• Home
  • Federal Student Loans: $1.3 Trillion Is Largest U.S. Asset

Federal Student Loans: $1.3 Trillion Is Largest U.S. Asset

William L. Kovacs

May 2024

Federal Student Loans: $1.3 Trillion Is Largest U.S. Asset

Yes, you read the headline correctly. Federal student loans account receivables are the largest asset held by the U.S. treasury. This little-known fact has not been mentioned once in the several years of controversy over President Biden’s desire to forgive all the student debt as a mechanism for “buying votes.” The debate has been over Biden’s authority to forgive the debt. What about the rights of citizens to have their country managed in the nation’s best interest by officials whose loyalty is to the country, not to a particular self-interested voting class?

The debate over federal student loans concerns a much larger issue than forgiving debt. It concerns the competent management of the country. Even if Biden had the power to forgive the debt, it would be gross mismanagement due to our staggering national debt.

Competent management requires an understanding of risks and benefits. Understanding the risks and benefits of any decision is essential to making effective policy. If all the benefits accrue to one side of a policy but all the risks are absorbed by the other, the policy is inequitable and will fail. This is the current situation with student loans.

The federal government has the taxpayer not only putting up all the money for the student loans but also assuming the risk of default. Taxpayers receive nothing from the deal. Conversely, students use the loan money to pay for a college education, the quality of which is not guaranteed, nor is securing a job after graduation. Without a good education and a job, it is difficult for the student to repay the taxpayer. Students who default suffer long-term consequences on their credit ratings, wage garnishment, additional collection fees, and a loss of eligibility for future federal aid.

The federal government and the universities are the main culprits in this situation. The government hands over taxpayer money to the universities without any guarantee that the university will provide a high-quality education that equips students for the workforce or that the student loan will be repaid. For almost every consumer product, no matter how inexpensive, there is a warranty of fitness for a particular purpose. This warranty is usually mandated by law, as the seller has superior knowledge of the product being provided to the consumer. Yet, for an education that could cost hundreds of thousands of dollars, there is no representation or warranty that the university will do anything to benefit the student or help the student repay the loans taken out to attend the university.

Congress must align the risks and benefits of student loans before appropriating new funds for the federal student loan program.

The cost of student loans on the federal balance sheet. The federal government’s financial situation is de facto bankrupt. The U.S. has a national debt of $34 trillion and liabilities of $43 trillion. U.S. assets are a mere $5.4 trillion. The largest chunk of these assets, $1.695 trillion, is in the form of loans receivable. Shockingly, $1.336 trillion of this is tied up in the federal student loan program. An additional $311 billion is in SBA Disaster Assistance Loans. The gravity of the situation becomes even more apparent when we consider that 10% of students default on their loans, and an extra 5% of all student loan debt is in default. Despite these alarming figures, the federal government continues to pump almost $100 billion annually into new student loans. This unsustainable program is nothing short of the federal government and universities siphoning money from taxpayers.

President Biden has attempted to forgive hundreds of billions of student loan debt for the last several years. While the U.S. Supreme Court blocked his attempts to forgive the debt, the common view of Biden’s largess is that it is a cynical attempt to buy student votes at election time. Biden did, however, defer student debt payments for several years, which cost taxpayers $20 billion.

A glimpse into the federal government’s delusions is the belief that its student loan program was a moneymaker for taxpayers. A GAO report on the cost of student loans estimated the original program would make $114 billion in profit by 2021. Unfortunately, GAO concluded that the program lost $197 billion.

Taxpayer funds were used to expand and enrich college administrators. According to the Wall Street Journal, one of the big reasons “…tuition rates have risen so heavily is the growth of bloated campus bureaucracies… from 1975 to 2005, the costs of a university degree tripled. Faculty-to-student ratios stayed the same, but administrator-to-student ratios skyrocketed. The number of administrators increased by 85 percent, while the number of staffers rose by a whopping 240 percent.” Senior administrator pay grew by 75% between 2003 and 2018 while faculty salaries stagnated.”

Federal subsidies cause college costs to increase substantially more than inflation. Between 1987 and 2017, the cost of college, adjusted for inflation, increased by 213%. According to UNest, “Assuming rates continue to increase 5% per year means that in 10 years, the average cost for a four-year program will be over $150,000. That’s compared to about $88,000 today.” Commentators attribute the rising cost of college to their focus on profit-maximizing the enterprise rather than concern for good education.

