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Enacting Devolution of Power to the States

William L. Kovacs

November 2023

Enacting Devolution of Power to the States

Part III 

The devolution of power from the federal government to the states is highly likely in the next decade. It is not feasible for the U.S. to pay off a $33 plus trillion-dollar national debt that requires annual interest payments of a trillion dollars or more. Debt and deficits will force cuts in federal programs. Many of the cuts will be federal grants to states. When this occurs, devolving national power to the states will be the best option out of a bad situation.

Before a crisis occurs, the feds and the states should negotiate a transition of power to ensure a workable separation of functions and an understanding of the costs involved.

The primary goal of devolving federal power to the states is to alleviate federal fiscal mismanagement as much as possible while enhancing democracy by transferring governmental services to the lowest level of government that can effectively and efficiently manage the programs. It will also require the states to determine which federal programs they want to continue managing and which programs are unneeded within their states. Every program and every level of bureaucracy eliminated saves money for taxpayers.

The federal government has created more government and complexity than it can manage. Devolution of power is essential for the federal government to focus on its most significant responsibilities to protect the nation from threats to national security.

Options for devolving power to the states.

Congress should establish a federal intergovernmental commission to identify the powers to be devolved to the states.

 A federal intergovernmental commission composed of members of Congress, governors, and state legislators would be the most straightforward way to approach this process. The Commission’s task would be to identify all federally exercised powers that could be more efficiently and effectively managed by the states. It could start with the thousand-plus grants that entice states to implement federally designed programs. In 2022, the federal government awarded states $1.2 trillion in subsidies. Since the federal government collects the monies given to the respective states from state taxpayers and only returns a portion of what is collected to the states, the states will be in a better financial situation if they tax their citizens for the programs citizens want and drop the unwanted programs.

As leverage against a resistant federal government, States that are reimbursed only a fraction of the program’s cost could refuse to administer federal programs not wanted by their citizens or unaffordable to the state. If the states decline to administer more than a few federal regulatory programs, they would cause chaos as the federal government lacks the personnel to administer the programs without the help of the states.

Such a move by the states would also demonstrate that the federal government, without state cooperation, cannot manage or pay for the government it has created.

When the work of the Commission is complete, its final product would be introduced in Congress and voted upon under rules established by Congress. The federal intergovernmental commission stands the best chance of success since the states would identify the programs they need and are likely to continue. Conversely, Congress would learn from the negotiations about unwanted programs.

Congress could enact a process similar to the Base Realignment and Closure Commission (“BRAC”) that applies to federal domestic programs imposed on states.

If Congress wants to avoid negotiations with the states and their legislatures, it could construct a Devolution of Power Commission comprised of experts to study and report to Congress on the programs most fitting to be transferred to the states. After receiving the BRAC-type report, Congress could do an up or down vote on the entire package as it does under BRAC, or it could allow amendments to ensure more legislative precision.

Re-constitute the Joint Committee on Reduction of Non-Essential Federal Expenditures (“The Joint Committee.”).

The Joint Committee would be similar to the Congressional Committee established by Congress after WWII to get control of the federal deficit. While the Joint Committee was only a study committee, requiring its recommendations to be submitted to authorizing and appropriation committees, it significantly impacted government budgeting by identifying non-essential federal activities.

Such a process keeps all study and decision-making within Congress. Once the recommendations are made, Congress could establish by rule that it must vote on them as a package. Alternatively, Congress could allow the recommendations to go through the regular committee hearings, markup, and floor debate order.

Use of Interstate Compacts to devolve federal powers to the states.

Interstate compacts are cooperative actions between states to advance specific policies and programs. The compacts can be congressionally approved to ensure they have legal recognition, or they could be informal agreements between states to cooperate.

Formal, congressionally approved compacts with other states are established under Article I, sec.10, cl. 3 of the U.S. Constitution. These formal compacts range from boundary disputes to lotteries, river management, drivers’ licenses, to multi-state tax matters. Ballotpedia provides a list of approved compacts from 1785 to 2018. Compacts can be on any subject that concerns several states. Every formal Compact requires congressional approval, which is very time-consuming. Due to approval complexities, States would be unlikely to submit, and Congress would unlikely approve enough formal Compacts to make any difference in the devolution process. While the formal Interstate Compact approach is doubtful for resolving a large number of programs, it is an option that the states and Congress can utilize on the more significant and controversial issues that would grant federal legal status to multi-state cooperative agreements.

The Southern States Energy Compact is a significant success in bringing economic development to the South. It has eighteen members and was created to encourage economic development among its member states by improving energy, environmental, and technology policies.

Under the informal Compact approach, the participating states would cooperate on specific programs without congressional approval. The downside of this approach is that states are free to withdraw at any time without congressional involvement. Moreover, Congress could terminate informal compacts at any time, assuming Congress can secure the votes to repeal an agreement between states or sue to have the compact declared contrary to federal law or unconstitutional. A good example is the climate change compacts. States with similar policy views are organized into regional working units designed to regulate activities of regional concern. For example, nine states in the Northeast and Mid-Atlantic and three west coast states formed regional compacts to address climate concerns in a manner beyond what was allowed under federal law. The states entering these informal compacts initiated a cap-and-trade process that capped CO2 emissions and authorized the trading of emission credits.

While the informal mechanism is an ad hoc approach to devolving power to the states, it could take several of the most controversial domestic issues off the federal plate, such as abortion, welfare, and illegal immigration, other than citizenship. The states in the various Compacts would address these issues uniformly, which will likely be dramatically different from existing federal policy.

Congress could terminate all federal grants and unauthorized programs and immediately save trillions over a few years.

