A Giant Insurance Company With An Army

With Tax Day now behind us, it’s worth looking, again, at where our tax dollars come from and also how our tax dollars are spent.  The Brown Bear helpfully sent me an article reporting on the Taxpayer Receipt prepared by a nonpartisan group called the Committee for a Responsible Federal Budget.  While the original article is behind the Wall Street Journal website paywall, a Fox Business reprint of the article’s text is available on-line.

The Taxpayer Receipt shows how every $100 in federal taxes was spent in 2016 — and, to give a sense of the trend lines, how that same $100 was spent in 2011, too.  The result supports the conclusion memorably expressed by the line I’ve used as the headline for this piece:  the United States has become a “giant insurance company with an army.”

Why?  Because half of all federal spending goes to Social Security, Medicare, Medicaid, and health programs, and that number is growing, with Social Security spending up 17% since 2011, Medicare up 15.1%, and Medicaid up 25.4%.  Social Security gets by far the biggest piece of the federal spending pie, receiving $23.61 of every $100 in tax dollars.  Medicare places second, with $15.26.

And what about that army?  National defense comes in third, with $15.24 of every $100 in taxes paid.  That amount dropped 22.3% from 2011 to 2016, incidentally.

On the spending side, the lesson from these numbers is clear:  we’ve become an enormous social welfare state, with benefits continuing to expand.  As the percentage increases from 2011 to 2016 indicate, the growing spending on such programs is crowding out our ability to fund other programs, like transportation infrastructure, federal parks, space exploration, and every other federal initiative you can name.  And the increased spending isn’t helping the nagging problem of Social Security solvency, either.  The program is underfunded by at least 20 percent, and under current projections the Social Security Trust Fund (not exactly an accurate moniker) will run out of money in 17 years.

Oh, and here’s another interesting data point — fully $6.25 of every $100 in tax revenue goes to pay interest on the national debt.  That number is growing, too.

On the tax generation side, the individual income tax provided 47% of the $100, with payroll taxes producing 34%, corporate income taxes 9%, and customs duties and excise taxes another 9%.

Now, get back to work!

Bald-Faced Waste

Imagine, for a moment, that you are a bureaucrat at the National Institutes of Health charged with making decisions about spending the NIH budget.

One of your subordinates comes to you with a proposal for the NIH to spend $22,500, over two fiscal years, to fund the 9th World Congress for Hair Research.  The subordinate notes that the theme of this year’s World Congress, sponsored by the North American Hair Research Society — which will be held at the “luxurious InterContinental Miami” hotel in Miami, Florida — is Reflect, Rejuvenate, and Regenerate.  He says the Congress will bring together “hair biologists, dermatologists, cosmetic scientists and hair transplantation surgeons” to “present new research, share experiences, and discuss new directions for the advancement of knowledge in hair growth, hair and scalp disease, and clinical care” and is sponsored by the likes of Women’s Rogaine, Procter & Gamble, HairMax, Theradome, L’Oreal, Aveda, and the International Society of Hair Restoration Surgery.

Do you: (a) tell the subordinate that his proposal is a very funny joke, and share a good laugh at the outlandish idea of federal tax dollars being used to help put on a “luxurious” conference about baldness and hair restoration surgery, (b) gently but firmly tell the subordinate that baldness and hair implant surgery aren’t the kind of serious health concerns that require the attention or support of the National Institutes of Health, or (c) rubber-stamp the proposal because it’s only for $22,500 out of the multi-million dollar NIH budget and note that the session about “Robotic Hair Transplants” looks like it should be interesting.

If you picked (c), you have a future as a federal bureaucrat.

In the grand scheme of trillion-dollar federal budget and trillion-dollar deficits, a $22,500 payment toward the 9th World Congress for Hair Research — which is going on now, thanks in part to your tax dollars — is just a drop of Rogaine in the bucket.  This is about principle, however.  Either the people who make decisions about how federal tax dollars are spent are zealous guardians of the public fisc, or they aren’t.  And while some men and women may fret about losing their hair, there simply is no justification for federal support for a hair-care conference that already is amply supported by large corporate sponsors peddling hair-care products and hair restoration and regeneration treatments and techniques.

