mykeystrokes.com

"Do or Do not. There is no try."

“Making Congress More Stupider”: Making Congress Dumber Has Not, In Fact, Made Government Smaller

You may recall Paul Glatris and Haley Sweetland Edwards’ cover article, “The Big Lobotomy,” from the June/July/August 2014 issue of the Washington Monthly. It documented how congressional Republicans had worked for decades to reduce Congress’ capacity for intelligent decision-making–while making it vastly more dependent on lobbyists and special interests–via reductions in appropriations for staff and committees and research initiatives.

The article clearly made an impression on Harry Stein and Ethan Gurwitz of the Center for American Progress, who cited it in reporting the latest self-lobotimizing effort in Congress in the FY 2016 appropriations process:

As Congress writes spending bills that attempt to implement the first year of its budget resolution, it is clear that the legislative branch intends to continue operating with one hand tied behind its back.

On June 12, 2015, the Senate Appropriations Committee advanced the fiscal year 2016 legislative branch appropriations bill, which would cut funding for the legislative branch by 17 percent from inflation-adjusted FY 2010 levels. The House of Representatives has already passed its version of the FY 2016 legislative branch appropriations bill, which makes roughly the same overall funding cuts as the Senate bill. These cuts may seem like a good way to score cheap political points at a time when Congress is deeply unpopular, but in the long run, they only increase congressional dysfunction and make the federal government less efficient and responsive to the American people.

The fact remains that the legislative branch includes much more than just members of Congress. When members vote to slash legislative spending, they undermine the professional staff and independent agencies that make it possible for Congress to oversee federal programs and understand complex policy questions. As funding and staffing levels for these legislative branch institutions have declined, Congress has become increasingly dependent on privately funded lobbyists and outside policy experts.

As the CAP article notes, the cuts include those unique legislative branch entities the Congressional Budget Office and the Government Accountability Office–both essential for understanding and reforming government spending.

The House’s FY 2016 legislative branch appropriations bill cuts the GAO budget by 15.4 percent from its FY 2010 inflation-adjusted level, while the Senate bill cuts GAO funding by 14.9 percent. If every $1 cut from the GAO equates to $15.20 of unexposed waste, fraud, and abuse, cuts of this magnitude could result in about $1.4 billion in missed opportunities for government savings, or between $7 billion and $8 billion based on the larger return-on-investment ratio of 80 to 1.

Even for conservatives who want a smaller federal government, Glastris and Edwards note that “making Congress dumber has not, in fact, made government smaller.” It just makes government less effective.

If you don’t really believe in any legitimate mission for the federal government beyond national defense, of course, this this is a distinction without a difference. But the rest of us are saddled with big, dumb government.

 

By: Ed Kilgore, Contributing Writer, Political Animal Blog, The Washington Monthly, June 16, 2015

June 18, 2015 Posted by | Congress, Conservatives, Federal Budget | , , , , , , | 1 Comment

“An Incredible Ignorance About The Economy”: Rand Paul Has The Most Dangerous Economic Views Of Any 2016 Candidate

Kentucky Senator Rand Paul has had better weeks. On Monday, he suggested there could be a link between vaccines and autism in a CNBC interview. Later on in that interview, he actually shushedas in, pressed one finger to his lipsthe female CNBC anchor. On Tuesday, a New York Times article linked him to a medical group that promotes anti-vaccine theories. But Paul’s dumbest comments came in Iowa on Friday nightand they show why Paul has the most dangerous economic views of any presidential candidate.

Speaking in front of more than 150 Iowa activists, Paul ripped into the Federal Reserve and promoted his “Audit the Fed” bill, which he introduced earlier this week. “I think there needs to be some sunshine,” he said, according to reports of the event. “I’m going to fight ’em, and we’re going to get a vote on audit the Fed.” I’m not sure if Paul will get that voteultimately, that’s up to Senate Majority Leader Mitch McConnell. But I do know that “Audit the Fed” is a terrible idea. First, the Fed already is extensively audited by the Government Accountability Office (GAO), the Office of the Inspector General (OIG) and even private sector auditors like Deloitte. Each week, the central bank also releases its balance sheet and even has an interactive guide of its balance sheet available for further explanation.