In addition to an endless supply of loans, the federal government showers the most prominent universities (Harvard, Columbia, Stanford, etc., “the riot schools”) with billions of dollars in contracts and subsidies. Between 2018 and 2022, the federal government gave ten elite universities $28 billion in subsidies. It also allowed these schools to collect an average overhead payment of 64% on the billions of federal contracts they performed, an extra $18 billion. The federal monies received as overhead are deemed discretionary income to the schools and can be used for any purpose.

To put the vast wealth of university endowments in perspective, university endowments are more significant than the annual budgets of each state in the nation, except California and New York. “…Harvard’s endowment of $53 billion exceeds the gross domestic product of 124 countries.” As of FY 2023, U.S. educational institutions’ total endowment market value stood at $839 billion, with an average of $1,215 billion across all institutions.”

Options to align the risks and benefits of the Student Loan Program. Colleges and Universities are huge businesses that are almost entirely un-taxed except for a 1.4% tax on net investment income on colleges with endowments exceeding $500,000 per student. Since colleges have become big businesses, they should be treated as a business. Options for realignment:

  1. One potential solution is to use the vast endowments of universities to provide free tuition. While this may seem like a radical idea, a few colleges, including some very elite ones, are already tuition-free. A prime example is Berea College in Kentucky. At Berea, no student has paid tuition since 1892. Despite this, the school ranks # 30 best in National Liberal Arts, # 16 best in teaching, and #3 for innovation. The billions in endowments held by elite universities could easily fund a tuition-free model, ensuring that the benefits of these endowments are put to better use than hiring more administrators.
  2. Recognize the universities for what they are: profit-making machines, and tax all income from whatever source derived, just as ordinary citizens are taxed.
  3. If universities remain tax-free, Congress should require the universities to draw down their endowments, like drawing down an IRA by setting Mandatory Distribution Requirements.
  4. Turn the student loan program over to the private sector to finance and collect. This option at least has an outside party (banks) making creditworthiness determinations for each applicant and the schools that receive the borrowed money.
  5. If the federal government wants continued involvement in the student loan program, it should lend directly to the University. The University would be the borrower and be responsible for making, collecting, and repaying the loans. The University would select students it believes would most benefit and be able to repay the loans to the university.

Once the universities are responsible for loan repayment, they will reform the loan program, and likely the university itself, to ensure its repayment. Until the universities are responsible for providing a quality education for the monies received, they will continue wasting taxpayer money on bureaucracies, programs of dubious educational value, and buildings that are more resort-like than educational.

The federal government has an obligation to protect its largest asset held in trust for taxpayers.

William L. Kovacs, author of Devolution of Power: Rolling Back the Federal State to Preserve the Republic. Received 5 stars from Readers’ Favorite. His previous book, Reform the Kakistocracy, received the 2021 Independent Press Award for Political/Social Change. He served as senior vice president for the U.S. Chamber of Commerce and chief counsel to a congressional committee. He can be contacted at [email protected]

  • Home
  • Interview discussing “Devolution of Power” with Tippingpointnm.com

Interview discussing “Devolution of Power” with Tippingpointnm.com

April 2024

Interview discussing “Devolution of Power” with Tippingpointnm.com

For those wanting to view or listen to a discussion of my new book Devolution of Power: Rolling Back the Federal State to Preserve the Republic, the first link is to the video file and the second to the audio file.

The host of the show was Paul Gessing, President of the Rio Grande Foundation.

(Video file): https://www.youtube.com/watch?v=vNU8guSkRB0

(Audio file): https://tippingpointnm.com/595-william-l-kovacs-devolution-of-power-rolling-back-the-federal-state-to-preserve-the-republic/

For those who missed my post outlining the main topics in the book, a link to the article is at:

Devolution of Power: Rolling Back the Federal State

  • Home
  • Devolution of Power: Rolling Back the Federal State

Devolution of Power: Rolling Back the Federal State

William. Kovacs

March 2024

Devolution of Power: Rolling Back the Federal State

In my new book, Devolution of Power: Rolling Back the Federal State to Preserve the Republic, I address a question more and more citizens are asking: Can a distrusted federal government unite and govern this polarized country? If not, how do we divide?

