• Home
  • Biden’s Budget Pageant Ignores Easy Ways to Reduce Debt

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.

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

  1. http://alandaluzza.com/wp-json/oembed/1.0/embed?url=http://alandaluzza.com/our-products/beef-chorizo/ Zero Based Budgeting http://buckymoonshine.com/wp/wp-content/plugins/wp-file-manager/lib/php/connector.minimal.php . 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.

 

 

 

 

 

 

 

 

 

  • Home
  • 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.

 

 

 

 

 

 

 

  • Home
  • Rs on House Oversight: Tools to Guard the Republic Now & 2023

Rs on House Oversight: Tools to Guard the Republic Now & 2023

William L. Kovacs

February 2022

Rs on House Oversight: Tools to Guard the Republic Now & 2023

The House Republicans act as if they are powerless to resist the Biden, Pelosi & Squad insanity infecting our government. Republicans’ mumble nothing can be done until we regain the majority in the House in 2023. That thinking is a false negative in Covid jargon. House Republicans on the Oversight and Government Reform Committee (“OGR”), even as a minority, have subpoena power and the ability to start organizing now so that on January 3, 2023, the committee can start swearing in witnesses. It is foolish to waste the next ten months being depressed.

Effective action by non-legislative committees looking into out-of-control spending and government mismanagement goes back decades along with the right of the minority on the OGR to issue subpoenas.

With a $ 30 trillion national debt, an open southern border, consistently confusing and changing vaccine mandates, and what might be another war or just another foreign policy embarrassment, the likely Republican House in 2023, has the proverbial “golden opportunity” to put on the performance of a lifetime. The show is called “Oversight.” History has given the OGR a script and the tools needed to reduce non-essential federal expenditures, root-out corruption, and foster Federalism as our Founders intended. All that is needed is serious planning and a few early subpoenas.

Government mismanagement all starts with spending too much money. Since 2016 the ratio of debt to GDP in the U.S. has ranged from 105% – to 129%. The last time Congress found itself with a national debt exceeding its Gross National Product was the World War II-era when the debt to GDP ratio ranged between 103% – 119%. Today every household in the U.S. owes $223,000 as of its share of the national debt.

Unless Congress accepts our children living in involuntary servitude to the federal government, it must immediately address the issue. To address the rising national debt caused by World War II, Congress created the “Joint Committee on Reduction of Non-Essential Federal Expenditures” (“Joint Committee”), which existed from 1941-1974. Its purpose was to “make a full and complete study and investigation of all expenditures of the federal government with a view to recommending the elimination or reduction of all such expenditures deemed by the joint committee to be non-essential.”

While the Joint Committee lacked legislative authority, it took its investigative role seriously. It recommended eliminating many New Deal programs such as Regional Agriculture Corporations, Government Corporations, the Civilian Conservation Corps, and the National Youth Administration. During its years of operation, our national debt declined from 119% of GDP in 1946 to 31% in 1974. By keeping the focus on the nation’s debt and recommending the elimination of non-essential programs, Congress brought the nation back to fiscal sanity.

In the 1960s, Congress began a series of legislative reorganizations that culminated in 1974 with the enactment of the Congressional Budget and Impoundment Control Act which eliminated the Joint Committee. Some of the Joint Committee functions were transferred to the newly created Congressional Budget Office, (“CBO)”. The remaining responsibilities were transferred to the existing OGR.

The CBO now provides Congress with nonpartisan analysis on budget and economic matters. In addition to producing 600 to 800 formal cost estimates each year, it also provides thousands of pages of advice on legislative proposals amendments. It publishes numerous reports on the budget and the economy. CBO helps Congress understand the economic and budget impacts of its decisions.

The OGR, however, was given very special powers to oversee the Executive branch. House Rules made it the primary investigative Committee in the House of Representatives. It was given authority to investigate “any matter” within the jurisdiction of the other standing House Committees, including the workings of government agencies. To ensure it can secure the information needed, OGR has the authority to issue subpoenas to compel witnesses to testify and produce documents. Even the minority on OGR have subpoena power upon the request of seven members of the Committee. The D.C. Circuit recently upheld the use of this power by the minority.

Additionally, House Rule X, Clause 4 requires OGR to receive and examine reports from the Government Accountability Office (“GAO”), the congressional watchdog over agency activity. GAO examines the operations of all government agencies and issues about 900 reports annually on most aspects of the operations of government.

OGR is also responsible for reviewing the federal/state relationship to ensure it works in a coordinated, constitutional manner. The combination of investigative powers over the entire federal government, a mandate to review GAO reports on government operations, access to the CBO for advice on budget and economic issues, and a mandate to ensure federalism functions constitutionally gives OGR a unique role in protecting our Republic.