However, the GAO and OIG audits exclude a few parts of the Fed’s policymaking, including transactions by the Federal Open Market Committee. Paul’s bill removes those exclusions and requires “recommendations for legislative or administrative action” from the Comptroller General. Sounds innocuous, right? It’s not. That would significantly damage the Fed’s independence, which exists so that politicians cannot influence the central bank for their own political purposes. In other words, “Audit the Fed” would lead legislators to interfere with monetary policy matters and put the entire economy at risk. For further explanations why the legislation is so dangerous, see the Roosevelt Institute’s Mike Konczal and the Washington Post’s Catherine Rampell.

With President Barack Obama in office, Paul’s legislation stands no chance of becoming law. It’s hard to imagine it overcoming a filibuster in the Senate, and even if it did, the president would veto it. If Paul were to win the presidency, “Audit the Fed” would still face long odds in the Senate since, even in the best case scenario, Republicans likely won’t have a filibuster-proof majority in the next Congress. So while “Audit the Fed” is theoretically dangerous, it’s not much of an actual threat to Fed independence.

But a Paul presidency would still have disastrous effects on the U.S. economy, for other reasons that were on wide display in Iowa on Friday night.

“Once upon a time, your dollar was as good as gold,” he said. “Then for many decades, they said your dollar was backed by the full faith and credit of government. Do you know what it’s backed by now? Used car loans, bad home loans, distressed assets and derivatives.” Paul’s comments make very little sense. When Paul asks what backs the U.S. dollar now, he’s effectively asking what makes it valuable. When the U.S. used a gold standard, it meant that a dollar was worth a certain amount of gold. Economists overwhelmingly agree that that was a terrible idea, but the connection seemed to explain why dollars had value. The real reason dollars had value is the same today as it was back then: It’s the only currency the government accepts to pay taxes. Businesses and consumers thus have an incentive to carry out transactions using dollars. Paul’s quip about dollars being backed by “used car loans, bad home loans, distressed assets and derivatives” may sound good to Iowa conservatives but it betrays an incredible ignorance about the economy.

What Paul and his followers are concerned about is the purchasing power of the dollar. They want to return the U.S. to the gold standard to ensure that inflation doesn’t undermine the actual purchasing power of the dollar. Over the long run, a gold standard would guarantee that price stability. But over the short run, prices would still fluctuate violently, as happened when the U.S. used the gold standard.

In terms of current policy, goldbugs, as they are often called, think the Fed’s recent decisionsits zero interest rate policy and bond-buying programwill cause skyrocketing inflation and reduce what you can buy with dollars. Those warnings look more foolish by the day. Inflation over the past year was just 0.7 percent, 1.3 percent if you remove volatile food and energy prices. Inflation expectations for the next 10 years are also very low. You would think that these low inflation rates would convince Paul and his followers to rethink their economic theory.

Paul’s economic ignorance doesn’t end there. “[The Fed’s] liabilities are $4.5 trillion; their assets are $57 billion. Do the math,” he said in Iowa. “They are leveraged 80-1. They are leveraged three times greater than Lehman Brothers was when Lehman Brothers went bankrupt. Why do we give ‘em a pass? Because they’ve got a printing press, and they can print up some more money.” Paul apparently can’t read the Fed’s balance sheets, because as of November, its assets were $4.487 trillion and its liabilities were $4.430 trillion. Where did the $57 billion figure come from? That’s its total capital. But as Cullen Roche, the founder of financial services firm Orcam Financial Group, points out, Paul also ignores the fact that the Fed remits most of its profits to the Treasury Department. In 2013, they gave Treasury nearly $80 billion. “The Federal Reserve isn’t just a profitable entity,” Roche writes. “It is perhaps the most profitable entity on the face of the planet.”

