who said "I'm voting 'no' on this budget because it increases the deficit with irresponsible tax cuts" please pass along a note.

Bush is back on the stump for Social Security...

...And the economy grinds to a halt. Or at least part of it: according to today's Jacksonville Clarion-Ledger, production at Nissan's Canton, Mississippi plant will stop while the President addresses plant workers to explain why his proposed Social Security changes are a good idea.

This might make sense if the Administration's goal is to give a fair hearing to the concerns of the plant's workers. And in fact, a Nissan spokesman says that's exactly the point: "He wants to hear from the folks on the line...This is really about the employees. That's who the president wants to hear from."

But to my knowledge, the only people the President ever "hears from" at these things are carefully hand-picked supporters of Social Security privatization. Does today's appearance mark the beginning of a new period of glasnost? Or is the Administration shutting down an entire auto factory just to give the illusion that ordinary workers are being allowed to have some input into this process?

I can't wait to see the transcripts from this one.

Criticism of the Bush Plan

Or, I guess it's more like criticism of a component of a potential plan, but so it goes.

The Daily Tax Report (subscription required), has good coverage in the wake of the Bush press conference. Since they've already got Senators Brownback and Allen against the indexing mechanism proposed by the President, it doesn't seem like it's got a lot of legislative legs right now. But, for what it's worth, the Democratic staff on the Ways and Means Committee put together an analysis.

Bush's proposal--once fully phased in--would result in a 28 percent benefit cut for a worker who had earned $37,000 per year. A worker who had earned $58,000 per year would have a steeper benefit cut of 42 percent. Meanwhile, a worker who had earned $90,000 per year would face a 49 percent benefit cut

A 28% reduction in benefits for people earning $37,000 a year is very serious.

Luckily, and this isn't unusual, Chris Dodd understands the big-picture choice that is being made.

Do I want to cut 50 percent of a middle-income person's retirement benefits, or do I want to ask the top 1 percent of income earners to do with a little less of a tax cut on a permanent basis? That choice is easy, and I think most of my
colleagues, Republicans and Democrats, would prefer that option

Senator Dodd has more faith in the Senate than I do. They did, after all, just pass a budget that cuts taxes for the wealthiest Americans, cuts Medicaid and other key services, and increases the deficits over the next several years.

Shifting Costs, Attacking Poor Families and Single Parents

Nothing comes for free. Proponents of the new federal budget resolution will say that they've made hard decisions without painful tax hikes. But as political leaders and the media in the states are rapidly becoming aware, the fallout from the budget resolution's spending cuts is being felt right now in state houses across the nation.

New Hampshire, already facing difficult choices on health care, is demonstrative. If TANF reconciliation goes the way most observers think it will, "more than $30 million" in costs will shift from the Federal Government to the Granite State over the next two years.

This is a relatively small example, considering the whole national stage, but it's a big deal for New Hampshire and it reflects the way more and more funding decisions are being made in government. Politicians talk about reducing costs, but mostly they just shift them.

Also, New Hampshire has more stringent restrictions on who can receive aid. So even while more costs are being shift down to the states, many people who need aid the most--like low-income single parents--are likely to to lose financial assistance.

FY 06 Budget Whip Count

When the budget resolution passed the House of Representatives last week, by a razor-thin margin of 214-211, not one Democratic voted for it. But here's the interesting part: 15 Republicans voted against it and 10 members of both parties didn't vote at all.

The 15 Republican defectors were:
Charlie Bass
Sherwood Boehlert
Mike Castle
Virgil Goode
Mark Green
Gil Gutknecht
Nancy Johnson
Tim Johnson
Walter Jones
Jim Leach
Frank LoBiondo
Jim Ramstad
Jim Saxton
Christopher Shays
Rob Simmons

The 10 non-voters (7 D's, 3 R's) were:
Clyburn (D)
Cunningham (R)
Doggett (D)
Filner (D)
Flake (R)
Ford (D)
Jefferson (D)
Paul (R)
Rothman (D)
Towns (D)

In the Senate, the only splitters were Chafee, DeWine and Voinovich.

Do any readers know why the defectors defected or why the abstainers abstained? There was a three vote margin, with seven Ds and three Rs not voting. So some quick math reveals that if all of the abstainers voted their party's line, it changes the outcome. I can only assume that votes would have changed then, had all members voted--keeping the result the same. So what's up?