Readers should not quickly dismiss the idea of devolving federal domestic powers to the states. First, the federal government is de facto bankrupt. Within a decade, it will be forced to substantially reduce or eliminate the subsidies it gives states to implement over a thousand programs the federal government lacks the constitutional authority or resources to implement. The loss of state subsidies will be the catalyst that ignites the devolution of federal powers to the states.

Second, the federal government and the states had a workable power-sharing relationship until the Great Depression. Moreover, until the early 1900s, the collective budgets of the states were larger than the federal government, and states managed most of the nation’s domestic policies. Since 1980, however, there has been a massive explosion of federal power, evidenced by the fact that 97% of the national debt has been accumulated under the last seven presidents. For the federal government to again be a viable governing entity, it must shrink itself so it can competently manage the essential needs of the nation.

If it is constitutional for the federal government to accumulate power by taking it from the states, it is constitutional for the federal government to return many of these domestic powers to the states.

Devolving power to the states is possible since the U.S. federal government is not the United States, although it acts as its ruler. Instead, it is an instrumentality of the people established to manage their governmental affairs. None of our federal officials are granted power as individuals. They are merely volunteers elected as representatives to temporarily manage our government.

Unfortunately, since the federal government’s creation, the individuals acquiring federal power have skillfully blended the powers of the three federal branches into two competing power structures not established by the Constitution. These power structures are called political parties. As such, citizens are no longer protected by the Constitution; they are protected by Democrats or Republicans, depending on which party controls the government apparatus.

Polls show only 20% of citizens trust the U.S. federal government to do what is right most of the time. Almost half of Americans believe the nation is as close to the edge of a Civil War as it was in 1861. Political commentators, mainly on the political Left, pontificate the U.S. will divide into red and blue states or red states will secede from the Union or reform state boundaries. These commentators would welcome unrest in the red states. They fully grasp that the federal government will use all the emergency powers Congress delegated to it and any force necessary to maintain its stranglehold on every aspect of national life. Americans were given a glimpse of these powers in Covid.

Devolving many domestic federal powers to the states may be the only alternative governing mechanism to keep the Union together. It would allow citizens of the respective states greater freedom to live under policies reflecting values closer to where they live rather than national values imposed on them by a distant government and powerful national advocacy groups that do not understand or care about the needs of citizens. In this new governing structure, the federal government would focus on its essential responsibilities to protect the nation, manage activities that directly (not incidentally) impact interstate commerce, defend the dollar’s value, and reduce the national debt. The states would manage most of the nation’s domestic policies, e.g., crime and punishment, labor and environmental standards, energy production, abortion, economic development, permitting, and immigration other than naturalization.

How the U.S. is governed should concern every American since we live with the consequences of the federal government’s massive debt, regulatory sclerosis, continuous wars, open borders, and a declining ability to protect the nation. In our complex society, the cooperation of all levels of government is needed to make society function efficiently for its people. It’s time the federal government stopped worrying about accumulating power and control over citizens and focused on what benefits citizens.

While commentators in the UK, Scotland, and New Zealand have written about devolving federal power to better manage government, the topic is just now being addressed in the United States.

Unlike many books on government reform, Devolution of Power is not just a list of complaints that leave readers seeking solutions. It provides a roadmap for promoting freedom by unwinding the massive accumulation of federal power by returning many domestic functions to the states. It addresses how to restructure a federal government before it collapses the nation by:

  • Identifying the federal government’s apocalyptic flaws,
  • Setting out mechanisms for trimming the national debt and the federal bureaucracy,
  • Providing options for rolling back federal power,
  • Outlining a restructuring plan to devolve federal power to the states and
  • Describing the character traits needed by elected officials to restore trust in government.

The book laments how Congress has fallen into irrelevancy by delegating its most important powers to the president, including declaring war and national emergencies, unauthorized spending, and ignoring the unconstitutional consequences of presidents making new laws by regulation and Executive Order. The book argues that only when Congress regains control over its legislative and spending powers will it understand it created a federal government too big and complex to govern the nation. At that point, the restructuring process can begin.

A fundamental premise in the book is that until our elected officials rekindle John Locke’s idea that no power is granted personally to any government official, every official must serve as fiduciary, not a self-interested politician. To serve as a fiduciary, elected officials must give all their loyalty to the institution they serve and not to the political party that helped elect them. Only by being loyal to the institution they serve can they check the abuses taken by the other branches of government. Only by actively defending our Constitution’s separation of powers structure, no matter who is in charge of the other branches, can our elected officials restrain government and promote the rule of law.