As all this shows, Paul’s views on monetary policy are profoundly misguided. As long as he’s in the Senate, that doesn’t really matter. He can spout his nonsense without having any effect on the Federal Reserve. But if he became president, he would be responsible for choosing the next Fed Chair when Janet Yellen’s term expires in 2018 and for nominating board members to the FOMC. That doesn’t give Paul unlimited power, since the Senate would still have to confirm his nominees. But as president, Paul would be the leader of the GOP, with an even greater ability to dictate its position on monetary policy and convince Republican senators to support his nominees.

Of course, the Republican Party itself has an incredibly misguided position on monetary policy. In 2012, its platform included returning to the gold standard. That’s a good reason why just about any Republican nominee would be a dangerous president. But Paul is far more open about his disdain for the Fed, and given his ideological bent, he’s far less likely to listen to conservative economists who reject his monetary policy views. At least on the economy, that makes Rand Paul by far the most dangerous candidate in the 2016 field.

 

By: Danny Vinik, The New Republic, February 8, 2015

February 9, 2015 Posted by | Economic Policy, Federal Reserve, Rand Paul | , , , , , , , | Leave a comment

“The Latest Hostage”: Fact-Checking Republicans On Social Security Disability

We’re going to be hearing a lot about the Social Security Disability program over the next few months. That’s because it is the latest “hostage” the Republicans have decided to use as leverage to get President Obama and Democrats to give them what they want. You can read more about all that here, but it comes down to this:

The largely overlooked change puts a new restriction on the routine transfer of tax revenues between the traditional Social Security retirement trust fund and the Social Security disability program. The transfers, known as reallocation, had historically been routine…

The House GOP’s rule change would still allow for a reallocation from the retirement fund to shore up the disability fund — but only if an accompanying proposal “improves the overall financial health of the combined Social Security Trust Funds,” per the rule…While that language is vague, experts say it would likely mean any reallocation would have to be balanced by new revenues or benefit cuts.

As you can see, its simply the GOP’s latest version of, “give us what we want, or else…”

In order to prime the pump, Republicans are already attempting to take on the “slackers” who rely on the disability program. Exhibit A: Sen. Rand Paul.

The first thing I’d like to point out is that – from these remarks – it appears as though Sen. Paul assumes that only those disabilities that are visible physically are real disabilities. We all know that is not true.

But PolitiFact did a thorough job of fact-checking Sen. Paul’s statements. And in so doing, provided us with a lot of information that is going to come in very handy as this whole hostage situation unfolds. On the overall accusations of wide-spread fraud, waste and abuse, here are the facts:

After an audit of disability insurance in 2013, the Government Accountability Office estimated that in fiscal year 2011, the Social Security Administration made $1.29 billion in potential cash benefit overpayments to about 36,000 individuals who were working and making more than $1,100 a month (the limit to receive disability benefits).

The 36,000 people receiving improper payments, while a lot on paper, represent about 0.4 percent of all beneficiaries, the report said.

There are other ways Social Security gives out benefits to those not deserving, but paying people already working is about 72 percent of the problem, according to the Social Security Administration. Factoring that in, the GAO estimates overpayments equaled $1.62 billion, or 1.27 percent of all disability benefits, in 2011. It’s a lot of money, but the disability program is a $128 billion program.

Got that? The level of fraud we’re talking about is 1.27% of benefits paid. As a friend of mine would say, “Now run and tell that!”

 

By: Nancy LeTourneau, Political Animal Blog, The Washington Monthly, January 17, 2015

January 19, 2015 Posted by | Republicans, Social Security, Social Security Disability Fund | , , , , , | Leave a comment

“Pilfering The Federal Treasury”: Mitt Romney’s Medicaid Shell Game

Mitt Romney is lambasting federal aid in his campaign for the presidency, including derisive comments against those who receive government assistance. But he pulled all the stops to pursue federal aid as governor of Massachusetts, even hiring “revenue maximization” contractors to scour federal programs for every possible penny — and using financial schemes to maximize and then divert the aid from his needy constituents.

