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  • Half the National Debt is from Undeclared Wars, Misinformation and Lies

Half the National Debt is from Undeclared Wars, Misinformation and Lies

William L. Kovacs

February 2024

Half the National Debt is from Undeclared Wars, Misinformation and Lies

Congress is again fighting over the funding of undeclared wars or U.S. proxies (Ukraine, Israel) involved in wars in which the U.S. asserts an interest. The U.S. has been involved in 32 similar-type wars since the Korean War in 1950. The U.S. has been absent from war only 14 of the 73 past years. More terrifying, however, Congress usually funds the wars with little debate over our security needs.

In addition to funding wars, Congress appropriates trillions of questionable dollars to anyone in the U.S. to address COVID-19 and green technology without any evidence of effectiveness or need.

At least $18 trillion of our $34 trillion national debt can be attributed to some combination of undeclared wars, misinformation, and lies. Every taxpayer is left with the $260,000 tab that accompanies federally created inflation, decaying schools, rising interest rates, declining wages, sagging productivity, labor strikes, supply chain problems, increasing taxes, open borders, and terrorists in the homeland. These problems are not music to the ears of Americans who “get another day older and deeper in debt.

The unfortunate aspect of this situation is that as much as one-half of the national debt might have been avoided by honesty from our presidents and a Congress willing to debate the critical issues of the day.

$18 trillion of policy mistakes that could have been avoided by a serious debate in Congress and good quality information.

 Vietnam (1965-1973). The U.S. was not attacked in the Gulf of Tonkin as it claimed, yet that lie was our excuse for waging a war against North Vietnam that killed 58,220 American soldiers, wounded 153,303, and another 1,643 are still missing. The war cost U.S. citizens $168 billion in the 1960s-1970s, which would be over $1 trillion today. The costs of that war continue today, with around $22 billion in compensation for injured veterans and lifetime benefits for their families. U.S. involvement in the war ended in 1973, but the U.S. withdrawal was a roadmap to its disgraceful surrender in Afghanistan.

 Afghanistan and Global War on Terror (2001 to 2022). After terrorists crashed airplanes into the Twin Towers in NYC and the Pentagon on September 11, 2001, the U.S. invaded Afghanistan, the home of the terrorists. The global war on terror began and lasted for two decades. The U.S. stayed at war in the Middle East 18 years after President Bush declared “Mission Accomplished.”  Its cost is estimated at $8 trillion and over 900,000 deaths. Even after the war ended, the U.S. estimates $2.2 trillion for the future care of our veterans. After two decades of fighting in Afghanistan, the U.S. disgracefully abandoned the war and the hundreds of thousands of Afghans who worked to help the Americans. The U.S. also left $7.12 billion worth of equipment for the terrorists to use against us.

The Iraq War (2003 – 2011). The Iraq War was the result of the U.S. Intelligence Agencies falsely telling the American people Saddam Hussein had Weapons of Mass Destructions (“WMD”). Hussein did not have any WMD. Rather, the war was President Bush’s obsession to remove Hussein from power to correct what he believed was a mistake by Father Bush not to invade Iraq and eliminate Saddam Hussein. The cost of the Iraq war was $1.8 trillion and cost 550,000 lives.

Ukraine War (2022-present). So far, the U.S. has spent $115 billion on the Ukraine war with Russia. Presently, the U.S. Senate wants to give Ukraine another $60 billion. While the history of the Ukraine War is not written, there is considerable controversy over the U.S. role in the 2014 coup that overthrew the pro-Russian president Viktor Yanukovych. The U.S. and the EU certainly wanted a friendly Ukrainian government. The toppling of the Russian-friendly ruler and the installation of a pro-western ruler of Ukraine led to Russia invading and taking Crimea from Ukraine in 2014.

Complicating Ukrainian politics, in 2016, after a new Ukraine president was installed,  then Vice President Biden threatened to deny Ukraine $1 billion if the president of Ukraine did not fire Special Prosecutor Shokin, who was investigating Burisma, a corrupt company that paid large sums of money to Hunter Biden to lobby the Obama administration to force Ukraine to end the investigations of its corruption. Now President Biden has forcefully stated he will support Ukraine for “as long as it takes.” The final cost of war is unknown, and the cost of rebuilding Ukraine will be in the hundreds of billions.