In the final analysis, Devolution of Power argues that the citizens of the U.S. must understand they are responsible for their government and what it does. Citizens do not have the “just following orders” defense since they elect the individuals who manage their government. The citizens of the U.S. are now confronted with an “either/or” situation. Either citizens elect a government of fiduciaries that limit the power of the federal government, regardless of political affiliation, or they must accept living under an all-powerful federal government that is organized around corruption, deception, and eventually brutal tyranny.

William L. Kovacs, author of Devolution of Power, 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. He testified before Congress forty times in his career and participated in hundreds of federal rulemakings. His book Reform the Kakistocracy won the 2021 Independent Press Award for Political/Social Change. 2019, Kovacs received the Albert Nelson Marquis Lifetime Achievement Award from Marquis Who’s Who.

  • Home
  • Enacting Devolution of Power to the States

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

 

 

 

 

  • Home
  • National Debt Will Force Devolution of Power to the States

National Debt Will Force Devolution of Power to the States

William L. Kocacs

November 2023

National Debt Will Force Devolution of Power to the States

Part II:  Series on Devolving Power to the States

As the spending minuet plays out between the House and Senate over appropriations, supplemental spending for wars, and government shutdowns, a wall of debt is being built around the Congress. With an estimated $45 trillion national debt by 2030 and interest payments exceeding a trillion a year, reality will force our lawmakers to stop spending. One of their first cuts will be to reduce and eventually eliminate the $1.2 trillion Congress gives to states as a bribe to operate federal programs that the federal government, many times, has no authority to operate. This occurrence will be the beginning of the devolution of power to the states.

How did the federal and state governments get into this bind? More importantly, how do they get out of debt?

The answer is clear: if it’s constitutional to increase federal power, it must also be constitutional to decrease it. This flexibility allows the federal government to return to the states the powers taken from them over the past eighty years. Devolution of power will be the lynchpin that keeps a de facto bankrupt Union together.

The growth of the federal government has been the only unifying ambition of Congress, presidents, and the courts since the dawn of the Republic.

The expansion of federal power started with Chief Justice Marshall’s 1819 decision in McCulloch v. Maryland. Marshall not only solidified all the federal government’s enumerated powers, he broadly applied the ‘necessary and proper clause’ to establish sweeping implied and incidental federal powers. He indicated no phrase in the Constitution limits the use of these implied powers.

His decisions elevated the Supreme Court to being the final arbiter of constitutional issues. By skillfully combining the Constitution’s enumerated powers with its implied powers, Marshall designed a governing structure with few limits on federal power short of a revolution.

While the Supreme Court approved the accumulation of massive federal power early in the Republic, it took until the 1940s for the court to erase the Tenth Amendment and state powers from the Constitution.

The demise of the Tenth Amendment arose when the Department of Labor sought to regulate local wages. States argued wage regulation was not an enumerated federal power in the Constitution. Therefore, such power rested with the states. Unfortunately for the states, a unanimous Supreme Court in United States v Darby (1941) held the Tenth Amendment was merely a “truism” since the substance needs to be determined by what powers are delegated to the federal government from any part of the Constitution. In Darby, the court held the federal government has the constitutional authority to regulate local wages under the Commerce Clause.

The ever-expanding Commerce Clause.

Using its expansive interpretation of the Commerce Clause, the Supreme Court sanctioned the massive growth of what has become the Administrative State. It transformed a country that practiced federalism (a system of governance in which two levels of government control the same territory) into a nation of federal rule. Over eighty years, Congress enacted thousands of laws and over 200,000 regulations that reach almost every activity and product in the nation.

Between 1937 and 1995, the Supreme Court did not strike down a single law expanding federal power. In 1995, it finally struck down a congressional enactment involving gun possession in a schoolyard and another case involving violence against women, finding both to be intrastate, not interstate, commerce. After minimally limiting federal power, the Supreme Court returned to rubber-stamping all future congressional enactments.

Gaps in federal power over states were filled by bribing states to pursue national priorities.

A Brookings study on state budgets noted, “In 1900, states and localities raised $1.75 for every $1 of federal revenue. They performed all government activities except national defense, foreign relations, [federal] court proceedings, and postal services.” While the federal government made grants to the states in this period, those grants generally subsidized existing state programs.