The most drastic approach to devolving federal power is for Congress to terminate its funding for all unauthorized federal programs and all subsidies to the states to manage federal programs. Under congressional rules, Congress cannot fund unauthorized laws without waiving its rules. If Congress does not have the time or interest to reauthorize programs enacted into law, it should not fund them. Moreover, if Congress stops subsidizing states, the states can eliminate the implementation of unneeded federal programs and fund the needed programs at a cost they can afford. Defunding these many programs immediately reduces the federal government’s budget by around $ 1.7 trillion ($432 billion of unauthorized laws and $1.2 trillion in grants to states).

Congress and the president will likely oppose, as infeasible, any devolution of power to the states. Unfortunately, the federal government faces an either/or situation. Either it relinquishes power and cuts its budget to what is manageable by the nation, or it faces a financial crisis that takes the nation to a dark place. Transferring federal programs to the states is a practical alternative to resurrecting a bankrupt nation.

William L. Kovacs has served as senior vice president for the U.S. Chamber of Commerce, chief counsel to a congressional committee, chairman of a state environmental board, and a partner in law D.C. law firms. His book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change. He can be contacted at [email protected]

Part I: Fix a Government Too Big to Govern: Devolution of Power to States

Part II: The National Debt Will Force Devolution of Power to the States

 

 

 

 

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  • Fix a Government Too Big to Govern: Devolve Power to States

Fix a Government Too Big to Govern: Devolve Power to States

William L. Kovacs

October 2023

Fix a Government Too Big to Govern: Devolve Power to States

For the last several weeks, Congress has been unable to function because of its inability to elect a Speaker of the House of Representatives. Before that, it was an inability to deal with the debt ceiling and the nation’s massive national debt that has been growing for decades. The U.S. Southern border had been opened to drug cartels and terrorists for years. We are depleting our military arsenal, draining our Strategic Petroleum Reserves for political gain at the ballot box, and now the U.S. faces the possibility of wars in Ukraine, Israel, and perhaps the entire Middle East and Taiwan. Most challenging to the U.S. is the formation of a new form of Axis power consisting of Russia, China, Iran, North Korea, and likely some associate members designated as terrorists. Our national defense is so distracted it cannot even identify a Chinese spy balloon traveling over all its top-security military bases.

The list of potential disasters facing the federal government seems to be never-ending.  Why does our federal government continuously have so many problems? The answer might be more obvious than most think. Our political friends in Washington have created a government that is too big to govern. By trying to control every aspect of life, the federal government is putting the entire nation at risk. Perhaps it’s time to devolve many of the domestic powers the federal government accumulated over the last century to the states. Call it a power-sharing arrangement to better manage the nation.

Taking on this topic will be a series of articles that discuss how the federal government has been allowed to grow without any constitutional changes and how the federal government can shrink the monster it has created. But first, is the devolution of power a path worth considering?

While I would argue yes, there are likely very, very few elected officials that would ever support losing the control over citizens they fought so hard to acquire. This first article will explain what devolution of power is and its benefits.

Our Constitution is structured to foster a strong economy while protecting the nation from harm. Until the Great Depression, the respective states had a major role in the domestic affairs of the nation. Unfortunately, the massive accumulation of federal regulatory and taxing power transformed the respective states into mere administrators of federal rule. If the federal government does not allow the country to return to a viable structure of federalism in which states have a serious role in shaping domestic policy, the U.S. is likely to join the many nations that now hold the status of a “once-great power.”

What is Devolution of Power?

Devolution transfers substantial power and authority from the federal government to state and local governments. Devolution differs from decentralization, which merely transfers certain functions from a central location to several locations. Decentralization would be a relevant concept if the federal government were to move its workforce out of Washington, DC.

Making devolution work and its benefits.

For devolution to work, the federal powers transferred to the states must include all powers necessary to implement the policies transferred, including decision-making authority, managerial control of the legal framework for the policies to be managed, and the ability to tax and spend. After the transfer of power to the states, the federal government would cease regulating those activities. .

By assuming such powers, the states will have the capacity to implement all of the programs transferred to them by the federal government or to eliminate current federal domestic programs unneeded or unwanted by its citizens. Moreover, by clearly identifying the powers transferred, devolution allows the nation to operate as a unitary country that legally divides the management of issues between the federal government and the states for efficiency and practical implementation of programs sought by citizens of the respective states. Devolving federal power to the states brings the domestic programs of government closer to the people it serves. It also eliminates an entire level of bureaucracy.

Greater program efficiency.

The programs administered by a state will be smaller in size and administered by government that is closer to those it serves. By having more knowledge of the area and people served, the government administering the programs will be better able to achieve program goals. Greater efficiency results in more government accountability.

Enhances democracy.

In smaller communities, there is less bureaucracy. Participating in decision-making and running for office is more accessible and less costly. Greater participation in democracy builds trust in government. People of ordinary means can seek elected office.

Fosters innovation and trust.

With less bureaucracy to block innovative ideas, there is more focus on solutions and getting the job done than protecting the status quo. Since citizens are more trusting of and familiar with state and local government, they can better evaluate how the government manages the issues of most concern to them, such as health care, crime, taxes, and the economy. Significant citizen participation cannot happen when a distant central government lacks knowledge of the local issues yet controls the process for the resolution of disputes.

Limits bureaucratic power.

Sharing power between different authorities at different levels of government is an effective mechanism for deterring the ability of any government to become too powerful.

Assists with resolving conflicts.

Solutions are easier to achieve when there is an ability of citizens and government to exchange views.

Denationalizes controversial issues.