Additional Wars (1950-2022). In addition to four major undeclared wars, the U.S. has been involved in the Korean War, Laotian Civil War, Permesta Rebellion, Lebanon crisis, Bay of Pigs, Dominican Civil War, Korean DMZ conflict, Cambodian Civil War, Lebanese Armed Forces, Grenada, Libya, Tanker war, invasion of Panama, Somali, Bosnian and Croatian wars, Kosovo war, intervention in Yemen, intervention in North-West Pakistan, second intervention in Somali Civil War, Ocean Shield, Operation Observant Compass (Uganda), intervention in Niger, Syrian Civil War, second intervention in Libya, Operation Prosperity Guardian (Red Sea conflict).

Cost of Covid (2019-2022). The federal government spent over $4.6 trillion during the Covid pandemic. Most of the money went to individuals and corporations to keep them afloat during the government-mandated shutdown and to Big Pharma for the vaccines that were never properly tested. There is considerable conflict over the usefulness of the Covid vaccines. Moreover, there are many who believe the lockdowns, school closures, fraud, lost productivity, and the rise in mental health cases will cost the U.S. many trillions in the future. The OECD estimates the cost of the lost learning in the U.S. will be $14.1 trillion. Congress never received any information from either Trump or Biden on the origins of COVID-19.

The Inflation Reduction Act (2023). The IRA is not about reducing inflation in any manner. It was about funding green technology. The IRA tax credits for anything “green” incentivized more pigs to show up at the trough than CBO estimated. Within months after the program started, Goldman Sachs raised its estimated cost of the credits to  $1.2 trillion for the same time period. The original forecast missed the cost of the credits for electric vehicles by $379 billion; energy manufacturing, $156 billion; renewable electricity production, $82 billion; energy efficiency, $42 billion; hydrogen, $36 billion; biofuels, $34 billion; and carbon capture, $31 billion.

Governments Make Mistakes; unfortunately, the U.S. federal government does not learn from them.

 The total cost of these few policy mistakes is well over $18 trillion. As to the wars, Congress never declared any of them. As to Vietnam and Iraq, the American people were simply lied to.  As to the COVID cover-up, the most disconcerting fact is that the federal government continues to refuse to tell citizens the origins of COVID-19 or provide scientific studies to support the mandated vaccinations, lockdowns, closures, or other police state tactics.

The U.S. federal government appears to be incapable of learning from its mistakes. The U.S. involves itself in war after war, yet Congress rarely debates the need for the war before the president sends money, equipment, troops, or some combination of war assistance to the fight. The U.S. federal government passes society-changing policies like COVID and IRA and appropriates trillions to implement them with few, if any, members of Congress or the president even reading the summaries of the laws.

The American people deserve more for the $6 trillion they send to Washington each year and the $34 trillion the federal government borrowed in our name. Asking Congress to perform its constitutional responsibility to declare war before the president sends troops and/or equipment to fight the war is not unreasonable. Demanding the Executive to provide the science underlying major public health emergency orders is not unreasonable. Demanding our leaders tell us the truth, rather than lies, about what the government is doing is not unreasonable. Unfortunately, Congress and the president seem very content with living in a state of undeclared wars, perpetual misinformation, and lies.

 

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]

 

 

 

Keyword: Undeclared WarsPoor federal policy decisions such as undeclared wars, misinformation and lies are very costly. A few bad decisions cost taxpayers $18 trillion.

 

 

 

 

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  • Memo to Climate Skeptics: You’re Losing, Change Strategies

Memo to Climate Skeptics: You’re Losing, Change Strategies

William L. Kovacs

December 2023

Memo to Climate Skeptics: You’re Losing, Change Strategies

(Part I of III parts)

As 90,000 corporate and environmental elites land their private planes in Dubai to be exquisitely wined and dined at the UN Climate Conference (“COP 28”) from November 30 to December 12, 2023, they will be demanding more reductions in fossil fuels and trillions more dollars for whatever controls they want to impose on humanity. Their newest demand is no more cows, no more meat. This is on top of restrictions on thousands of products. Twenty-eight years of COP parties demonstrate the persistence of the movement to shut down human progress. Those opposing this insanity argue the facts, science, and common sense. These are useless arguments in a world where tweets, influencers, money, and misinformation rule. It is time to challenge this brave new world of hypocrites at its source of power.

