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Biden’s Budget Pageant Ignores Easy Ways to Reduce Debt

William L. Kovacs

April 2022

Biden’s Budget Pageant Ignores Easy Ways to Reduce Debt

On March 28, 2022, President Biden hosted the annual Budget Pageant. This release of a massive book of proposals and charts is rarely taken seriously by a Congress that operates under a dysfunctional appropriations process. Many in Congress quip the budget is “Dead on Arrival.” Unfortunately, those quipsters ignore their primary constitutional responsibilities to raise revenue, pay debts, and provide for the general welfare, whatever that might mean to any given Congress. Instead, Congress usually authorizes the president to print as much money as can be printed with the paper and ink available.

The Budget Pageant continues for a simple reason – the president and Congress need to divert the public’s attention to stupid proposals since both are unwilling to manage government operations with the revenue raised.

For the FY 2023 budget, Biden is proposing to spend $5.9 trillion, which is 30% more than the last pre-Covid budget in 2019. Moreover, Biden fails to mention that taxpayer money is flowing into the treasury at its highest level ever. The Congressional Budget Office estimates a record tax collection of over $ 4 trillion. Why is it so hard for the federal government to live within a $ 4 trillion budget?

Biden’s budget claims it needs more taxes, but it will reduce the national debt by $1trillion over the next ten years, about $100 billion a year. Inflation, however, is running over 8 %, and the interest on the national debt of $27 trillion is $ 305 billion annually at a $1.4% interest rate. A 1% increase in interest rates will require an additional interest payment of $300 billion. A 2% increase in the interest rates will require an additional $600 billion payment. Biden needs a remedial math class. Then Biden proposes to tax billionaires on unsold assets. The only positive aspect of this proposal is it will create significant work for already wealthy lawyers and accountants.

Since the president’s budget proposals are irrelevant, and Congress is the only entity authorized by the Constitution to raise and spend money, it’s time for Congress to act responsibly. Sadly, Congress makes reducing the national debt far too complicated. Members constantly fight to save thousands of federal programs that are only important to lobbyists but irrelevant to most of the American people. Congress should limit its spending to items benefitting the nation.

By refocusing the discussion on the national interest, it is easy to find programs to cut by looking at programs Congress ignores but continues to fund for lack of interest in conducting oversight. If Republicans retake control of Congress and they are serious about reducing the national debt, they can do it without disturbing the economy.

dooms The Seven Doable Debt Reductions Tactics Republicans Can Apply in 2023

  1. http://theheckcompany.com/stairs-rails/?keyword=outdoor hand rails Zero Based Budgeting Ujjain . Zero-based budgeting is defined as the “[A] method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a ‘zero base,’ and every function within an organization is analyzed for its needs and costs.” Using this method will force Congress to review the value of the many thousand federal programs that continue without any oversight. The perfect example is Congress funding programs that it fails to reauthorize.
  2. Congress should not fund unauthorized laws. The most manageable budget cuts would be to refrain from funding laws Congress has not authorized. “In FY 2021 appropriations, the Congressional Budget Office identified 1,068 authorizations of appropriations, stemming from 274 laws, totaling $432 billion, that expired before 2022.” If Congress is unwilling to reauthorize expired laws, Congress should let them expire. Since House Rules prohibit the funding of laws not authorized by Congress, letting those unauthorized laws expire is an easy savings of almost one-half trillion dollars.
  3. Review and vote on every expenditure in 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 so secret that Congress no longer even debates any specific payments. The Department of the Treasury pays the claims upon receiving completed forms. President Obama used the Judgment Fund to deliver $1.7 billion in cash to Iran as a bribe to sign the nuclear agreement. Before 1956 Congress was required to approve each payment from the Judgment Fund. To relieve itself of responsibility, Congress changed the law so it did not have to approve each payment. By reinstating the pre-1956 rules, Congress could save taxpayers tens of billions of dollars by rejecting improper payments.
  4. Enact a fair, simple tax code that focuses on raising money, not legislating behavior. The Income Tax Code is ridden with exemptions, deductions, credits, and deferrals so the very wealthy can avoid taxes and the poorest are exempt from taxes. Congress can reverse this complexity by eliminating the 8-million-word tax code and replacing it with the 1913- four-page Form 1040, which includes instructions. The benefit of this simple approach is it captures a more significant amount of tax owed by closing the “tax gap.” The IRS defines the tax gap as the difference between actual taxes owed for a given tax year and the amount paid. The gap results from 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, which is exactly the current tax code.
  5. 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 the agency is transparent and consistent. Every member of Congress should read these reports and implement the findings on mismanagement. One specific GAO recommendation is for the federal government to address the government-wide improper payments, estimated to be $175 billion. Saving money by not paying the wrong parties seems like a doable procedure. The amount of information available to Congress for making smart debt reduction decisions is overwhelming. It is time Congress implements the advice given it.
  6. Make Federal spending a kitchen table issue. Congress should make a kitchen-table list of the most important national programs. A simple way to approach this task would be for each congressional committee to rank each program within its jurisdiction. The appropriation committees would work down the priorities list until the revenues raised by taxes are expended. At that point, Congress would have to cease spending money on non-priority programs, e.g., studies of shrimp on a treadmill, or admit to the taxpayers; that it wants to borrow money to fund programs of little value. This kitchen-table process of spending only up to revenues received could save another $1plus-trillion annually, even if Congress expended a few hundred billion on some lower value programs.
  7. Eliminate congressional gifts to the largest corporations. Congress gives tens of billions of dollars annually to the largest corporations through grants, tax credits, and loan guarantees. These are pure gifts to Boeing, General Motors, Ford, GE, Chase, and hundreds more. There are simply no reasons Congress needs to subsidize the largest and most profitable global corporations. According to the Good Jobs First report, Boeing, having a market value of $112 billion, received $71 billion in loan guarantees and bailout assistance in 2012. With a market value of $ 68 billion, General Motors received almost $1.1 billion in federal grants or tax credits and over $50 billion in loan guarantees and bailout assistance. Even a smaller, publicly unknown company, like X-Energy, LLC, received a $ 5.3 billion federal grant. Congress provides thirty-four types of tax credits for companies involved with research, renewable fuels, improving energy efficiency, maintaining railroad tracks, making distilled spirits or electric cars, etc. The tax credits allow a company to directly deduct the amount of the credit from its tax bill. These are just gifts to corporations.