National governments nationalize all matters before them, from abortion and education to local permitting and economic development issues. When the federal government deals with state and local issues, the national lobbying organizations control the outcome to fit their national objective. For example, it is the national environmental groups that block oil drilling and mineral mining in Alaska, not Alaskans. The same is true for oil and gas pipelines and forest management. National environmental groups control local development across the nation by capturing the federal bureaucracy. By allowing states to control controversial issues, each state will take a different path that is usually more satisfactory to the locals than the advocacy of the national groups. This approach allows citizens the ultimate right to live as they want and to vote with their feet.

By having fewer responsibilities, the federal government will be able to focus on the nation’s defense and national issues. The states can very competently manage most domestic matters. Only through a system of genuine federalism can the U.S. prevent authoritarian rule, a civil war, or a wholly weakened, unstable nation in a world of enemies.

The states can’t afford the programs is a myth.

That answer as to what level of government can afford what will come very soon as the federal government is crushed by its own debt and the surge in interest payments on it. The federal government funds well over 1,000 state programs. Keep in mind, however, that many of these programs are the brainchild of the federal government, and the state is given grants to implement them. Since the federal grants rarely cover the state’s costs, the states end up subsidizing the federal programs.

Most significant, however, is that many unwanted federal programs displace programs important to the states. Also, every dollar the federal government pays the states to implement federal programs is a dollar the federal government took from a citizen of the states. Washington merely collects the tax dollars and returns them to the states, minus its commission.

The question is not who is going to pay. The taxpayer always pays. The real question is, who decides and implements the programs that citizens must pay for?

 

William L. Kovacs has served as senior vice president for the U.S. Chamber of Commerce, chief counsel to a congressional committee, and a partner in law D.C. law firms. His book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change. He can be contacted at [email protected]

 

 

 

 

 

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  • Blessed Are the Young, They Shall Inherit the National Debt

Blessed Are the Young, They Shall Inherit the National Debt

William L. Kovacs

September 2023

Blessed Are the Young, They Shall Inherit the National Debt

Between now and September 30, 2023, Congress must fund the government, a task it has been unable to do on time for 27 consecutive years. The only kind word to describe Congress and the president during appropriation season is that they are   “pixilated,” “mildly insane, bewildered, tipsy” over their inability to manage the nation’s money. If a corporation managed its books in the same manner as our federal government, it would be a fraudster, and the feds would be actively shutting it down. Fortunately for Congress, President Herbert Hoover, the man many blame for the Great Depression, provided advice for the ages, “Blessed are the young, for they shall inherit the National Debt.”

Why would Herbert Hoover make such a comment when the National Debt was only $23 billion dollars when he left office in 1933? Hoover and all presidents and Congresses after him knew the answer. If the federal government taxed current citizens the total amount of the programs it funds, there would be a tax revolt, and all elected officials would lose their jobs. So, there is no controlling federal spending as long as the nation has children who will inherit the national debt.

The United States is 247 years old. By the end of Biden’s term in office, the last seven of forty-six presidents, in their forty-four combined years in office, will have borrowed $34 trillion, in addition to the trillions spent annually to run the nation. That is 94% of the estimated FY 2025 national debt of $36 trillion. Each taxpayer’s share of the national debt exceeds $250,000. The average personal income in the U.S. is $63,211. The Congressional Budget Office estimates that our national debt will continue to increase from 98% of GDP in 2023 to 181% in 2053. Over the next ten years, the federal government will pay an additional $10.5 trillion in interest on the debt.

Unfortunately, our Constitution is only as good as the people we elect to manage the nation. It has few guardrails as to the type of government established. The federal government can operate as a capitalist or socialist government as long as our rulers are elected and give lip service to the Constitution. The dialogue in the debate plays out like a long-running Broadway show. Well-rehearsed Conservatives argue for less domestic spending and more military spending. Better rehearsed Progressives advocate for more domestic spending and less military spending. The only issue both parties have historically agreed upon is spending more money.

Moreover, a sober reading of the words of our Constitution illuminates the fact Article I, sec. 8 of the Constitution establishes the federal government as an unrestrained tax master that has unlimited taxing, spending, and borrowing authority. The Sixteenth Amendment to the Constitution expanded Congress’ power to tax without apportioning taxes among the states. Its power to tax extends to all gross income. The monies collected can used to reward friends with subsidies, deductions, and tax credits to minimize the taxes of those that support the government in power. The tax code is loaded with gifts to friends and private industries, from semiconductors to NASCAR and horse racing, and low carried-interest tax rates for the wealthiest.

Federal spending solidly rests on  U.S. Supreme Court decisions that hold high taxes are not considered involuntary servitude or the taking of property. Excessive, even confiscatory taxes, are authorized under the Constitution. Marginal tax rates were above 90% from 1944 to 1963.

To the federal government, taxation is a means to collect money to keep politicians in power.  The average citizen is a mere commodity whose only duty is to pay taxes and die in one of the many useless wars that benefit only the defense industry and those politicians to which it contributes money.

Democrats and Republicans are jointly responsible for the National Debt. Republicans, for all their righteous calls for fiscal restraint, are responsible for 57% of it through FY 2022. This percentage, however, will come into balance as the Biden administration is projected to add another $ 6 trillion or more to the national debt by the end of its first term.

The chart below illustrates that both parties equally share the blame for the national debt.