Kudos to Senator Rand Paul — whose tousled coiffure is at the other end of the hair spectrum — for calling attention to this little example of spending silliness.  You can see the NIH information about the funding for the 9th World Congress here and here, and the Congress website is here.

Our reckless federal spending has fallen off the political radar screen, both because we’ve become hardened to enormous federal budget deficits and because other issues have come to the forefront.  At some point, though, our federal government’s inability to control its budget and to resist obviously unnecessary spending will have terrible consequences.  And that’s the bald-faced truth.

The Governmental Accountability Problem

On Thursday the State Department’s Inspector General issues a report stating that $6 billion in contracting money spent by the Department over the last six years cannot be properly accounted for. The report noted “significant financial risk” and “lack of institutional control” and, astonishingly, reported that the State Department could not even produce contract files documenting precisely how $2.1 billion was spent.

Perhaps the most damning aspect of the report is the apparent utter lack of concern about accountability in spending our tax money. In the State Department, the inspector general position — which is supposed to be a kind of public watchdog — went unfilled for almost six years. Moreover, there have been fraud warnings and prior reports about slapdash controls and accounting for money shoveled overseas and paid to private contractors, and the State Department failed to address the problems.

I have two reactions to this news. First, this is the kind of story that feeds the fury of fiscal conservatives, who believe that the federal government takes too much of our money and then simply wastes a lot of it. The government takes in and spends so much money that even an astronomical sum like $6 billion is only a drop in the bucket — but we’ll never know precisely how that $6 billion was spent and how much of that money was lost to fraud, corruption, or simple overspending by unconcerned bureaucrats. How could an important position like inspector general go unfilled for six years?

People who support big government spending tend to pooh-pooh the focus on “waste, fraud, and abuse,” but I remain convinced that a federal government that actually had to tighten its belt because of budget reductions would find lots of places where money could be saved or spending reprioritized. At present, with the federal government awash in cash fueled by constant, large-scale deficit spending, the government has no incentive to be careful and prudent in its spending — and as a result reports and warnings about financial accountability tend to be ignored.

Second, this story can’t help whatever presidential aspirations Hillary Clinton may have. She ran the State Department for much of the period when accountability was lacking and warnings apparently were disregarded. As I understand it, part of her pitch is that she would be more fiscally conservative than other Democrats who might seek the presidency — but this report really undercuts the perception of careful stewardship of the public fisc that Hillary Clinton is trying to project. If you strongly believe that the government needs to get its fiscal house in order, how can you vote for someone who presided over a department that couldn’t even document how it spent $6 billion? If a public company were in a similar situation, the CEO would be fired, the SEC investigators would be knocking at the door, and private lawsuits would be inevitable.

It may never happen, but wouldn’t it be refreshing if we elected administrations that actually paid attention to the unglamorous nuts and bolts of accounting for their spending, reassessed whether long-time programs were still truly needed, tried to save a penny here and there, and acted like they took financial responsibility seriously, rather than worrying about immediately jetting off to some faraway location for a photo op with a reset button?

Guns, Guns, Guns . . . And Distraction

Your daily newspaper and your favorite news websites have been dominated recently by news about guns and gun control.  Since the awful shootings at the Sandy Hook elementary school, where a heavily armed lunatic murdered more than two dozen children and adults, our political leaders have been talking a lot about firearms and what we can do to prevent another horrible massacre.

In an odd way, the opportunity to talk about guns must be a kind of welcome relief for our politicians, because the gun control debate lets each party retreat to safe, time-honored positions that appeal to their bases.  Democrats understand that most of their voters will support attempts to license gun owners, register all weapons, and restrict or even ban ownership of “assault weapons” or other firearms.  Republicans, on the other hand, know that their supporters will cheer vigorous defenses of the Second Amendment right to keep and bear arms and stalwart opposition to overly zealous attempts to regulate gun ownership.