The Progressive Left is winning the climate war it should be losing.

Those skeptical (“climate skeptics”) of the Progressive Left’s claim that the world is coming to an end due to manmade greenhouse gas emissions are a dwindling group. They are fighting the good fight with few supporters and little financial assistance. To prevail, the skeptics need to gain visible support from common-sense citizens who are unwittingly impacted by the increased costs of green technology. To achieve this feat, climate skeptics should move away from their current lobbying strategy that relies on well-documented science and technology briefing papers that discuss the technical inadequacies of the green agenda and focus on the adverse economic and community impacts of the Biden administration’s policies.

The transition from regulatory oppression to costly giveaways.

The Progressive Left’s change in its climate lobbying strategy between the Obama and Biden administrations illustrates why the Progressive Left is winning the climate fight to limit fossil fuels to “stop the rise of the oceans.”  While both administrations initiated aggressive attacks on the use of fossil fuels, their strategies are radically different. Obama went the traditional route of complex legislation to regulate most industries in the economy. The Biden administration gives away lots of money, which makes all the difference.

The climate skeptics in 2008-2016 organized the business community and used data in eye-catching, easy to understand charts to illustrate the complexity, costs and burdens of Obama’s legislative and regulatory agenda on business and citizens. By explaining how business, jobs, citizens, and communities were adversely impacted, the skeptics defeated Obama’s major proposals in Congress, even in years when Democrats controlled both Houses of Congress.

The Biden administration changed strategies in 2021. It recognized giving away taxpayer money is a proven path to the heart of the business community. Giving away money for a “public purpose” is also unreviewable by the courts. As such, it is easier for spending legislation to pass. Moreover, it also avoids a regulatory conflict with industry, as happened to Obama’s Clean Power Plan. Using giveaways, Biden enacted the Inflation Reduction Act (“IRA”) to build more green technology than can be absorbed by the grid or afforded by consumers. Additionally, by placing such a massive amount of green technology into the economy, Biden makes reversing his policies very difficult.

Beginning in 2021, climate skeptics challenged Biden’s climate agenda by developing excellent policy papers explaining the technological flaws in achieving zero emissions with green technology. Unfortunately, for the climate skeptics, business prefers subsidies over well-reasoned technical reports that might upset their gravy train., Moreover, most common-sense citizens do not read technical policy papers, nor are they persuaded by them.

American business is Congress’ Pavlov’s dog, and tax credits are its treats.

With a massive national debt approaching $34 trillion and annual combined deficits and interest payments approaching $2 trillion, Congress fails to understand how it is wasting the taxpayer’s money. Worse, when it spends by enacting tax expenditures, it has no control over how much is wasted.

Tax expenditures are defined by law as “revenue losses attributable to provisions of the Federal Tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liabilities.” When Congress enacts these expenditures, it creates public policy by changing behavior, i.e., rewarding corporations that do what the government wants done. It transforms American businesses from defenders of competitive markets into the government’s Pavlov dog. The government offers a treat, and business gets rewarded if it does what Congress wants done.

Unlike policy determinations that must be authorized and subsequently funded by Congress, tax expenditures are not viewed as direct spending programs since Congress places them outside of the budget process. As such, they are an unlimited charge on the federal treasury since anyone who conforms to the government’s desires gets credits that reduce their income tax. For example, taxpayers purchasing an electric vehicle can receive up to $7,500 in credits to reduce their federal income taxes.

Additionally, the IRA includes a $ 400 billion loan guarantee fund that allows green energy developers to secure lower interest rates on loans that the federal government guarantees in case of default. These unfunded liabilities are also off budget.

The cost of dog treats is expensive.

The IRA gives tax credits for activities legislatively deemed to reduce emissions causing climate change. Those activities include battery storage, energy efficiency, residential green energy, hydrogen, carbon capture, solar and wind generation, and electric vehicles. The Congressional Budget Office (“CBO”) initially estimated these tax credits would cost the treasury $391 billion between 2022 and 2031.

The IRA tax credits for anything “green” incentivized more pigs to show up at the trough than CBO estimated. Within months after the program started, Goldman Sachs raised its estimated cost of the credits to $1.2 trillion for the same period. The original forecast missed the cost of the credits for electric vehicles by $379 billion; energy manufacturing, $156 billion; renewable electricity production, $82 billion; energy efficiency, $42 billion; hydrogen, $36 billion; biofuels, $34 billion; and carbon capture, $31 billion.