 

 

Natl Debt increases              

 Republicans Democrat Total National Debt
Hoover FY1930-1933 + 5.7 billion $ 23 billion
F. Roosevelt FY 1934-1945 +$ 236 billion $ 259 billion
H. Truman FY 1946-1953 +$ 7.3 billion $ 266 billion
D. Eisenhower FY1954-1961 +$ 23 billion $ 289 billion
J. Kennedy FY 1962-1964 +$ 22.8 billion $ 312 billion
L.B. Johnson FY 1965-1969 +$ 41.8 billion $ 353 billion
R. Nixon FY 1970-1974 +$121.1 billion $ 475 billion
G. Ford FY 1975-1977 +$223.7 billion $ 698 billion
J. Carter FY 1978-1981 +$ 299 billion $ 997 billion
R. Reagan FY 1982-1989 +$ 1.86 trillion $ 2.857 trillion
G.H.W. Bush FY 1990-1993 +$ 1.55 trillion $ 4.407 trillion
W. J. Clinton FY 1994-2001 +$ 1.4 trillion $ 5.807 trillion
G.W. Bush FY 2002-2009 +$ 5.85 trillion $ 11.665 trillion
B. Obama FY 2010-2017 +$ 8.6 trillion $ 20.257 trillion
D. Trump FY 2018-2021 +$ 8.2 trillion $ 28.845 trillion
J. Biden (estimate) FY 2022-2025 + $7.2 trillion+ $ 36.0 trillion
Party totals $ 17.83 trillion $ 17.82 trillion

 

Since all branches of the federal government have manipulated the Constitution to acquire more federal power to tax, spend, and borrow, how can citizens control it?

There is a passage in Martin Luther King, Jr.’s Letter from Birmingham Jail on unjust laws that should be mandatory reading for every elected official and their staff. It extends far beyond the heinous evils and unjust nature of racial discrimination. It is a timeless analysis of the fundamental attributes of structuring “just laws” in a democracy.

King is asked: “How can you advocate breaking some laws and obeying others?” He replied, “…there are two types of laws: there are just laws, and there are unjust laws.” He explained the moral basis for the distinction. But his two examples of the differences provide insight into structuring “just laws” in a democracy.

To Dr. King, an unjust law is a law the majority imposes on a minority but not itself. A just law applies to all equally.

Secondly, an unjust law is inflicted upon a group that had no part in its passing, e.g., deprived of the right to vote.

While these principles apply to racial discrimination, they can also be applied to the rapidly increasing, massive national debt imposed on future generations who have not been given a “say” or “vote” in the process. Future generations are being told, “Pay our bills.”

It is improbable the federal government will pay off the debt in the lifetime of those living today. We, citizens, are allowing the federal government to let us live on the future productivity of those who have not voted for or benefitted from the debt being created.

We can easily claim there is nothing we can do; our elected leaders control the budget, spending, and continuing increases in the debt ceiling. Moreover, we are constantly told those borrowed funds go to the many “good causes” supporters claim must be addressed.

Notwithstanding the immense power exercised by federal officials, citizens are responsible for the actions of the state. If we continue to allow the federal government to amass debt, we are telling future generations “they have no rights. All wealth belongs to the federal government and those it decides to give money to.” The U.S. is an unjust nation to its children.

Benjamin Franklin, the first prophet on the evils of federal spending, noted, “When the people find that they can vote themselves money, that will herald the end of the republic.” Today, we elect representatives who campaign on giving us trillions of dollars more than we send to Washington in taxes. Franklin reportedly also quipped when asked about the type of government created by the Constitution “We have a Republic if we can keep it.”

It looks like our pixilated federal government will be a Republic until our elected officials run out of green ink. Alternatively, our children could get off their climate change obsession and lobby the federal government to control its spending, an action that will really preserve the U.S. for its children.

 

William L. Kovacs has served as senior vice president for the U.S. Chamber of Commerce, chief counsel to a congressional committee, and a partner in law D.C. law firms. His book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change. He can be contacted at [email protected]

 

 

 

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  • Restoring Trust in Government by Using IQA

Restoring Trust in Government by Using IQA

William L. Kovacs

April 2023

Restoring Trust in Government by Using IQA

The Federal government has citizens living in information confusion, misinformation, and conspiracy theories. Information clutter explains why only two in ten Americans trust Washington to do the right thing. Distinguishing between good and bad quality information should never be difficult when the information comes from our government. There is a U.S. law that mandates government disseminated information be accurate, useful, and having integrity. The federal government just refuses to abide by the Information Quality Act (IQA), section 515 of the Treasury and General Government Appropriations Act for FY 2001.

The Information Quality Act is designed to foster trust

The IQA requires the Office of Management of Budget (“OMB”) to ensure and maximize “… the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by federal agencies.”

In 2002, OMB issued detailed guidelines defining the IQA terms. Information disseminated by the government was to be accurate (precise, complete, and unbiased); useful to intended users; and possessing integrity (protected from manipulation). OMB also set forth a correction process for citizens, including experts, to challenge data inaccuracies. For influential scientific information, there must be a “high degree of transparency about data and methods to facilitate the reproducibility of such information by qualified third parties.” IQA procedures were designed to build trust in government information by following a modified scientific method of testing and reproducibility of data.

Information was defined as “any communication or representation of knowledge such as facts or data, in any medium or form.” Dissemination of information to the public included agency distribution of information to the public. While opinions are not covered by the IQA, when one is given, the agency must clearly identify it as an opinion.

Had IQA guidelines been followed during Covid, the federal government would have provided the public with more useful information.

 By not following IQA guidelines during Covid briefings, misinformation, and opinion was stated as fact without any supporting documentation or being noted as opinion.  As a result, citizens were forced to live in lockdowns, masks were mandated, schools closed, causing massive learning losses, and natural immunity was deemed a conspiracy theory. Government-issued mandates, but it provided little supporting information, and it never stated a level of uncertainty.

 The Biden administration waffled between Presidential statements that it seeks evidence-based information on Covid’s origins and the unequivocal statements of its leading scientist Dr. Fauci, who pronounced it came from an animal.  After several years of delay, FBI and Energy Department informed the public “the Covid pandemic most likely arose from a [Wuhan] laboratory leak,” not from animals, which highlights the difficulty in believing the federal government.