I suspect that all of the talk, talk, talk about guns is, in part, a means of distracting voters from other pressing issues.  Members of Congress and the Obama Administration would rather stay snugly in their gun debate comfort zones than deal with the spending, tax, and budget deficit issues that have far more long-term significance for our country.  With all the talk about guns, how much discussion of those core economic issues have you heard recently?  When those issues are in the forefront, and feet are being held to the fire, there are no easy, pat answers and no rote appeals to political bases.

As terrible as the Sandy Hook shootings were, we shouldn’t let our political leaders divert our attention from the federal debt time bomb and other issues that are restraining our economy.  Yesterday we received an unpleasant reminder of these problems when it was announced that gross domestic product dropped in the fourth quarter of last year.  Imagine:  our economy actually shrank during the hottest shopping season of the year.  It’s time we remind Congress and the President of the paramount need to focus on the hard budget and economic issues, before our economy plunges into another recession.

A Few Thoughts On The Paul Ryan Pick

I’ve been off the grid, so I didn’t think much about Mitt Romney’s pick of Paul Ryan as his running mate until today.  As we were driving home, Russell, UJ, and I listened to a replay of Meet The Press, which featured the all-too-predictable conservative and liberal shouting match about whether Ryan’s budget plan will gut Medicare and destroy the student loan program — among other issues.

Of course, it’s too much to expect that any political debate these days could be done at a reasonable decibel level, without yelling or over-the-top metaphors.  Nevertheless, I thought the discussion (if you can call it that) itself said something about the selection of Ryan.  Rather than arguing about whether the pick would help Romney politically in this state or with that constituency, the commentators were talking about something of actual substance — the budget, our debt problems, and how we deal with them.  How refreshing it would be if this election actually involved consideration of those crucial, meat-and-potatoes issues, rather than phony, grossly overheated topics like whether the evil Bain Capital caused a woman to die of cancer!

I think our exploding debt is the most important issue we face.  I therefore applaud anything that gets our country to focus on its budget problems and the hard choices we need to make to actually address those problems.  I recognize that my fellow citizens might disagree with my views on how we should address those issues — but that’s what elections are for, aren’t they?  If the selection of Paul Ryan causes President Obama and Mitt Romney to lay out their plans on taxes and spending and the deficit in sharp detail, and the election becomes a referendum on those plans, I think our country would be much better off.

For these reasons, Romney’s selection of Ryan is a positive thing for us all.  I hope we’ll be talking more about Ryan’s budget, and other fiscal issues, until Election Day.  For now I say, let the debate begin — and let’s see if we can’t have that debate in a civilized way, shall we?

Butt Belts And Budgets

Our political leaders’ approach to our budget woes reminds me of a curious device that we found in my grandmother’s basement, long ago.

We called it the butt belt.  It was a machine linked to a canvas belt.  You stood on a platform, slipped the belt around your keister or waist, and turned on the motor.  The belt vibrated and you leaned back, letting the contraption shake your rump like crazy.

The marvelous concept was that you could just stand there, let the machine do all the work, and the mechanical jiggling of your flesh would make the pounds and cellulite melt away.  Heck, you could even eat a sandwich back there, while the machine whaled away.  And after you were done shrinking your ample butt, you just turned around and let the magic belt cause that stubborn belly flab to vanish.  A few sessions with the butt belt, and you’d be ready to slip into that new bathing suit!

Of course, the machine really didn’t work, which is why we never found Gramma down there, getting shaken all over.  We now know that if you’ve overindulged, lost any sense of dietary discipline, and let yourself go, getting back into reasonable shape is going to require some really hard work on your part.  You’ll have to get some exercise and sweat, reduce your caloric intake, and change your habits to stop the constant snacking if you really want to make progress.