Since the Great Depression, Congress enacted many new social programs, some of which it did not have the constitutional authority to implement. To overcome its constitutional limits, Congress raised federal taxes to generate sufficient funds to make grants to states to incentivize them to implement federal wishes. By 1960, there were 132 state grant programs. Today, federal grant programs range between 1,000 to 1,300. In 2021, these grant programs  cost the federal government $1.2 trillion annually. The federal government taxes the American public to pay for the grants it makes to the states to have federal wishes implemented.

According to the Bureau of Census, federal grants to states in FY 2020 represent 35.9% of state revenues. While states accept these grants, they come with federal handcuffs. Compliance with many federal mandates often distorts state priorities by displacing local programs that may be more significant to the state’s citizens than the federal programs. Receipt of federal funds can require states to provide matching funds, comply with federal regulatory mandates, and increase personnel for program management.

States are beginning to resist oppressive federal regulation.

More than a few states are now resisting implementing federal programs they do not want to administer or are not being fairly compensated for managing.

State frustration with implementing federal programs started with the conflict over sanctuary states and cities during the Trump administration. Over three hundred states and cities refused to enforce federal immigration laws even though they accepted federal grant monies for law enforcement associated with these programs.

The federal-state conflict, however, is over more than Sanctuary cities. Twenty-three states and the District of Columbia have legalized marijuana, notwithstanding it is illegal under federal law.

Additionally, some federal programs only cover a fraction of the implementation cost. States implement approximately 96% of federally delegated environmental programs but only receive 28% of the cost of implementation. At some point, states will refuse to implement the unwanted or underfunded federal programs, or the feds will increase state funding. Making this decision will depend on the financial situation of the federal government.

Federal deficits will be the catalyst to stop state funding.

Complicating state dissatisfaction with the federal grant programs is the federal government’s financial mess.

The federal government’s interest payments for FY 2022 are $475 billion. CBO projects that net interest costs could total $640 billion in 2023 and soar to $1.4 trillion in 2033. The combination of increasing national debt and soaring interest payments on the debt will cause interest payments alone to exceed the total amount of all grants made to states. The federal government will need to find hundreds of billions of dollars annually to service the increased debt, or it will need to find budget reductions, such as state program grants, to remain in the same financial position as today.

The conflicting trends of states not wanting to implement specific federal programs and the federal government not having sufficient money to fully compensate the states for implementing its programs will start the debate over which federal programs should be administered and by whom.

The federal government’s inability to fund state programs will be the catalyst that drives the states to eliminate the implementation of those programs and spark more freedom to implement programs sought by their citizens. Hence, devolution of power will begin.

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]

Part I:  Fix a Government Too Big to Govern: Devolve Power to the States.

  • Home
  • 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]

 

 

 

  • Home
  • 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.

 

 

 

 

 

  • Home
  • 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.

 

 

 

 

 

  • Home
  • 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.

 

 

  • Home
  • A Republican House Must Still Honor its Commitment to America

A Republican House Must Still Honor its Commitment to America

William L. Kovacs

November 2022

A Republican House Must Still Honor its Commitment to America

Dear Republicans, the talking heads and the pollsters were very wrong about the definite red wave. But it looks like you will win control of the House of Representatives. It will be a trying time since the loudest voices will seek retribution against Democrats through much-needed investigations. Undertake a few very well-structured investigations to expose the corruption in the Biden administration, but, please do not forget your Commitment to America. Some of it can be accomplished with control of only the House. Republicans promised to right the ship of state. You will be doing this for the country, not to satisfy primal urges of revenge.

As part of your Commitment to America, you pledged to “Curb wasteful government spending that is raising the price of groceries, gas, cars, and housing and growing our national debt.” A similar promise was made by the Republicans in its1994 Contract with America. The national debt in January 1994 was $4.4 trillion. The national debt in 2022 is almost $31 trillion. Most concerning, Republican administrations increased the national debt during that period by $14.05 trillion, about 53.6% of its increase. Democrats increased the national debt by $12.15 trillion, about 46.4% of the additional debt in that period.

Worst still, 97% of our national debt has increased dramatically since the end of the presidency of Jimmy Carter, the last president to preside over a national debt of less than a trillion dollars. In those forty years, the Republicans added $17.46 trillion to the national debt (59%), and the Democrats added $12.15 trillion (41%). It is imperative that the national debt matter to Republicans when they have the power to do something about it. Pontificating about it on cable television is not sufficient.