Federal public guidance consisted of Fauci communicating inconsistent health-related information. First, he told the public, “There’s no reason to be walking around with a mask.” A few weeks later, he supported universal masking. Subsequently, he endorsed double masking. As independent scientists offered contrary views, Fauci and his boss, Francis Collins, formulated a press strategy to discredit the credibility of their leading critics as conspiracy theorists.

Federal misinformation fostered a state of fear. Eventually, state Attorneys General brought a lawsuit over the legality of Fauci’s mask mandates. In depositions, Fauci could not identify any study he relied upon to support his conflicting policy pronouncements. And when asked direct questions about his knowledge of the virus’s origins or the tests supporting his conclusions, he “could not remember.”

Such misinformation harmed public health. A Lancet study finds public trust in government is vital to effectively implementing public health measures.

Since its enactment, the federal government refused to implement the IQA.

From the moment OMB issued the IQA guidelines, federal agencies fought to undermine its implementation. Agencies viewed OMB’s guidelines as discretionary. The Department of Justice supported the agencies in court filings.

The public filed lawsuits against agencies to implement the guidelines and to correct inaccurate information. These efforts failed. The courts avoided interpreting the substance of the statute holding private parties lacked standing to enforce IQA requirements. The federal courts gave agencies complete discretion on the type of information disseminated to the public. With strong resistance from the federal government, the IQA drifted into obscurity. It is amazing that on public health issues, courts did not recognize that citizens can be directly injured by public health misinformation.

Imagine if federal agencies followed IQA.

If the IQA had been implemented during Covid, federal agencies would have been limited to disseminating only reliable, consistent, reproducible information or disclose the agency did not have supporting data. Under the IQA, “Mr. Science,” Fauci would have had to inform the public that his daily statements were mere opinions. The public would have known the truth, which would have allowed it to seek guidance from knowledgeable health professionals.

Government health misinformation is propaganda. Fortunately, it can be immediately remedied.

Government information permeates all of our society, from climate change to nutrition or labor statistics. Good quality information is essential for protecting themselves, family, and their businesses.  When government provides misinformation, or mere personal opinion, as the truth, it harms the citizens it has sworn to protect.

Fortunately, the government misinformation can be immediately remedied. President Biden could today order OMB to implement the statute by reinstating and enforcing the original IQA Guidelines. Moreover, Congress could codify the 2002 guidelines and clarify that citizens suffer injury when government misinformation harms their ability to protect their health.

William L. Kovacs, author of Reform the Kakistocracy, winner of the 2021 Independent Press Award for Political/Social Change, and served as senior vice president for environment, technology & regulatory affairs at the U.S. Chamber of Commerce.

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  • The Federal Spending Diet Book

The Federal Spending Diet Book

William L. Kovacs

February 2023

The Federal Spending Diet Book

It’s time for Congress and the president to shed their thirty-five-year delusion that the federal government can manage the nation’s finances.  In Fiscal Year 2022, the United States collected $4.8 trillion in revenue and spent $6.32 trillion. Our federal government spent $1.47 trillion more in 2022  than taxpayers gave it to spend. The federal government is $31.4 trillion overspent. That is more money than the $25.46 trillion GDP of the nation. In human terms, the federal government is a fat, bloated organization that cannot manage the nation. It needs to go on a diet, a spending diet. It needs to read “The Federal Spending Diet Book” for serious ways to cut spending.

The Federal Spending Diet Book

Reducing federal spending is about responsible governance, not Republican or Democrat power. There are relatively commonsense efforts to reduce the debt. If “[The] journey of a thousand miles begins with one step,” our federal government needs to start walking.

 Chapter 1. Do not fund laws that have not been authorized. The easiest set of budget cuts would be to refrain from funding laws that Congress has not authorized. “In FY 2021 appropriations, the Congressional Budget Office identified 1,068 authorizations of appropriations, stemming from 274 laws, tolling $432 billion, that expired before the beginning of the fiscal year 2022.” Since House Rules prohibit such appropriations, it should be an easy savings of almost one-half trillion dollars.

Chapter 2. Review and vote on every expenditure of the Judgment Fund. The Judgment Fund is the mother of all slush funds. It is a permanent, indefinite, and unlimited congressional appropriation continuously available to pay money judgments entered against the United States and settlements of cases in or likely to be in litigation with the United States. It is an indefinite appropriation, so secret that Congress no longer even debates what the amounts are for. The amounts are appropriated, no matter what the amount. The Department of the Treasury just pays the claims upon the receipt of the paperwork. This is the fund that President Obama used to deliver $1.7 billion in cash to Iran as a bribe to sign the Iran nuclear deal. Why should our government officials have billions in a secret fund to cover up illegal activity? Having Congress approve each judgment and settlement as it did before 1956, the U.S. could save taxpayers tens of billions of dollars.

Chapter 3. Enact a fair, simple tax code that raises money to operate the government rather than legislating personal behavior. Another easy way to reduce the deficit it to get rid of the 8-million-word tax code and replace it with the 1913- four-page Form 1040. Few deductions and low rates, but requiring everyone to pay some tax, including the wealthiest. Another benefit of this simple approach is it captures a greater amount of tax owed by closing the Tax Gap.  The IRS defines the tax gap as the difference between true taxes owed for a given tax year and the amount that is paid. The gap is caused by the under-reporting of income, non-filing, and tax evasion. While the exact amount is unknown, the IRS estimates it to range from $574 to $700 billion annually. A complex tax code invites under-reporting and manipulation, whereas failing to pay taxes in a simple system subjects one to tax fraud or tax evasion charges.

Chapter 4. Follow and implement GAO’s Generally Accepted Accounting Principles (“GAAP”). Congress mandates GAO to perform a GAAP analysis of federal spending and assets and provide recommendations to ensure the financial reporting by an agency is transparent and consistent. Every member of Congress should read these reports on how our money is managed and should implement its findings.  One specific GAO recommendation is for the federal government to address the government-wide improper payments, estimated to be $175 billion.