Hey, President Obama and members of Congress!  Standing immobile and hoping that the butt belt machine will magically turn your blubber into muscle won’t do the trick!

On Tax Day, Remember The GSA!

All American taxpayers should be grateful this April 15, as we curse and finish our returns and contemplate how much we pay to our federal government:  we have the General Services Administration out there working for us.

You all know the GSA, of course.  Its website describes the GSA as “responsible for improving the government’s workplace by managing assets, delivering maximum value in acquisitions, preserving historic property, and implementing technology solutions.”  To translate: the GSA are the bureaucrats bureaucrats.

The GSA has been in the news lately, but not due to its selfless performance of its crucial bureaucratic mission.  No, the GSA is in the news because the agency spent $822,000 — $822,000 — on its 2010 Western Regions Conference in Las Vegas.  That included payments for upscale accommodations, commemorative coins, and $3,200 for a “mind reader,” among other indefensible expenditures.  When an Inspector General’s report uncovered the gross waste, the GSA Administrator resigned.  Now the GSA official charged with organizing the event, who has been subpoenaed to testify about the matter before Congress, has indicated he will invoke his Fifth Amendment privilege against self-incrimination.  In short, there’s not just concern about bad judgment — there’s concern that outright criminal conduct may have occurred.

If you look at the GSA website, you’ll find a video of the acting administrator of the GSA, Dan Tangherlini, soberly pledging that the GSA will adhere to the highest standards of ethics and service.  (You’ll also learn that the GSA has its own flag, which appears behind him.  Thank God for that!)  The video is a classic of buzzwords and bureaucratese — other governmental bodies are called “client agencies” and “customers,” and the response to the abuse of the Western Regions Conference talks about rules and “top-down” agency reviews.  In short, the timeless solution to abusive practices in the bureaucracy is more bureaucracy!

Forgive me if I’m not reassured that the same agency that allowed the abuse is recommitted to its end.  The only real solution to waste and abuse in government is to cut back government, period.  Does anyone really think the country would grind to a halt if the GSA budget were reduced to one-third of its current size?

As I sign and send my returns today, I’ll be thinking of the GSA and its careful stewardship of our tax dollars.  And during this campaign season, when we hear candidates for federal offices talk about how “draconian” proposed budget cuts are, and how we need to raise taxes because cutting spending is just too difficult, I’ll think “Remember the GSA!” And then I’ll vote for their opponent.

Buying The President’s Books

Sometimes it is the little stories that are the most instructive.  I think that may be the case with the story about the State Department, through various U.S. embassies, spending more than $60,000 on books authored by  President Obama.

According to a federal database, the American embassy in Paris spent more than $8,300 on Dreams From My Father in French.  Embassies in Indonesia, Turkey, and South Korea made similar purchases.  The embassy in Egypt led the way, spending a whopping $37,000 on copies of Dreams From My Father.  According to a State Department spokesman, diplomats “often use books to engage key audiences in discussions of foreign policy” and he notes that “[t]he structure and the presidency of the United States is an integral component of representing the United States overseas.”  He says the books stock “information resource centers” that are located around the world and include books about U.S. culture, history and values, and that the State Department also provides “key library collections with books about the United States.”

Sorry, I don’t buy it.  I’m not suggesting the President had anything to do with this — I think it’s an example of bureaucrats using discretionary spending to curry favor with their political appointee bosses.  Could it really be true that Americans conduct diplomacy by handing foreign counterparts The Audacity Of Hope and asking them to read through chapter 12 before tomorrow’s meeting?  If so, that may explain some of our recent foreign policy problems.  And has anyone looked lately at the value of maintaining a worldwide network of “information resource centers” stocked with hard copy books?  If we’re spending so much on President Obama’s biographies, the “information resource centers” must be enormous — unless those books are the only ones that have been found to reflect the American viewpoint on culture, history, and values.  How often are the “resource centers” used?  Wouldn’t a more diverse, more cost-effective “information resource” be a computer terminal with internet access?