In his first budget proposal, Romney promised balancing the budget without tapping reserves, and “without the use of fiscal gimmicks.” However, buried in the details, he suggested tapping reserves such as taking $4 million from the Catastrophic Illness in Children Relief Fund, and he included fiscal gimmicks to maximize and divert federal aid into his general state coffers.

His strategies are akin to tax schemes using offshore bank accounts — but instead of avoiding federal taxes, seeking to pilfer the federal treasury. The Wall Street Journal labeled such financing mechanisms “Medicaid Money Laundering” and a “swindle.”

Medicaid is a matching grant program. If a state with a 50 percent match rate like Massachusetts spends $50 on qualifying services, the federal government will provide an additional $50 so there is $100 total for Medicaid services. The federal match payment is much higher in some states, such as Mississippi where its almost 75 percent.

Unfortunately, some states concocted budget shell games, often with private consultants, providing an illusion of state spending to claim federal matching funds, when no state spending has occurred. As governor of New Hampshire, Judd Gregg developed such a practice labeled “Mediscam.” Gregg taxed hospitals serving the poor, routed the money into an “uncompensated care fund” which he sent right back to the hospitals, and used the round-trip of money to claim federal matching funds. Then, the swindle gets worse, because he routed the federal Medicaid funds into his general coffers rather than for Medicaid services.

Romney’s schemes were similar to Gregg’s. Buried in his 2004 budget, Romney proposed maximizing federal aid by taxing hospitals, shifting the resulting tax payments in and out of an uncompensated care fund, back to hospitals as adjustment payments, and diverting resulting federal Medicaid funds to state general revenue. He also proposed using taxes on nursing homes and pharmacies in his efforts to maximize and divert federal aid.

In such strategies, health care facilities serving the poor are used to claim federal funds to help the poor. But the health care facilities and the poor may get nothing, as the state diverts the federal aid to general coffers — and revenue maximization contractors reap millions in contingency fees. Romney used such private companies to help carryout his strategies.

After a US General Accounting Office report responding to concerns of Republican Senator Charles Grassley, the Romney administration vigorously defended using contingency-fee revenue maximization consultants and revenue practices – that the GAO labeled illusory. The GAO responded that “hospitals should benefit from increased federal reimbursements and Massachusetts’s arrangement appeared to result in lower payments to hospitals, despite increased claims for federal reimbursement.” The Romney administration even defended double (if not quadruple) billing practices “of allowing multiple agencies to bill Medicaid” for “services for the same beneficiary.” The GAO concluded that the Romney administration “did not provide convincing evidence that the [Medicaid] services provided by the four state agencies were unique,” and the Bush administration agreed with the GAO’s conclusions.

The Bush administration implemented regulations trying to reduce such practices, and the Obama administration continues efforts to improve fiscal integrity in the Medicaid program. However, Romney would virtually end federal oversight by block-granting federal Medicaid funds to states.

It’s not hard to imagine how a governor — one that employs complex shell games to find loopholes in federal rules in order to maximize and divert federal aid — would use the federal funds if handed to the state without any federal oversight. The answer to state misuse of federal aid is not to give those states even more discretion to do whatever they wish – but to simplify the claiming process, reduce loopholes allowing the revenue schemes, and improve oversight to ensure Medicaid funds are used as intended.

Romney has undergone dramatic and hard to follow shifts in his apparent views of government aid. Romney2004 proposed cutting healthcare while simultaneously proposing illusory schemes to maximize and divert federal Medicaid funds. Romney2006 changed course with the first nearly universal healthcare plan. Now Romney2012 is turning back to cuts, denouncing federal aid he once schemed to maximize and divert, condemning those who need government aid, and seeking repeal of national health care reform that is nearly identical to the plan he signed into law. And now he proposes giving all the federal money from the Medicaid program to states without federal control.

Romney2004 would have a field day with Romney2012’s plan.