Chapter 5. Government must operate only for a public purpose. The issue of Congress giving away our money to private entities has been debated since the founding of the Republic. Opponents of giveaways argue taxpayer money can only be spent on matters enumerated in the Constitution. The government asserts it can spend taxpayer money on anything that promotes the general welfare. Continuing this debate is irrelevant since the courts have made it clear legislatures determine what the general welfare is. To address the excesses of gifts to private individuals, Congress should stop giving money to private parties, including tax credits for fancy automobiles, horse racing, NASCAR, and short-line railroads, and finally eliminate carried interest.

Chapter 6. Members of Congress and the President should imagine their conference tables are merely kitchen tables that invite a family discussion over finances. The amount of information available to Congress for making smart debt reduction decisions is overwhelming. It is time Congress puts these materials to use. A simple way to approach this task would be for each congressional committee to rank each program within its jurisdiction in order of priority.  The budget and appropriation committees would work with the authorizing committees to ensure the highest-priority programs receive priority funding. The appropriation committees would work down the list until the revenue raised by taxes is expended. At that point, Congress would have to cease spending money on programs for which there is no longer any revenue, e.g., studies of shrimp on a treadmill, or admit to the taxpayers it wants to borrow money to fund programs of lesser value. This kitchen-table process of spending only up to revenues received could save hundreds of billions of wasted dollars.  

Chapter 7. Re-constitute the Joint Committee on Reduction of Non-Essential Federal Expenditures, which existed from 1941 to 1974. This committee was established after World War II to recommend ways to reduce a massive federal budget.  Its goal was to identify non-essential spending. While the committee was only a study committee, requiring its recommendations to be submitted to authorizing and appropriation committees, it had a major impact on budgeting in government. With the inability of Congress to control spending or the states to force a Balanced Budget amendment to the Constitution, an alternative would be to create a similar committee to make recommendations to Congress but require its recommendations be voted on by Congress. This process creates accountability.

Chapter 8. Enact a Base Realignment and Closure Commission (“BRAC”) that applies to general appropriations. Due to political pressure to locate the military bases in numerous congressional districts, the U.S. constructed an excess of bases but could not close unneeded ones. To address the situation, Congress established BRAC, giving the Commission power to identify unnecessary bases and to send recommendations to Congress. The key to BRAC’s recommendations to Congress is that they became law unless Congress passed a Resolution of Disapproval and the President signed it. Using the BRAC structure, Congress could apply the same concept to all recommended reductions as a means of reducing political support for unneeded programs.

Chapter 9. Establish a Budget & Waste Reduction Director in every agency to identify unnecessary expenditures. Federal agencies have recycling and permit streamlining directors to help implement certain laws. Due to massive budget deficits, there should be a similar position to identify ways an agency can eliminate unneeded programs. The person should report directly to the head of the agency. All reports must be addressed by the head of the agency, and reasons for “No Action” must be publicly justified. Each director would recommend a 10% reduction in agency expenditures. Give the director a big bonus for meeting the target.

Chapter 10. The federal government needs to seriously re-think the massive subsidies it gives to private parties to buy green products. In the recently enacted “Inflation Reduction Act,” Congress authorized $370 billion in new tax credits for corporations and individuals if they purchase green energy products or build green energy facilities. The tax credits are to boost sales of electric vehicles, the installation of rooftop solar panels, the development of solar power systems, heat pumps, water heaters, space heating, electric stoves, circuit breaker boxes, additional home insulation, and exterior windows, to name a few private beneficiaries. This is in addition to federal regulations imposing energy efficiency requirements on at least sixty products and $577 billion in tax credits and grants for green energy projects since 2004.

The IRA was passed only a week after Congress authorized $280 billion to incentivize the semiconductor industry to build plants in the U.S. The semiconductor industry is a very profitable $573 billion industry that is expected to grow to $1.4 trillion by 2029 due to high demand for its products.

Starting a diet requires acknowledgment of being overweight and the desire to lose weight. The same is true with overspending. It cannot continue for the health of the nation. If overspending continues, the long-term consequences will be extremely harmful to the nation, especially future generations. While not every step in the diet book needs to be followed, if, however, the federal government implements four or five goals, it is guaranteed to reduce spending by a trillion dollars.

William L. Kovacs, author of Reform the Kakistocracy, winner of the 2021 Independent Press Award for Political/Social Change, and former senior vice president at the U.S. Chamber of Commerce.

 

 

 

 

 

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  • Yes, Virginia, The Federal Government is the Real Santa Claus

Yes, Virginia, The Federal Government is the Real Santa Claus

William L. Kovacs

December 2022

Yes, Virginia, The Federal Government is the Real Santa Claus

The Christmas season is a time of giving. Young children sit on Santa’s knee and provide him with a list of presents for under the tree. While it’s rewarding to see children happy with gifts, there is a dark downside to their expectations. Children grow up to be businessmen and women or social activists, and at Christmas time, they still expect presents. Now, however, they want, and usually receive, presents worth billions of dollars from the real Santa Claus, the federal government.

2022 is no exception. Since 1991, Congress has failed to pass its twelve appropriations bills. To avoid public failure, Congress takes the easy route. It bundles all spending into the proverbial secret Santa grab bag called an Omnibus appropriation bill. The corporatists and social advocates, like children opening presents, must wait to find out what they got until they can read the new law. The timing is usually the end of the year before Congress goes home for Christmas.