I recognize that $60,000 is just a tiny molecule of water in the great, slopping, steaming ocean that is the federal budget — but every journey begins with a single step.  Programs that permit the purchase of thousands of dollars of the President’s books are programs that can be cut.

Another Week, Another Stalemate

Ho hum.  If it’s Monday, there must be another political stalemate in Washington, D.C., and another possible government shutdown looming.

The contours of this dispute are familiar.  Federal funds are running out and a short-term spending bill must be passed.  The Federal Emergency Management Agency also needs more money.  As a matter of fiscal discipline, Republicans insist that the increased funding for FEMA should be offset by cuts elsewhere.  House Republicans passed a bill that would make $1.6 billion in offsetting cuts that target the Department of Energy’s Advanced technology Vehicle Manufacturing Program, which makes loans to car companies to pay for things such as factory upgrades and the development of new, green, fuel efficient technology.  Senate Democrats object and argue that the cuts to the DOE program would cost up to 10,000 jobs.

I’m with the Republicans on this one.  Congress can always find an emergency to justify more spending.  If we don’t make cuts to compensate, spending will just spiral even more out of control.  Moreover, the DOE program sounds like a classic federal boondoggle.  If market forces make better fuel efficiency important to car buyers, car makers will have plenty of incentive to spend their own money to achieve better fuel efficiency.  And haven’t we done more than enough for auto companies lately, with the taxpayer-financed bailouts of GM and Chrysler?  We need to curb our appetite for ever-increasing spending, and curtailing programs that subsidize big auto companies seems like a good place to start.

For all of their protestations about being serious about restraining spending, Senate Democrats apparently are unable to identify even $1.6 billion in spending “cuts.”  Doesn’t that say something about how serious they really are?

The Debt Limit Merry-Go-Round

The talks between Republicans and Democrats about raising our national debt limit are frustrating to follow.  It’s like a merry-go-round.  The people go round and round and there appears to be activity, but nothing ever goes anywhere.  All the while, the August 2 deadline — after which the United States will default, according to Treasury Secretary Timothy Geithner — looms ever closer.

House Republicans have passed a budget that was rejected by President Obama and Senate Democrats.  The Republicans say any increase in the debt limit must be matched by actual cuts in current and future spending and have insisted that tax increases cannot be part of any resolution.  Senate Democrats haven’t passed a budget in years, but have floated a proposal that has not been the subject of public hearing or debate.  President Obama has gone from proposing a budget at the start of the year that did nothing to reduce annual deficits, to proposing a budget framework that was so nebulous it could not even be scored by the Congressional Budget Office, to now taking the Republicans to task for not agreeing to compromise on tax increases.

Talks are occurring, behind closed doors, between the principals — a result that should cause good government advocates everywhere to shake their heads in dismay.  Republicans say President Obama stalked out of the talks last night; Democrats say the President left because he was rudely interrupted by House Majority Leader Eric Cantor.  Posturing is running rampant on all sides.

In the meantime, Moody’s has announced that it is placing the U.S. under review for a rating downgrade.  Imagine!  U.S. government bonds and notes, for years viewed as the safest possible investment, may lose that designation because our political leaders cannot reach an agreement.  Any rational person  understands that if any default or serious uncertainty occurs, the interest rate on future U.S. borrowing will increase as investors demand an increased return for the increased investment risk — as investors inevitably and understandably do — and that result will just make our debt burden that much heavier and the ability to bring the budget into balance that much more difficult.

It’s time for our leaders to put aside the politics and put the national interest first.  It appears that Republicans would agree to a short-term deal that would make cuts proposed by the President’s own Debt Commission and raise the debt ceiling by the same amount, to allow additional time for negotiations on a broader solution.  That is what the parties should do.  The President, having waited until the eleventh hour to engage, can’t reasonably insist on a long-term deal and risk a default as a result.  And while Democrats may complain, they have only themselves to blame — they could have raised the debt ceiling last year, when they controlled both Houses of Congress and the White House, but they failed to do so.