These federal tax credits create few jobs. “Total [cost for each green job created] range from $ 2 to $ 7 million per job.” Unfortunately, the jobs created will have an average annual wage of $45,000. Where have all the billions gone? Into corporate pockets everywhere!

Tax credits are only one type of government gift. The tax code is stuffed with over 2000 subsidy [gift] programs. Companies that receive the gifts are given a competitive advantage over non-recipients in the market. Farming is an excellent example. The federal government distributes $30 billion a year in subsidies to the farm industry. “The largest 15 percent of the farm businesses receive 85 percent of the total farm subsidies.”

The Center on Budget and Policy Priorities estimates that in 2019, IRS tax expenditures carried a value of $1.3 trillion for the recipients. Additionally, the IRA tax credit adds another $1.2 trillion. None of these $2.5 trillion tax credits is part of the appropriations process. No wonder Congress cannot control spending. These same companies also received $3.5 trillion in subsidies in 2020 from state and local governments.

As long as green technology is infused with unlimited tax credits, businesses will take the credits until the government stops giving them or the project suffers losses the government will not cover. It is up to the skeptics to educate the public on these costs.

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 received the 2021 Independent Press Award for Political/Social Change. Kovacs also led the business coalition’s lobbying activities against Obama’s legislative climate proposals. He can be contacted at [email protected].

 

 

 

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  • An Age of Unreason: Undeclared Wars, Misinformation and lies

An Age of Unreason: Undeclared Wars, Misinformation and lies

William L. Kovacs

October 2023

An Age of Unreason: Undeclared Wars, Misinformation and lies

It’s appropriation season in Congress. As part of its annual ritual, Congress is unable to get its job done. It’s obvious it can’t cut small items out of its spending. It also can’t cut big items out of its spending. More terrifying, however, Congress does not debate undeclared wars, misinformation, and lies. Other than exhibiting passion on cable news, Congress is full of sound and fury but accomplishing nothing.

At least $18 trillion of our $33 trillion national debt can be attributed to some combination of six undeclared wars, emergency declarations, and lies. Citizens are not only left with the $250,000 per taxpayer tab but also with inflation, decaying schools, rising interest rates, declining wages, sagging productivity, labor strikes, supply chain problems, increasing taxes, open borders, and terrorists in the homeland. These problems are not music to the ears of Americans who “get another day older and deeper in debt.

The unfortunate aspect of this situation is that more than one-half of the national debt might have been avoided by honesty from our presidents and a Congress willing to debate the issues of the day.

$18 trillion of policy mistakes that could have been avoided by a serious debate in Congress.

 Vietnam (1965-1973). The U.S. was not attacked in the Gulf of Tonkin as it claimed, yet that lie was our excuse for waging a war against North Vietnam that killed 58,220 American soldiers, wounded 153,303, and another 1,643 are still missing. The war cost U.S. citizens $168 billion in the 1960s-1970s, which would be over $1 trillion today. The costs of that war continue today, with around $22 billion in compensation for injured veterans and lifetime benefits for their families. U.S. involvement in the war ended in 1973, but the U.S. withdrawal was a roadmap to its withdrawal from Afghanistan.

 Afghanistan and Global War on Terror (2001 to 2022). After terrorists crashed airplanes into the Twin Towers in NYC and the Pentagon on September 11, 2001, the U.S. invaded Afghanistan, the home of the terrorists. The global war on terror began and lasted for two decades. The U.S. stayed at war in the Middle East 18 years after President Bush declared “Mission Accomplished.”  Its cost is estimated at $8 trillion and over 900,000 deaths. Even after the war ended, the U.S. estimates $2.2 trillion for the future care of our veterans. After two decades of fighting in Afghanistan, the U.S. disgracefully abandoned the war and the hundreds of thousands of Afghans who worked to help the Americans. The U.S. also left $7.12 billion worth of equipment for the terrorists to use against us.