While Republicans claim they want to stop the next giveaway, they want their share of gifts even more. For this year’s share, several Republicans will likely help the Democrat business community keep their prize gifts, favorable tax treatment for research and development, and carried interest. The social activists want billions of dollars of higher childcare tax credits. The final deal is always more spending, never less.

Since the beginning of the republic, there has been a debate over the scope of Congress’s power to spend our money and then tax us to generate more money for Congress to spend. James Madison argued Congress could only spend on the items enumerated in the Constitution. Alexander Hamilton argued the Constitution’s Spending clause is independent of the enumerated powers, thus allowing Congress to tax and spend as it deems necessary. The only limitation – spending must be for the general welfare, and Congress is the only institution that determines the general welfare.

Continuing to debate the limits of Congressional spending is a waste of time. The Supreme Court has made it clear that Congress can spend on whatever it wants as long as it promotes the general welfare.

Such a broad interpretation of Congress’ ability to tax and spend has resulted in a massive expansion of government and a $31 plus trillion national debt.  The growth of the national debt will likely force posterity into involuntary servitude to the federal government. Most troubling is that the general welfare has morphed from building canals, bridges, and highways to make the U.S. an economic superpower into trillions of dollars of gifts to special interests and friends. These gifts to private entities come in the form of grants, tax credits, low rates, loan forgiveness, and paycheck protection plans.

Below are a few of the thousands of congressional gifts to private parties.

Suspending  $20 billion of student loan payments for two years and now seeking $600 billion more in student loan forgiveness based on the Higher Education Relief Opportunities Act of 2003, an act that addresses national welfare emergencies.

$ 721 billion was given in grants to states as a bribe to manage federal programs enacted outside the constitutional authority of Congress to legislate.

Forgiving tens of billions of dollars of federal Paycheck Protection Program loans made to organizations controlled by the elite rich such as Paul Pelosi (husband of the Speaker of the House); Khloe Kardashian, Tom Brady and Reese Witherspoon, Forbes Media, Ruth Chris Steakhouse, The Washington Times, and more than a few members of Congress.

$16 billion was given in farm aid to offset losses suffered by farmers on tariffs imposed on products sold to China. The top 10% of farmers receive 70% of the subsidies. This top 10% includes insurance companies, multinational corporations, and corporate farms.

Flood insurance subsidies are given to insure high-end housing in flood-prone areas, i.e., beachfront properties. This insurance program is potentially liable for $1.3 trillion in flood claims while only collecting $3.5 billion in annual premiums. The program already has $25 billion in losses taxpayers will have to pay.

The $330 billion prescription drug industry received $64 billion in federal research funding, along with immunity for any harm their drugs may cause.

Most recently, through the falsely named “Inflation Reduction Act,” Congress authorized $370 in new tax credits for corporations and individuals if they acquire green energy products or build green energy facilities. These tax credits are in addition to federal regulations imposing energy efficiency requirements on at least sixty products and $577 billion in tax credits and grants for green energy projects since 2004. The tax credits are to boost corporate sales of electric vehicles, the installation of rooftop solar panels, the development of solar power systems, heat pumps, water heaters, space heating, electric stoves, circuit breaker boxes, additional home insulation, and exterior windows, to name a few beneficiaries.

A week before the passage of the IRA, Congress authorized $280 billion to incentivize the semiconductor industry to build plants in the U.S. and invest in new research. The $ 573 billion semiconductor industry is expected to grow to $1.4 trillion by 2029 due to high product demand.

With a $31 trillion-plus national debt, citizens need to appreciate that every taxpayer owes $247,882 as their portion of the debt.

Christmas gifts to children are rewarding when parents see happiness in their eyes. Unfortunately, as some of these children grow up, they still expect gifts from the real Santa Claus, the federal government. The federal government likes playing Santa but never considers the immutable fact that the only money the federal government has is what it takes from taxpayers. The federal Santa game is simple. The federal government sees the glimmer in the eyes of its friends when they find out about the billion-dollar gifts they received for doing nothing. This tradition is the true meaning of a Washington, DC, Christmas.

William L. Kovacs, author of Reform the Kakistocracy, winner of the 2021 Independent Press Award for Political/Social Change, and former senior vice president at the U.S. Chamber of Commerce.

This article was first published in The Thinking Conservative.

 

 

 

 

 

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  • The Emperor Has New Clothes; U.S. Has New National Debt

The Emperor Has New Clothes; U.S. Has New National Debt

William L. Kovacs

December 2022

The Emperor Has New Clothes; U.S. Has New National Debt

In the oft-told story, The Emperor’s New Clothes, the vain emperor was constantly showing off his new clothes and wanting more impressive new clothes. To satisfy his vanity, a weaver told him there were magic clothes that were invisible to anyone who was unusually stupid. The emperor wanted them and the weaver went through the motions of dressing the emperor in magic clothes. While the emperor could not see the clothes the weaver dressed him in, he pretended to see them so he did not appear stupid. The emperor was told by all how fabulous were his new clothes. The emperor paraded everywhere so all could see the magic clothes that fit him to perfection.

One day, a little child saw the emperor, and said out loud, “But he hasn’t got anything on.” The child’s father dismissed his comments as “prattle.” But many in the crowd knew the child was right and whispered to others what the child said. The emperor heard it and suspected the child was right. But not wanting to appear wrong, he continued to walk prouder than ever in his magic clothes, and his nobleman continued to hold the train that wasn’t there.

Like the emperor, the leaders in our federal government dismiss as “prattle” the many in the crowd who cry, “The federal government hasn’t got any money at all.” But the federal government, unwilling to acknowledge it has no money, continues to proudly print more magic money.