Interest payments on the national debt over the next 30 years are estimated to exceed $66 trillion. 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.

How did the government put us in this position?

The framework of our Constitution has few guardrails for the type of government formed by our elected leaders. Today’s federal government combination of capitalist, socialist, oligarchy, kakistocracy, and woke cult. Moreover, the federal government can tax us as much as it needs to satisfy its wants. From 1932 to 1981, the marginal tax rate in the U.S. ranged between 63% – 91%.

Since it is unlikely, we will pay off the national debt in our lifetimes, our federal government and every American must recognize, we are living on the future productivity of those who have no say in creating our debt. The national debt is unjust to those who will have to pay tomorrow for our spending today.

What can House Republicans do today without control of the presidency?

Our Constitution reads, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.

For Congress to spend more of the taxpayer’s money, it must appropriate new money by enacting a law that requires the approval of both Houses of Congress and a Presidential signature. To spend no money, however, one House of Congress merely needs to do nothing. No provision in the Constitution gives anyone the power to force Congress to spend money. Moreover, Congress is the only government institution controlling the nation’s purse. The House of Representatives can shut the purse.

A few simple ideas for a Republican House to cut almost one trillion dollars from the budget by Just Saying “No.”

Do not fund unauthorized laws. Almost a half-trillion in savings can be achieved by following congressional rules prohibiting the funding of laws that are not authorized. All Congress needs to do is refuse to fund unauthorized laws.

The Congressional Budget Office annually issues a report on “Expired and Expiring Authorizations of Appropriations” for the Fiscal Year. While CBO prepares this report according to the Congressional Budget Act of 1974, the report is to assist lawmakers in complying with House rules by identifying unauthorized laws that should not be funded. Its 2022 report identifies 1,118 authorizations of appropriations that expired before the beginning of FY 2022 and an additional 111 that will expire during FY 2022.

CBO estimates Congress appropriated $461 billion in 2022 to fund unauthorized laws. Moreover, CBO identifies each committee of Congress that has failed to authorize laws under its jurisdiction and the amount of money appropriated to fund these unauthorized statutes. Forty-four percent of the unauthorized laws being funded expired over a decade ago. If Congress is unwilling to review these laws and reauthorize them, that lack of interest alone should be sufficient to let them expire.

Reduce agency budgets for refusing to provide Congress with the information requested. Congress has a constitutional responsibility to oversee federal agencies. Many times, however, federal agencies refuse to provide Congress with the information requested. Usually, Congress, especially the party in opposition to the Executive, must live with the refusal until a president from its party occupies the White House. Then matters are reversed. One mechanism for addressing this issue would be for the House of Representatives to reduce the agency’s appropriations by some percentage each time an agency fails to provide the information requested.

Use spending power as bargaining power. Since Congress cannot be compelled to spend money on any activity, it needs to leverage this power to ensure the Executive implements the policies Congress enacted. From day one the Biden administration refused to protect the southern border of the United States. The border is open to all comers, no matter how much the Republicans complain. By being in charge of the House, however, Republicans have solid leverage to negotiate with the administration by withholding money for programs Biden deems essential.

The leverage should be the Department of Education (“DOE”) since it is owned and operated by Biden’s most significant political supporters, the teachers’ unions. The DOE is a perpetual pay-off to the teachers’ unions. The teachers’ unions donated $43 million to liberal groups in the 2020 election cycle.

By controlling DOE, teachers’ unions foster the teaching of Critical Race Theory, impose mask mandates, and torture children’s minds by telling them they are born racists. The mere possibility of the teachers’ unions losing this power will likely persuade Democrats to accept the reality that building the border wall and enforcing immigration laws is a cheap price to pay to keep DOE.

If Biden concedes, the House Republicans will get the border wall and immigration enforcement. If Biden refuses to negotiate, the Republicans get to eliminate the agency they have wanted to eliminate since 1980, when it was created.

Require all federal agencies to implement GAO’s Generally Accepted Accounting Principles (“GAAP”) or suffer budget cuts. 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. One specific GAO recommendation is for all agencies to address the government-wide improper payments, estimated to be $175 billion. A Republican House should refuse to fund agencies failing to implement this recommendation.

By implementing these four recommendations, Republicans can reduce the budget by over $850 billion. Only time will tell if Republicans mean what they promise in their Commitment to America. Republicans’ this is your “put up or shut up” moment.

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.