The Iraq War (2003 – 2011). The Iraq War was the result of the U.S. Intelligence Agencies falsely telling the American people Saddam Hussein had Weapons of Mass Destructions (“WMD”). Hussein did not have any WMD. Rather the war was President Bush’s obsession to remove Hussein from power to correct what he believed was a mistake by Father Bush not to invade Iraq and eliminate Saddam Hussein. The cost of the Iraq war was $1.8 trillion and cost 550,000 lives.

Ukraine War (2022-present). So far. the U.S. has spent $115 billion on the Ukraine war with Russia. While the history of the Ukraine War is not written, there is considerable controversy over the U.S. role in the 2014 coup that overthrew the pro-Russian president Viktor Yanukovych. The U.S. and the EU certainly wanted a friendly Ukrainian government. The toppling of the Russian-friendly ruler and the installation of a pro-western ruler of Ukraine led to Russia invading and taking Crimea from Ukraine in 2014.

Complicating Ukrainian politics, in 2016, after a new Ukraine president was installed,  then Vice President Biden threatened to deny Ukraine $1 billion if the president of Ukraine did not fire Special Prosecutor Shokin, who was investigating Burisma, a corrupt company that paid large sums of money to Hunter Biden to lobby the Obama administration to force Ukraine to end the investigations of its corruption. Now President Biden has forcefully stated he will support Ukraine for “as long as it takes.” The final cost of war is unknown, and the cost of rebuilding Ukraine will be in the hundreds of billions.

Cost of Covid (2019-2022). The federal government spent over $4.6 trillion during the Covid pandemic. Most of the money went to individuals and corporations to keep them afloat during the government-mandated shutdown and to Big Pharma for the vaccines that were never properly tested. There is considerable conflict over the usefulness of the Covid vaccines. Moreover, there are many who believe the lockdowns, school closures, fraud, lost productivity, and the rise in mental health cases will cost the U.S. many trillions in the future. The OECD estimates the cost of the lost learning in the U.S. will be $14.1 trillion. Congress never received any information from either Trump or Biden on the origins of COVID-19.

The Inflation Reduction Act (2023). The IRA is not about reducing inflation in any manner. It was about funding green technology. The IRA tax credits for anything “green” incentivized more pigs to show up at the trough than CBO estimated. Within months after the program started, Goldman Sachs raised its estimated cost of the credits to  $1.2 trillion for the same time period. The original forecast missed the cost of the credits for electric vehicles by $379 billion; energy manufacturing, $156 billion; renewable electricity production, $82 billion; energy efficiency, $42 billion; hydrogen, $36 billion; biofuels, $34 billion; and carbon capture, $31 billion.

Governments Make Mistakes; unfortunately, the U.S. federal government does not learn from them.

 The total cost of these few policy mistakes is over $18 trillion. As to the wars, Congress never declared any of them. As to Vietnam and Iraq, the American people were simply lied to.  As to the COVID cover-up, the most disconcerting fact is that the nation has still not told its citizens the origins of COVID-19 or provided the scientific studies to support the mandated vaccinations, lockdowns, closures, or other police state tactics.

The U.S. federal government appears to be incapable of learning from its mistakes. The U.S. involves itself in war after war, yet Congress never debates the issue before the president sends money, equipment, troops, or some combination of war assistance to the fight. The U.S. federal government passes society-changing policies like COVID and IRA and appropriates trillions to implement them with few, if any, members of Congress or the president even reading the summaries of the laws.

The American people deserve more for the $6 trillion they send to Washington each year and the $33 trillion the federal government borrowed in their name. Asking Congress to perform its constitutional responsibility to declare war before the president sends troops and/or equipment to fight the war is not unreasonable. Demanding the Executive to provide the science underlying major public health orders is not unreasonable. Demanding our leaders tell us the truth, rather than lies,  about what the government is doing is not unreasonable. Unfortunately, Congress and the president seem very content with living in a state of unreason, i.e., the absence of reason. Does anyone care?

 

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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  • Tax Expenditures & Cardsharps Deal From Bottom of the Deck

Tax Expenditures & Cardsharps Deal From Bottom of the Deck

William L. Kovacs

October 2023

Tax Expenditures & Cardsharps Deal From Bottom of the Deck

Without being a card player, it can be difficult to spot a cardsharp who cheats by manipulating cards to serve their own interest. Without being a tax expert and certified accountant, it is difficult to spot how federal tax expenditures manipulate government spending for friends and supporters.