The United States is $31 trillion in the hole. In the last several months, the Biden administration persuaded Congress to enact the Inflation Reduction Act ($500 billion), subsidies for the semiconductor industry ($46 billion) and is promising to forgive $400 billion in student loans and transfer another $36 billion to bail out the Teamsters Central States Pension Fund. The federal government of the U.S. is a “Spending Addict.” It is in desperate need of rehabilitation, but like the Emperor, it is too proud to stop doing stupid, shameful acts.

The federal government is the central reigning governmental body in the U.S. It is not the United States, notwithstanding the caption on lawsuits. Rather it is a constitutionally established mechanism in which representatives of the people are granted limited powers to serve the people and advance the common good of the nation. These representatives are not given individual or personal power. They are fiduciaries who must exercise their powers solely for the benefit of the common good of the nation and the American people.

The framework of our Constitution has few guardrails as to the type of government it can create. As long as any government is elected by the people to make laws and serve their interests, it is an acceptable Republican form of government under the Constitution.  Today, while the people of the nation elect representatives that have the theoretical power to change the laws, the political culture of the nation is such that these representatives are more loyal to the political party that helped them get elected than to the institution in which they serve. As such, our representatives are elected, but their power to change laws is limited by the power of the political party of which they are a member; not the institution in which they serve.

By giving their loyalty to the political party rather than the institution in which they serve, the power of representative government is severely limited. In this instance, it is the political party that protects freedom. In the other instance, it is the institution of Congress that protects freedom. Under the protection of a political party, our government functions as a combination of capitalist, socialist, oligarchy, kakistocracy, woke cult, and very likely, though unproven, a “deep intelligence state” that allows the optics of a Republic to exist in order to maintain the secrecy of action and the accumulation of greater powers.

The intent of our founders was to place perpetual sovereignty with the people of the country, not the federal government. As such, the federal government is an entity separate from but theoretically subject to control by the people. Unfortunately, those occupying the institutions comprising the federal government manipulate the Constitution and our laws to amass great personal power over the people. The individuals occupying federal positions, especially those in the Executive branch, have used their accumulated powers to become rulers and have transformed the people into servants.

Being separate from the people has allowed the federal government to use its powers to spend our money and impose mandates on us. The question must be asked who will pay off the debt? Notwithstanding its gross mismanagement of the nation, the federal government will tax the people to pay for its mismanagement. It has given itself the power to impose a tax burden of almost any amount needed to pay for what it wants to be done. From 1932 to 1981, the marginal tax rate in the U.S. ranged between 63% – 91%.

The national debt is 102% of the nation’s Gross Domestic Product (“GDP”) of the nation. It is expected to be double the GDP by 2051.  Each taxpayer’s share of the national debt today is $245,191. The average personal income in the U.S. is $63,211. If Americans are concerned with inflation, wait until they get the bill for the national debt. The national debt will become so burdensome to future generations that it will undermine democracy. If the federal government taxed current citizens the amounts needed to pay for today’s government, a tax revolt would topple the government. It avoids being confronted for its lack of responsibility by passing the debt to future generations who have no responsibility for creating it.

If it is our responsibility today to ensure the federal government runs the country for the common good, we have failed. The federal government has spent more money than it brings in almost every year since Calvin Coolidge was president in 1930. The American people now send the federal government over $4 – $5 trillion annually for its operations. That amount is never enough. The federal government always spends trillions more annually. It just spends and spends without restraint. 88% of our $31 trillion national debt was accumulated by our last six presidents.

On the asset side of the balance sheet, the federal government holds only $5.6 trillion of assets in cash, accounts receivable, loans receivable, and property, plant, and equipment. Its largest asset is $1.6 trillion of student loan debt, which the government wants to forgive to curry political favor with college students.

The federal government has so far escaped default on its debt obligations by printing magic money.

The federal government has also developed mechanisms for passing the cost of federal programs onto the public without having to account for the cost. Specifically, the federal government has imposed so many statutory laws on the private sector that it is a “fruitless project” to count them. In addition to statutory laws, federal agencies have imposed over 200,000 regulations between 1976 and 2016 and published over 10,000,000 pages of regulations between 1950 – 2021. Regulations are also laws. Additionally, presidents have issued 14,088 Executive Orders, and hundreds of thousands of Guidance Documents to explain the hundreds of thousands of issued regulations. Congress has also enacted 136 Emergency laws that allow the president to rule as a dictator at the time of their choosing. These “laws” are not only costly, but they also restrict our freedom, literally mandate by mandate. The emergency laws come in the form of Covid lockdowns and vaccine mandates that carry a penalty of being fired for non-compliance.

Furthering the tentacles of the federal government, it has thousands of employees in every state in the nation. It also provides state and local governments with  $721 billion in grants to manage programs the federal government wants to be implemented but does not have the constitutional authority to impose by law or regulation.

With all of its massive spending and millions of workers, laws, and regulations to control every aspect of life, the federal government oozes incompetence. Not only is it bankrupt, but it is also unable to control its own borders, the essence of sovereignty. Its educational system, the core system for supporting future competition with the world, is in disarray. The U.S. ranks 30th in math and 18th in reading, on international assessments. The American people know the nation is not well governed. Seventy-four percent of its people believe the U.S. is going in the wrong direction. Only 21% think it is going in the right direction. Forty-three percent of Americans believe the U.S. will be in a civil war in the next ten years.

While the federal government continues to print more and more money while dismissing as prattle those claiming it has no money; it will soon find that magic money, like magic clothes, is not real. Eventually, the debt will have to be repaid by people who had no say in its borrowing or spending. As a final act to save itself, the federal government will put future generations of Americans into involuntary servitude to it as a means of paying off the national debt. So much for the federal government worrying about the common good for Americans.

William L. Kovacs, author of Reform the Kakistocracy, winner of the 2021 Independent Press Award for Political/Social Change, and former senior vice president at the U.S. Chamber of Commerce.