The republicans in the House of Representatives and the White House have been playing a game of budgetary poker for the past two years and taxpayers have been paying the price. House Budget Committee Chairman Paul Ryan’s (R-Wisc.) fiscal year (FY) 2013 budget was the next card played in this high stakes game. In FY 2012, Rep. Ryan showed his cards and went all in with spending cuts. This year Rep. Ryan continues his aggressive stance as he doubles down on tax cuts. All the meanwhile, the Senate has folded by not proposing a budget for more than 1,000 days. And, according to The Hill, Senate Majority Leader Harry Reid doesn’t even seem bothered by their lack of work. “Senate Democratic leaders on Friday said they do not intend to bring a fiscal 2013 budget up for a floor vote. ‘We do not need to bring a budget to the floor this year — it's done, we don't need to do it,’ Senate Majority Leader Harry Reid (D-Nev.) told reporters on Friday.” Rep. Ryan addresses both spending and taxes as he ups the ante on America’s fiscal future.
In 2011, taxpayers sent a clear signal to all Washington politicians that politics (and especially spending) as usual just won’t be tolerated anymore. Today President Obama unveiled his FY 2013 budget with little or no recognition that he understands the frustration of taxpayers. The budget shows that taxpayers have little to be excited about, especially since the budget deficit will top $900 billion. Here is the quick and dirty. According to CNN money, “President Obama unveiled a $3.8 trillion budget request Monday that hikes taxes on the rich, spends new money on infrastructure and education, but does little to reform the entitlement programs that pose the biggest long-term threat to the federal budget. . . . The administration is proposing a series of investments focused on infrastructure, education and domestic manufacturing, including old favorites like $30 billion to modernize schools and an additional $30 billion to retain and hire teachers and first responders. One key element of that plan is a six-year proposal to spend $476 billion on surface transportation, a big increase from current levels, and much more than other proposals lawmakers are considering.”
Trying to cut government spending is the easiest and toughest thing to do. Many good government groups and internal watchdogs have submitted ideas on how and where to cut spending but members of Congress refuse to seriously cut spending. On February 7, 2012, the Government Accountability Office (GAO) released a report, “Improper Payments: Moving Forward with Governmentwide Reduction Strategies,” which identifies $115 billion in improper payments by the federal government. This comes on the heels of many ideas to cut spending such as The National Commission on Fiscal Responsibility and Reform, the Congressional Budget Office’s “Reducing the Deficit: Spending and Revenue Options.” In addition President Obama’s fiscal year (FY) 2012 budget included his Fiscal Year 2012 Terminations, Reductions, and Savings list which outlines $33 billion in potential spending cuts. Obama’s 2013 budget should have a similar list. GAO has a long history of exposing waste, fraud, and abuse so their latest report on improper payments should come as no surprise. According to the report, “The $115.3 billion estimate was attributable to 79 programs spread among 17 agencies. Ten programs accounted for about $107 billion or 93 percent of the total estimated improper payments agencies reported for fiscal year 2011…The federal government continues to face challenges in determining the full extent of improper payments…Internal control weaknesses continue to exist, heightening the risk of improper payments.”
Even though most of the high profile budget battles often occur in Washington, D.C., the states are where the most intense budget battles take place. Many states are mandated to balance their budgets so deficits and debt are not an option. A typical reaction to a state budgetary shortfall is to raise taxes. For example, the state of Idaho may be considering a tax increase of $1.25 per pack of cigarettes as a way to generate more revenue. A recent report by the Idaho Freedom Foundation, “2012 Idaho Report on Government Waste,” has another idea: cut spending. From union contract shenanigans to taxpayer-subsidized transportation, the report is 120 pages of eye-opening detail of government waste in Idaho.
On Sunday January 22, 2012 Rep. Gabrielle Giffords (D-Ariz.) announced that she will be resigning from Congress. Rep. Gifford’s prime legacy will be the shooting that occurred in January of 2011. As Congress returns from their winter break, taxpayers should also remember another legacy that Rep. Giffords will leave, her desire to cut congressional pay. In July of 2011 Our Generation and the Taxpayers Protection Alliance (TPA) released a report titled, “Are Taxpayers Getting Their Money’s Worth? An Analysis of Congressional Compensation.” The report exposed that Members of Congress receive a salary of $174,000 per year, as well as generous fringe benefits that increase their total compensation to $285,000 per year. From the very beginning Rep. Giffords was supportive of the report and sent a “Dear Colleague” letter asking members of Congress to co-sponsor legislation to cut congressional compensation. Rep. Giffords also urged the Super Committee to consider a congressional pay cut as part of their mandate to cut spending by more than $1 trillion over ten years (see Huffington Post article here).
The country is facing yet another debt ceiling increase. This time around when the debt ceiling is increased by $1.2 trillion there won’t be any 24 hour news coverage and there won’t be any last minute negotiations to trick taxpayers thinking that serious spending cuts will be offered (see previous post here). Debt ceiling negotiations last August set up a scenario that requires another debt ceiling increase before the 2012 elections. But, according to The Hill, “Under the terms of the August debt-ceiling deal, the debt will increase unless the Senate and Obama go along with the House disapproval, and that is never going to happen.” This increase should not be an exercise in futility; it should be an opportunity for taxpayers (and all Americans) to show their displeasure and frustration with current government spending.
The 1970’s sitcom “Welcome Back Kotter” depicts a dysfunctional classroom of trouble making students. When Americans “Welcome Back Congress” next week from their Christmas break, a group of dysfunctional and trouble making members of Congress will begin work on reducing the national deficit and debt. With a work week of only 2 days next week, there won’t be much time to get anything done so the following week is when the legislative process will begin to heat up when Congress returns for a full work week (by congressional standards) and the President gives his State of the Union address. Since last year’s State of the Union, the national debt has increased by $1 trillion despite numerous spending fights with threatened government shut downs, a debt ceiling crisis averted with sham spending cuts, and a Super Committee that failed to come up with $1 trillion in spending cuts over ten years. The first order of business when Congress returns is to cut spending and taxes to put the country back on the proper fiscal path.
Montgomery County, Maryland ushered in its new 5 cent bag tax on January 1, 2012. The goal is to change consumer behavior and raise money for the county. Montgomery County follows the neighboring District of Columbia who instituted a bag tax in 2010 in trying to squeeze more money out of an already tax-weary public. D.C.’s experience has been a complete failure. According to a report by Americans for Tax Reform and the Beacon Hill Institute, “the bag tax will result in the elimination of more than 100 local jobs and precipitate a $5.64 million decline in aggregate disposable income for 2011. The majority of this income would have been spent in the District and, as a result of the bag tax, D.C. will now needlessly forgo an additional $108,340 in sales tax revenue and will see investment drop by $602,000, with the bulk of the loss occurring in the retail sector.” The obvious scenario is that people will shift their purchasing behavior to patronize stores that are outside the geographical area of the tax. The bag tax should come as no surprise to folks around the country who have been bombarded with all types of taxes to justify the expansion of government. Taxes are also a way to avoid cutting spending to balance state and local budgets. Besides the growing popularity of bag taxes, federal, state, and local governments are obsessed with usage and consumption taxes on telecommunications, tobacco, and alcohol.
President Obama and Defense Secretary Leon Panetta announced a new Defense strategy on January 5, 2012. The new strategy involves hundreds of billions of dollars in cuts. The mysteries in these cuts are the specifics. According to the Austin Business Journal, “President Barack Obama and Defense Secretary Leon Panetta gave few specifics about program cuts at the U.S. Department of Defense [DOD] during a briefing Thursday on DOD’s strategy…” This is problematic because as much as the Pentagon budget needs to be cut, it should be done responsibly with the Pentagon still having the ability to meet the defense needs of the country. In addition to the Defense cuts, President Obama should also require all federal agencies to do the same and come up with target cuts.