Cardsharps use sleight of hand, false shuffles, and dealing from the bottom of the deck to manipulate the cards to cheat people out of their money. Congress and the White House use the appropriations process and tax code (“tax expenditures”) to cheat taxpayers out of trillions. Tax expenditures reduce federal tax revenue by $1.3 trillion annually. Every tax expenditure (gift) benefits the recipient and punishes the non-recipients who must pay for the lost revenue.

The most recent example is the Inflation Reduction Act (“IRA”) which went into effect January 1, 2023. The Biden administration told the public the new law would reduce inflation and achieve deficit reduction. Staying with the card game analogy, the many types of tax expenditures are merely different types of playing cards.

The various types of tax expenditure cards provide direct subsidies to specific individuals and industries in the form of loans, loan guarantees to keep bankrupt industries operating, tax breaks in the form of deductions, lower marginal rates for specific financial activities, the elimination of fees or penalties and the most dangerous – tax credits.

In the case of the IRA, the federal government gives taxpayers credits against their tax liability if the taxpayers do what the government wants done. The tax credit is an unlimited charge against the federal treasury since anyone who conforms to the government’s desires gets the credit to reduce their income tax. For example, taxpayers purchasing electric vehicles receive up to $7,500 in credits to reduce their federal income taxes by an amount equal to the credit.

The IRA gives the credits for activities that are asserted to reduce emissions causing climate change. Those activities include battery storage, energy efficiency, residential green energy, hydrogen, carbon capture, solar and wind generation, and electric vehicles. The Congressional Budget Office (“CBO”) initially estimated the tax credit would cost the treasury $391 billion between 2022 and 2031.

The IRA tax credits for anything “green” incentivized more pigs to show up at the trough than CBO estimated. Within months after the program started, Goldman Sachs raised its estimated cost of the credits to  $1.2 trillion for the same time period. The original forecast missed the cost of the credits for electric vehicles by $379 billion; energy manufacturing, $156 billion; renewable electricity production, $82 billion; energy efficiency, $42 billion; hydrogen, $36 billion; biofuels, $34 billion; and carbon capture, $31 billion.

Most troublesome is the fact that a trillion-plus dollars of tax credits are creating few jobs.  “Total [cost for every green job it created] range from $ 2 to $ 7 million per job.” Unfortunately, the jobs created will have an average annual wage of $45,000. Where have all the millions gone?

While tax credits are the most abusive form of government gifts, the entire tax code is stuffed with over 2000 subsidy [gift] programs. Every federal tax expenditure, or gift, interferes with the entire market to which it is directed. Companies that receive the gifts are given a competitive advantage over non-recipients in the market. Farming is an excellent example. The federal government distributes $30 billion a year in subsidies to the farm industry. “The largest 15 percent of the farm businesses receive 85 percent of the total farm subsidies.”

Through the aggressive use of tax expenditures, the federal government controls what is manufactured, the energy used in the process, the type of research conducted, what is mined, medical benefits received, deductible building expenses, the cars purchased, the development of communities, and many more. There are so many tax expenditures that the Department of the Treasury catalogs them in large groupings: National Defense, International Affairs, General Science, Space and technology, Energy, Natural Resources & Environment, Agriculture and Housing, Transportation, Community and Regional Development, Education, Training, Employment and Social Sciences, Health, Income Security, Social Security, Veterans Benefits, General Government, Interest on Bonds.

The Center on Budget and Policy Priorities estimates that in 2019 IRS tax expenditures carried a value of $1.3 trillion for the recipients. The top 1% of the income earners received 24.1% of the value, and the top 20% of income earners took 58.8%. The IRA adds another trillion to the free lunch pie.

The most deceitful aspect of tax expenditures is they do not compete for appropriations; they are just taken by whoever is willing to conform their business or lifestyle to the federal government’s wishes. This brings the discussion back to today’s budget fights over how much money to spend or cut. Consider the consequences of exempting the $1.3 trillion in green tax credits from the budget fight. While Congress fights over cutting billions from the deficit, the green industry’s tax credits are exempt from the cuts. The green industry laughs all the way to the bank.

There are a few simple solutions. Over a decade ago, a Missouri State Senator, Emily Kilmer, proposed legislation that would require every state tax credit program in Missouri to be limited to the amount of tax credits authorized by the legislature that fiscal year.