The bottom line is, we shouldn’t be playing chicken with our national credit or investor confidence in U.S. securities.

 

HUD Dud

President Obama, and many other others, have pointed out that those saying we can balance the budget solely by eliminating “waste, fraud and abuse” are taking a phony approach to fiscal discipline.  However, that doesn’t mean that “waste, fraud and abuse” doesn’t exist — a fact proven by yesterday’s Washington Post piece on spending by HUD on community housing projects.

The Post story found that in recent years more than $400 million in HUD money has been spent on stalled or abandoned projects.  In some cases, money was loaned and projects never got underway.  Many of the people to whom money was given had no experience in construction or had questionable qualifications for getting the federal booty.  The overall picture painted by the article suggests that our tax dollars were spent with little concern for how they would actually be used, and then with little attention to how they were actually being spent.

I recognize that $400 million is only a tiny drop in our colossal deficit bucket — but $400 million is still a lot of money in my book, and the Post article looks at only one program administered by one agency.  What would we find if every federal program were subjected to similar scrutiny?

I’m not surprised by the waste found in the HUD housing efforts, nor am I surprised by the attitude reflected in the quotes from government officials who are involved in this poorly run program.  One person who manages HUD money says we need to reduce the risk by enacting “basic standards” — which suggests that hundreds of millions of dollars have been spent without even “basic standards” that apply.  Could that possibly be true?  The Post quotes another government official, Mercedes Marquez, HUD’s assistant secretary for community planning and development, says “We can do better and we will.”  But why on Earth should we believe her?  Isn’t it safe to assume that every HUD official since that agency was formed has said pretty much the same thing?

This is an example of where governments and businesses diverge.  In any business, a division that failed to insist on basic accountability and frittered away $400 million would be shut down — period.  Why shouldn’t we take the same approach with this badly administered program?

Time To Get Realistic About The Postal Service

Let’s face it — the Postal Service, as we know it, is doomed.  How many people write letters anymore?  How many people under the age of 30 have ever even received a handwritten letter?

The U.S. Postal Service lost $2.2 billion in the first quarter of this year.  $2.2 billion!  Why?  There are at least three reasons.  First, usage has declined dramatically.  More people now communicate primarily by text or email.  The post is used largely for commercial mail, and even that usage has declined in the face of the recession and the decided economic advantages of relying on electronic rather than paper-and-stamp missives.  Second, postal delivery is highly labor-intensive, and gas-intensive, when electronic mail is neither.  And there isn’t much the Postal Service, in its current form, can do to change that fact.  You can only squeeze so much efficiency out of an approach that requires a guy on a truck to physically deliver junk mail to every stop on his route.  And third, the Postal Service is blessed with congressional oversight, which makes closing unprofitable outposts in small towns a political tug-of-war and has kept the Postal Service from achieving savings by eliminating unprofitable Saturday delivery.

The Postal Service has long been a dinosaur; now it has become a fossil.  Any rational person knows this.  If Congress and the President are serious about getting rid of deficit spending, our subsidies of the Postal Service seem like a good place to start.  Let’s stop them, and let the Postal Service do what it thinks it must to be competitive.  If it fails, so be it.  If we can’t sacrifice Saturday delivery of junk mail and bills in order to get our “fiscal house in order,” we’ll never be serious about cutting spending and balancing the budget.

Who Is This Guy? (The Time And Timing Side)

One other point about President Obama’s April 13 speech on fiscal policy struck me, and that was the whole question of time and timing.

The budget savings numbers cited by the President in his speech all were based on a 12-year period, rather than the 10-year period typically used in long-term budgeting.  For example, House Budget Committee Chairman Paul Ryan’s proposed budget, which the President sharply criticized in his speech, uses a 10-year period.  Why did the President use a 12-year period?  Because he wanted to say that he proposed roughly as much in deficit reduction as the Ryan plan, and a lot of the “savings” anticipated by the President occurs at the end of his 12-year period.  In my view, this is the kind of numbers gimmickry that shows a real lack of seriousness about the deficit issue.