 

By: Daniel L. Hatcher, Law Professor, University of Baltimore, Published in The Boston Globe, October 12, 2012

October 15, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

Why The Debt Ceiling Debate Matters Now

If Congress doesn’t act soon, interest rates could spike–maybe for a long time. Then you’ll care.

The White House and Republican congressional leaders insist the debt ceiling will be raised well before the United States has to default, which would cause massive economic disruption. But a resolution seems less than assured. In the last few days, Republican presidential candidates Michele Bachmann and Tim Pawlentyhave joined a growing conservative chorus loudly denouncing a deal, and antagonism among the various parties appears to be growing, not diminishing.

Still, nobody in Washington or on Wall Street seems very alarmed. The Treasury says it can hold out until Aug. 2. But a look at the current politics and the recent history of debt-ceiling showdowns suggests that alarm might soon become warranted.

There are two reasons why. The first has to do with how difficult it will be to settle on something that can get through Congress in time to stave off any damage. This struggle has been largely misportrayed and crudely simplified as a tug-of-war between Republicans set on spending cuts and Democrats who want tax increases to accompany them. It’s actually a three-way struggle, because Republicans themselves don’t agree on their ransom demands to permit a larger debt.

House Republicans want to cut $2 trillion without raising any taxes or closing any loopholes. They’re focused strictly on spending. But Mitch McConnell, the Republican Senate leader, wants any deal to include Medicare reform. He’s focused on politics. McConnell worries that the House Republican budget passed in April, which takes the deeply unpopular step of privatizing Medicare, presents a mortal threat to Republican candidates in next fall’s elections. A debt-limit deal on Medicare that drew the support of President Obama and Democrats would inoculate the GOP against this danger.

The trouble is, House Republicans don’t share McConnell’s concern, so an agreement among Republicans seems nearly as remote as one between Republicans and Democrats.

That gets to the second reason for alarm: the United States need not default on its debt in order to incur costly and potentially lasting damage. A February report by the Government Accountability Officeexamining the recent history of “debt-ceiling events” — none nearly so serious as the current one — showed that government borrowing costs began to rise well in advance of default. Call it a taxpayer premium for congressional squabbling: the disruption of Treasury auctions and the threatened loss of liquidity among Treasury notes and bills caused billions in additional borrowing costs in the form of higher interest rates.

One reason why the debt showdown isn’t causing more alarm is that interest rates have been falling. But that’s due mostly to declining economic forecasts in the United States and fear of a Greek default — currently more powerful influences, but also ones that would mask worries about a US default.

At some point, perhaps as soon as in a few weeks, the fight in Congress could eclipse those factors and drive interest rates higher. That’s been the historical pattern, and it is already causing worry about what might trigger such a rise. “The nervousness on our end is that the markets will misperceive what’s going on,” an aide to a conservative House Republican told me. “If something fails on the House floor, people might react as if all life is about to end — just like they did when the TARP vote failed.”

That could cost taxpayers dearly, even if a default is ultimately avoided. One reason why US borrowing costs are so low is the universal belief that the government will always make good on its debts in a timely manner. But if that faith is shaken — and a good scare could do the trick — investors might decide that government debt is a riskier investment than they had imagined and demand a better return.

That will hurt. The Office of Management and Budget determined that a mere 1 percent rise in interest rates would cost taxpayers $973 billion over the next decade [pdf, pg. 23]. So a fight purportedly about cutting the deficit could actually cause it to grow much larger. That’s worth worrying about now — especially as Republicans threaten a default and claim there’s no cause for alarm.

 

By: Joshua Green, Senior Editor, The Atlantic, June 30, 2011

June 30, 2011 Posted by | Class Warfare, Congress, Conservatives, Debt Ceiling, Debt Crisis, Economic Recovery, Economy, Federal Budget, GOP, Government, Government Shut Down, Ideologues, Ideology, Lawmakers, Medicare, Middle Class, Politics, Republicans, Right Wing, Taxes, Wall Street | , , , , , , , , , , , | Leave a comment

   

%d bloggers like this: