Tax Hike Standoff

Are Republicans and Obama hopelessly split on the Bush tax cuts?

The persistent split between Democrats and Republicans on the Bush tax cuts remained at a standstill after the President met with GOP leaders Nov. 30. An attempt at compromise was shuffled off to minor players to try to seek agreement.

Republicans want to extend all the tax reductions to help stimulate the economy. Democrats want to make the well-of pay higher taxes, contending the country can’t afford to lose revenue from taxes of the rich. That argument falls flat in the face of historical facts. Under two Democrat and two Republican Presidents—Coolidge and Kennedy and Reagan and Bush--tax reduction for the wealthy brought in more revenue, not less.

President Obama tried to snatch the spending spotlight Nov. 29 by proposing savings of $5 billion with a two-year freeze on salaries of federal workers. Unimaginable as this switcheroo from spendthrift to saver is for Obama, it follows another money decision the previous week.

Standing firmly for parsimony, Obama Nov. 16 commanded: no more federal handouts to dead people and those in the pokey. The federal government had made improper payments of $125 billion in fiscal 2010 to 89,000 deceased or imprisoned folks, according to the Office of Management and Budget, The Washington Post reported Nov. 17.

But, not to worry, agencies scouring at full throttle recovered $587 million erroneously paid to contractors and beneficiaries of federal programs, such as Medicaid and unemployment benefits. The improper payments were only $15 million higher than for the previous year.

As for the freeze on federal civilian employees’ pay, it would start Jan. 1, 2011, if Congress goes along. The pay freeze would not affect the military or those in the executive branch, or members of Congress.

The president -- sounding like a Tea-partier -- said that federal spending and the economy should be at the top of the agenda in meeting with Republicans. “We now have a shared responsibility to deliver for the American people on the issues that define not only these times but our future,” Obama said. And what a future, with the country’s $1.3 trillion deficit and $14 trillion debt.

The 2010 loss in 2010 could have been worse. As Office of Management and Budget Deputy Director Jeffrey Zients explained on his blog:

As part of the President’s Accountable Government Initiative, we’ve worked hard to bring down the rate of improper payments, recapture misallocated funds, and meet the President’s goal of reducing improper payments by $50 billion by the end of 2012....

For 2010, the government-wide improper payment rate declined to 5.49 percent, a decrease from 5.65 reported in 2009. This means that we prevented an additional $3.8 billion in improper payments  from being made in 2010, and are headed in the right direction[.]

Now isn’t that something to be proud about? Zients also clarified, “This is an unfortunate result of the recession and of basic math: the more that is paid out, the more paid out in error, even if the overall rate declines.” Without saying it directly Zients was confirming what sensible Americans believe deeply--that the more government spends, the more it wastes.

As calculated by South Capitol Street website, the government reduced waste by .0016, but it’s still wasting 5.5 cent out of every dollar. For a middle-income family making $100,000 a year, you can trust the government to handle it. Or you can take $4,690 and flush it down the toilet. It’s about the same either way.

Obama ordered a “Do Not Pay List” in a memo to executive department heads in March. He stated: “Agencies maintain many databases containing information on a recipient’s eligibility to receive Federal benefits payments or federal awards, such as grants and contracts. By checking these databases before making payments or awards, agencies can identify recipients and prevent certain improper payments from being made in the first place.” Gee, why didn’t somebody think of that before?

Rep. Darrell Issa (R-CA), destined to chair the House Oversight and Government Reform Committee, charged Sept. 22 that the Democrat-controlled Congress has “consciously abdicated its Constitutional responsibility  to provide oversight of the Executive Branch.” He said the 111th Congress had led a “tsunami of opacity, waste, fraud, and abuse," calling for “vigorous oversight.”

As for the federal employees salary freeze, Rep. John Boehner (R-OH), on track to be House Speaker, commented that he was pleased with the salary freeze idea. Without Congressional action, federal workers would automatically get a 0.9 percent raise in 2011, on top of a 1.9 percent pay boost this year.

Rep. Issa said the pay freeze was long overdue. But, as might be expected, Obama is “getting an earful from union allies,” as reported.

“Cutting federal employee pay is really going to do nothing for the deficit” complained John Gage, president of the American Federation of Government Employees. "It just looks like a panic gesture.” Gage called the $5 billion in pay savings “peanuts.”

AFL-CIO President Richard Trumka and National Federation of Federal Employees President William Dougan also sounded off against the freeze.

Obama got his only enthusiastic support from the Republicans, House Republican Whip Eric Cantor (R-Va) called the president’s plan “exactly the kind of savings measure we have to make in order to begin to restore some fiscal sanity in America.”

Rep. Chris Van Hollen (D-MD) said, “By focusing exclusively on federal employees, the Administration runs the risk of enforcing the myth, pushed by some for politically convenient but cynical reasons, that America suffers from a federal government comprised of unproductive and overpaid civil servants."

In fact, with government employees averaging $123,000 a year while the average private-sector worker makes about $67,000, the truth far out weighs any “myth” in the political spiel of Rep. Van Hollen. It will be an arduous road to reconciliation on the Bush tax cuts, if there is one, but at least Obama's pay-freeze olive branch is a step in the right direction.