Another interesting time and timing issue was raised when the President talked about a “failsafe” that would be part of his plan.  The President stated:  “But just to hold Washington — and to hold me — accountable and make sure that the debt burden continues to decline, my plan includes a debt failsafe.  If, by 2014, our debt is not projected to fall as a share of the economy -– if we haven’t hit our targets, if Congress has failed to act -– then my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code.  That should be an incentive for us to act boldly now, instead of kicking our problems further down the road.”

I don’t follow this logic.  The “failsafe,” whatever it will be, isn’t triggered until 2014 — three years from now, after the President’s first term has long since ended.  Why would the possibility of actions in three years hold the President, or anyone else, “accountable” now, and why would it be “an incentive for [politicians] to act boldly now”?  With an election looming on the near horizon, and the parties already bickering and name-calling about just about everything, why would a distant, post-election deadline have any impact at all?  If a “debt failsafe” really is a good idea, how about invoking it now, so that voters can hold politicians “accountable” the way they should be held accountable in a democracy — through having to explain and justify their decisions in the election that is less than two years away?

President Obama’s fiscal policy is predicated on the notion that our continued deficits are a serious problem that must be addressed.  However, the time frames set at the end of his speech don’t seem to match the urgency expressed at the beginning of his speech.  Instead, the President seems to want to defer making the tough decisions that should be made immediately, while at the same time using words like “accountability” that test well with focus groups.  To me, that seems more like electioneering than leadership — and that is another reason why I found the President’s speech so disappointing.

Who Is This Guy?  (The Revenue Side)

Who Is This Guy?  (The Health Care Side)

Who Is This Guy?  (The Defense Side)

Who Is This Guy?  (The Spending Side)

Who Is This Guy? (The Revenue Side)

The next part of President Obama’s approach to the budget deficit, outlined in his April 13 speech, addressed what he called “tax expenditures” and “spending in the tax code.”   At the outset, he said he regretted agreeing to extend “tax cuts for the wealthiest Americans” only a few months ago, but explained that he did so “because it was the only way I could prevent a tax hike on middle-class Americans.”  He added that “we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society” and declared:  “I refuse to renew them again.”

The President next said the tax code is “loaded up with spending on things like itemized deductions.”  He agrees with “the goals of many of these deductions, from homeownership to charitable giving,” but “we can’t ignore the fact that they provide millionaires an average tax break of $75,000 but do nothing for the typical middle-class family that doesn’t itemize.”  He then called for “limiting itemized deductions for the wealthiest 2 percent of Americans.”

Finally, he said “we should go further,” and Congress should “reform our individual tax code so that it is fair and simple — so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford.”  The White House fact sheet that UJ linked to recently phrases the issue more bluntly — it says: ” the President is calling for individual tax reform that closes loopholes and produces a system which is simpler, fairer and not rigged in favor of those who can afford lawyers and accountants to game it.” (The emphasis is in the fact sheet itself.)

These remarks are, commendably, more specific than the President’s remarks on spending and health care.  He wants to raise the current tax rates on high income earners (by not “extending” those rates) and he wants to “limit” deductions for the wealthiest 2 percent of Americans.  It is interesting that the President now regrets a decision he made only a few months ago, but it is even more interesting that he seems to equate “income” with “wealth.”  The federal income tax only addresses “wealth” if the wealth produces taxable income.  The notion that individuals who are taxed at the highest tax brackets are all “millionaires and billionaires,” as the President suggested, is preposterous.  Instead, many of those people are simply productive workers in two-income families — small business owners, professionals, and so forth — who are reaching the peaks of their earnings potential while at the same time they are putting their kids through college and trying to save for retirement.  The notion that such people are “the wealthiest Americans” who have somehow gamed the system is ludicrous.