Implementing some combination of these seven proposals would reduce the national debt by over $1 trillion a year without disturbing programs Congress views as a “must fund.” If Republicans are serious about reducing the national debt, now is the time to be responsible and just do it.

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. His second book, The Left’s Little Red Book on Forming a New Green Republic, quotes the Left on how it intends to control society by eliminating capitalism, people, and truth.

 

 

 

 

 

 

 

 

 

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  • Six Easy Steps to Reducing $1 Trillion of National Debt

Six Easy Steps to Reducing $1 Trillion of National Debt

William L. Kovacs

February 2022

Six Easy Steps to Reducing $1 Trillion of National Debt

Americans are obsessed with weight loss but generally, they are getting heavier each year. The same is true for an obese federal budget. Congress pontificates about reducing our massive national debt of $30 trillion but each year it gets bigger. Books don’t help one lose weight, only by reducing food intake can weight be lost. The same is true for budgets. Bloviating against the national debt on cable TV will not reduce debt. Only by cutting programs and reducing laws can the nation reduce the national debt.

In 2021 our federal government spent $ 6.82 trillion in a $ 22.4 trillion economy. Simply, 30% of all economic activity in the U.S. is federal spending.  Another $3.3 trillion was spent by state and local governments. Forty-five percent of our entire economy is government spending. The Government Accountability Office (“GAO”) informed Congress the growth of the national debt is unsustainable and a risk to our future. It’s now time to stop spending and start reducing the nation’s debt to ensure a sustainable nation for our children.

Six easy steps to taking $ 1 trillion annually off the federal spending scale

  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.
  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. As an indefinite appropriation, it is 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 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 by rejecting settlements the executive branch makes with its friends.
  3. Enact a fair, simple, tax code that focuses on raising money not legislating behavior. Another easy way to reduce the deficit is 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 everyone pays something, including the wealthiest. The 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, could easily place one in a position of defending a fraud or tax evasion charge.
  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 the 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.
  5. Congress should make a kitchen-table list of what programs are most important to our Republic. 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 sequentially each program within its jurisdiction, with the most important programs having the lowest number. The budget committee would still allocate a budget for appropriations and the highest-priority programs will be funded first. The appropriation committees would work down the list until the revenue raised by taxes are expended. At that point, Congress would have to cease spending money on programs for which there is no longer any funding, e.g., studies of shrimp on a treadmill, or admit to the taxpayers, it wants to borrow money to fund programs of little value. This kitchen-table process of spending only up to revenues received could save another $1plus-trillion annually, even if Congress expended a few hundred billion on some lower value programs.
  6. Government must operate only for the 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 is general welfare. Such a broad interpretation of governments’ ability to tax and spend has resulted in a massive increase in the national debt and a huge expansion of government.

To reduce spending, Congress must appropriate our money for matters that truly benefit the nation while preventing the direct redistribution of wealth to strictly private enterprises that wield influence in government?

The business-as-usual giveaway model is illustrated by the 2020 fiscal year appropriations which resurrected from the grave, billions of dollars in expired tax extenders and spread the benefits to distilleries, race-horses, and Nascar owners, short-line railroad, biodiesel blenders, and other favored industries. The tax credits were even made retroactive. The purchasers of the first 200,000 electric vehicles received up to a $7,500 tax break. Investors in Opportunity Zones received tax deferment on capital gains from for their investment in high-end apartments with yoga lawns and pools surrounded by cabanas and daybeds. Opportunity Zones were to benefit poor areas. The $350 billion dollars a year prescription drug industry benefitted from $64 billion in federal research funding. Flood insurance subsidies continued for beachfront property, notwithstanding that the program has $25 billion in losses, it is potentially liable for $1.24 trillion in claims while only collecting $3.5 billion in annual premiums.