This simple solution would put tax expenditures into the same category as all appropriations, thereby giving the legislature control over all aspects of state spending. True to political form, the Missouri legislature never moved forward with the proposal. This type of law would work very well at the federal level. It would actually make federal appropriators responsible for all their spending. It would make budgeting and appropriations more transparent since anything with budget implications would be on the table for being funded, cut, or eliminated. Every person and interest group would be publicly fighting over the food in the same trough.

Another option is to repeal the 8-million-word tax code and replace it with the 1913- four-page Form 1040. It had few deductions and low rates but required everyone to pay some tax. 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 a simple tax code fosters greater participation and prevents large-scale manipulation due to its transparency.

By requiring tax expenditures to be subject to the same rules as all appropriations and closing the tax gap, the federal government could achieve savings of well over a trillion dollars annually. It’s time for the federal government to stop dealing from the bottom of the deck and start fair dealing with its citizens.

 

 

 

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  • In Need of a Federal Ban on Gifts to Friends of Congress

In Need of a Federal Ban on Gifts to Friends of Congress

William L. Kovacs

September 2022

In Need of a Federal Ban on Gifts to Friends of Congress

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 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 limitations – spending must be for the general welfare and Congress cannot use taxation as a pretext to indirectly control states.

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. Only Congress can make that determination.

Such a broad interpretation of Congress’ ability to tax and spend has resulted in a massive expansion of government and a $30 plus trillion national debt that will likely place our posterity in involuntary servitude to the federal government. Most troubling is that the general welfare has morphed from building the 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, loan forgiveness, and paycheck protection plans.

A few examples of the cost of congressional gift giving.

$600 billion in student loan forgiveness based on the Higher Education Relief Opportunities Act of 2003, which forgave $10,000 – $20,000 of student loan debt for approximately 15 million students.

$ 721 billion 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 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.

The $330 billion prescription drug industry was granted $64 billion in federal research funding.

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

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. 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. 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.

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 the new research.  The semiconductor industry is a $573 billion industry that is expected to grow to $1.4 trillion by 2029 due to high demand for its products.

While there is almost no limit to Congress making gifts to its supporters, historical precedents prohibited state governments from giving gifts to private entities. In the mid-1800s, many municipalities and states used public funds to purchase stock in the railroads being built across the continent. Many of these governments lost or were swindled out of large amounts of taxpayer money. To prevent this type of financial loss in the future, forty-five states enacted constitutional limitations preventing gifts to private entities. The limits placed on gifts to private parties came to be called “gift clauses.”

The general gift clause prohibited state and local governments from giving or loaning public funds to private corporations or associations or for private undertakings. The sole purpose of these gift clauses was to prohibit the gifting of public money for nonpublic purposes. Initially, these provisions stopped government speculation with taxpayer money and the gifting of public money to private entities.

Over time, however, the courts began to legislate exceptions to the prohibitions for what they construed as a “public purpose,” a purpose similar to the federal Constitution’s general welfare clause.  Courts simply found legal the gift of public funds to a private entity if the gift would somehow result in a public benefit. The courts further expanded the definition of “public benefit” to include almost anything the legislature believes is a public benefit. Such gifts can be seen in almost every type of government project, from parking lots to sports facilities, corporate rent subsidies, to outright gifts to attract business to a state or locality.

At the federal level, gifts are deemed legal to private parties for almost anything Congress wants to finance, incentivize, or throw money at. Taxpayer money just flows, and the courts find it legal since the appropriations prove that the legislature viewed the gift to private parties to be for a public purpose.

With a $30 trillion-plus national debt, citizens need to demand the enactment of a federal gift clause to limit how Congress spends our money. And while few believe that Congress will ever enact a prohibition on gifts to friends and interest groups, citizens need to demand every person running for Congress to take the following pledge:

I pledge that, as a member of Congress, I will not vote to give, grant, or loan public funds or to extend the credit of the public to any private corporation, association, or private undertaking.

By asking every candidate for Congress to take this pledge, citizens will easily distinguish between candidates seeking to protect the public’s money and those seeking personal gain.

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, and his book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change. His second book, The Left’s Little Red Book on Forming a New Green Republic is a collection of quotes from the Left on how to control society by eliminating capitalism, people, and truth.