I’m all for making the tax code simpler and fairer — but does anyone really think President Obama is well positioned to do so?  His health care legislation is already producing volumes of regulations that are of breathtaking complexity.  And this is not a President who has shied away from advocating tax breaks and incentives for causes that he agrees with — like green energy.  A better course, I think, would be to get away from deductions altogether.  I’d like to see an end to special tax treatment of donations to charitable and religious organizations and the non-profit political groups, right and left, whose vile advertising makes TV watching during the election season so revolting.  Our tax policy should not encourage such groups.

And consider the intemperate language of the White House fact sheet quoted above.  It actually suggests that our federal tax system is “rigged in favor of those who can afford lawyers and accountants to game it.”  Does the President honestly believe that the federal tax system that he has presided over for two years is “rigged” and “gamed” by “lawyers and accountants”?  If so, why hasn’t he done something about it before now?

Who Is This Guy?  (The Health Care Side)

Who Is This Guy?  (The Defense Side)

Who Is This Guy?  (The Spending Side)

Who Is This Guy? (The Health Care Side)

The third part of the approach President Obama outlined in his fiscal policy speech on April 13 addressed health care costs.  He first contrasted his approach with his characterization of the Republican plan.  He said Republicans intended to reduce health care costs in the federal budget by “asking seniors and poor families” to pay the health care costs, whereas his approach would “lower[] the government’s health care bills by reducing the cost of health care itself.”

How to do so?  First, by reducing “wasteful subsidies and erroneous payments,” cutting “spending on prescription drugs by using Medicare’s purchasing power to drive greater efficiency and speed generic brands of medicine onto the market,” and working with governors “to demand more efficiency and accountability from Medicaid.”  Next, the government will “change the way we pay for health care” with “new incentives for doctors and hospitals to prevent injuries and improve results.”  Finally, “we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services that seniors need.”  These initiatives, the President said, will save $500 billion over the next 12 years.  And if those savings don’t materialize, “then this approach will give the independent commission the authority to make additional savings by further improving Medicare.”

This part of the speech seems completely inconsistent with a prior part of the same speech.  The President earlier observed:  “So because all this spending is popular with both Republicans and Democrats alike, and because nobody wants to pay higher taxes, politicians are often eager to feed the impression that solving the problem is just a matter of eliminating waste and abuse.  You’ll hear that phrase a lot.  ‘We just need to eliminate waste and abuse.’  The implication is that tackling the deficit issue won’t require tough choices.”

The clear implication of that passage is that promising savings from eliminating “waste, fraud and abuse” is not a serious approach to solving budget problems.  Yet isn’t that all that the President’s health care approach does?  Look again at the President’s proposed approach, and you’ll see plans to eliminate “wasteful subsidies and erroneous payments” (end waste), to demand more “efficiency and accountability from Medicaid” (prevent fraud), and to “improve results” while “reducing unnecessary spending” (avoid abuse).  It’s as if the two parts of the speech were written by two different speechwriters — or as if President Obama thinks that, just because he is the one making the proposal, the tired “waste, fraud and abuse” mantra has actual validity this time.

So, again, I am left to wonder what this President actually believes.  Does he believe that a deficit reduction plan that focuses on eliminating purported “waste, fraud, and abuse” is really no plan at all?  Or, does he truly think there is $500 billion in waste, fraud and abuse to be wrung from our health care spending — and if that is the case, why has that waste, fraud, and abuse been allowed to continue unabated during the first two years of his Presidency?

While we are asking questions, another fair question is whether the President honestly thinks that there is any real value in blue-ribbon commissions, when the political landscape is littered with the reports of prior blue-ribbon commissions that have been happily ignored by those in power.  And if the President does think such commissions are a powerful answer to problems, why does he hold that belief when he has pretty much ignored the recommendations of the Bowles-Simpson budget commission that he himself appointed?

Who Is This Guy?  (The Defense Side)

Who Is This Guy?  (The Spending Side)