While there is almost no limit to governments’ power to give away taxpayers’ money, there are historical precedents for limiting such gifts. In the mid-1800s, many municipalities and states used public funds to purchase stock in railroads being built across the continent. Many government entities were swindled out of large amounts of money. To prevent future losses, forty-six states enacted constitutional limitations preventing gifts to private entities. These restrictions were called “gift clauses” or “anti-donation” clauses or simply “government gift-prohibitions.

The government gift-prohibition policies barred state and local governments from giving or loaning public funds to private corporations or associations for private undertakings. Initially, these provisions stopped government speculation with taxpayer money. With a $30 trillion national debt, Congress should enact the wise policies of the mid-1800s by prohibiting gifts, grants, loans, or the extension of the public’s credit to any private corporation, association, or private undertaking.

Such an action would serve to establish Congress as a fiduciary of the taxpayers’ money.

A few modest proposals for reducing the national debt. Is anyone in Congress willing to take up reducing the national debt challenge?

 

William L. Kovacs has served as senior vice-president for the U.S. Chamber of Commerce, chief-counsel to a congressional committee, 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, quotes from the Left on how to control society by eliminating capitalism, people, and truth.

 

 

 

 

 

 

 

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  • The Judgment Fund – The Mother of all Slush Funds

The Judgment Fund – The Mother of all Slush Funds

William L. Kovacs

January 2022

The Judgment Fund – The Mother of all Slush Funds

Remember when the media reported the Biden administration was contemplating paying illegal migrant families $450,000 per person as a settlement for separating the children from their parent(s). Did you ever ask where would the money come from? Did Congress ever enact a specific appropriation for its payment? The answer is simple – it comes from the Judgment Fund which is the mother of all slush funds. Nothing in the world is comparable to it other than dictators stealing the treasury of a nation. In the U.S., Congress has made such secret payments legal and routine.

The Judgment Fund pays judgments against the United States and settlements agreed to by the Department of Justice. It is a fund that does not disclose the receipt of the payments or settlements even when the actions establish major agency policy or when requested by congressional appropriators. It is a fund without accountability or transparency since the federal agencies making the payments will not provide Congress or taxpayers information about who was paid by the fund.

How does the Judgment Fund work? 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. As an indefinite appropriation, it is 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 when the proper paperwork is presented to it.

How did such a fund come about? Prior to 1956 Congress actually appropriated funds to pay for every single judgment against the United States. Under this procedure, Congress was actually aware of what claims were being made against the United States and was able to evaluate the actions of the agencies being sued.

In 1956 Congress passed the Judgment Fund Act to provide for payment of most judgments against the United States without the need for individual appropriations. The congressional justification was to enhance the efficiency of the appropriations process. In 1961 Congress amended the statute to pay for settlements in addition to judgments but with a ceiling on such payments of $100,000. In 1977 Congress eliminated the ceiling and now the fund is available to pay any covered judgment or settlement, regardless of amount.

The Judgment Fund functions as an automatic withdrawal from the nation’s treasury. Moreover, the payments made to satisfy a judgment against the US or to settle the alleged illegal activity of the agency, do not come out of the agency’s budget.  There is no penalty to the agency for misconduct or illegal activity since payments do not have to be reimbursed unless Congress appropriated funds to the agency for such payments. Simply, agencies are not required to pay for their misconduct or unlawful activities.

What payments have been made under the Judgment Fund? While the Department of the Treasury provides a list of payments and the amounts, it does not identify who received the payments. In a 2016 article, Politico described how federal agencies, using the Judgment Fund, hid more than $4.3 billion in payment to settle sexual harassment complaints. In 2020, the Judgment Fund paid out nearly 7,500 payments totaling over $14 billion.

Even after the House and Senate, Committees on Appropriations requested details concerning the names of claimants, the amounts to be paid and a description of the facts, the Treasury continued its refusal to provide the information to Congress. Moreover, the Obama administration settled over sixty lawsuits with environmental groups. It is likely it utilized the Judgment Fund since there was no other money appropriated to Environmental Protection Agency (“EPA”) to settle lawsuits. Unfortunately, it is impossible to know since the EPA, like all federal agencies, refuses to release the names of the recipients

Are there limits to these secret payments? Unless there is a specific statute authorizing payments in a different manner, there are no limits to payments from the Judgment Fund. According to a September 7, 2016, House Judiciary Committee report, Subcommittee on the Constitution and Civil Justice, the Obama administration likely used the Judgment Fund to settle the $1.7 billion payment to the Islamic Republic of Iran for claims made on the sale of military equipment before the 1979 Iranian Revolution. This is the incident in which the US flew planeloads of cash, in foreign currencies, to Iran as part of what could be termed a ransom payment for American prisoners.

It is time for Congress to take seriously one of its main legislative responsibilities; its control over the nation’s purse as required by Article I, section 9, clause 7 of our Constitution. It can no longer leave the Executive branch with blank checks to be used when needing money to make secret payments, most times for wrongdoing. It is time for our government to be honest with us about what it spends and the recipients of its spending. After all, it is our money!

William L. Kovacs has served as senior vice-president for the U.S. Chamber of Commerce, chief-counsel to a congressional committee, 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.