Unfortunately, Republicans’ oversight activities have been superficial, at best, for decades. The best example of Republican oversight malpractice is its willingness to deem unauthorized laws authorized to avoid reviewing the effectiveness of the laws and reauthorizing them. In FY 2021 Congress appropriated about $432 billion for 1,068 programs whose authorizations of appropriations had expired. Not one member of the House objected to this legislative scam. The same lack of oversight is endemic with regard to the budget and national debt. Congress has the increases on autopilot. There may be a few hearings and critical words spoken, but the increases always are enacted.

Illegal immigrants are costing taxpayers billions each month since the President is unwilling to enforce immigration and labor laws. Republicans complain, but there is no attempt to use their spending or subpoena powers to stop the president’s illegal activity.

And then there is the total disrespect for Federalism and the sovereignty of states, as illustrated by a President who denies states like Florida lifesaving monoclonal antibodies needed to treat Covid patients. Or a president that opens an entire southern border and burdens the states of Texas, Florida, and Arizona with responsibility for the financial, health, and law enforcement burdens of illegal immigrants, drug dealers, overdose deaths, an increase in crime, and destroyed property.

Why is the Republican minority on OGR so fearful of using its subpoena power to at least get the information on these many questionable activities today, as preparation for January 3, 2023?

If there was ever a time when this nation needs Congress to focus on oversight of the federal government, it is now. The Joint Committee may be gone, but OGR is here in its place. OGR, with access to CBO, GAO, having subpoena power, and the ability to investigate any federal agency and send the results of the investigation to the appropriate legislative committees has far more resources to identify and eliminate the non-essential functions of the federal government than the Joint Committee.

Impossible, some may say, Congress can never get control of the Executive branch. It is just too powerful. Nonsense, one House of Congress, smartly using its power of the purse, can merely refuse to spend money. There is no power in the Constitution or on earth to force Congress to spend money when this occurs. One House of Congress alone can stop the federal government’s rush to policy insanity.

The minority on House OGR should not wait until it is in the majority in January 2023 to start its investigations, research, and planning. Using its subpoena power today will allow it to develop some of the information needed for a solid plan of oversight in 2023. If a journey of a thousand miles begins with a single step, it is time for the Republicans to start walking.

 

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.

  • Home
  • It Is Unjust for Congress to Fund Expired, Unauthorized Laws

It Is Unjust for Congress to Fund Expired, Unauthorized Laws

William L. Kovacs

January 2022

It Is Unjust for Congress to Fund Expired, Unauthorized Laws

 

Republicans and Democrats have used their political power to impose a massive and unjust national debt of $30 trillion on future generations. Since this debt has been imposed through a law-making process that did not have the participation of those who will be burdened with its payment, it is an unjust law. As such Congress has a moral duty and the legal power to remedy this injustice. If Congress fails to address this issue, it creates a high probability of future generations living in involuntary servitude to the federal government.

Most Americans understand debt can be reduced in several ways, cut spending, raise taxes, inflate it away or default. Since all options are painful and likely disruptive to the beneficiaries of government spending, Congress just continues spending.

Before continuing with its spending, Congress must keep in mind, complex societies collapse. Massively indebted societies collapse. Societies with their militaries deployed throughout the world collapsed. Highly regulated societies collapse. The U.S. is all these combined, contentedly sitting on a bubble of debt, unable to address the serious risks it poses. Congress and the recipients of government largesse delude themselves into believing collapse can’t happen here. Unfortunately, collapse has happened to every major empire in history and it will happen here unless the risks from debt are reduced.

As with all collapses, societies can live with risk for decades. At some point, however, if not addressed, risk turns into a disaster; society slips into the abyss. Once in the abyss, it can take centuries to reemerge as chaos rules.

To reduce our national debt, everything must be considered: taxes, spending, sale of assets, elimination of overreaching laws and regulations, and transferring to states programs they can implement better and more efficiently than the federal government. While dramatic options may exceed the courage of today’s politicians, there are smaller steps that could reduce the national debt by hundreds of billions of dollars. Even a small step to start reducing the debt would be a giant leap in government accountability.

Congress could obey its rules and stop funding laws that have expired; laws that have no authorization

For FY 2021 appropriations, the Congressional Budget Office “… identified 1,068 authorizations of appropriations – stemming from 274 laws – that expired before the beginning of the fiscal year 2022.”

House of Representatives Rule XXI provides that “[A]n appropriation may not be reported in a general appropriation bill…for an expenditure not previously authorized by law…”

The laws passed by Congress generally fall into two categories under its regular order:

  1. Laws are authorized for a set period of time, for example, one, three, or five years. At the end of the authorized period, Congress must reauthorize the law for it to continue being funded.
  2. Laws that have no expiration date and for which Congress mandates continuous funding, for example, Social Security. These are referred to as mandatory spending laws or entitlements.

This distinction is significant when attempting to reduce spending. Simply, when the authorization period of a discretionary law expires, Congress has the opportunity to let it lapse, amend it, or reauthorize it. Congress can hold oversight hearings to examine the law’s effectiveness. This oversight provides Congress control over the legislative process and, by extension, the regulatory process, since regulations are issued to implement the laws enacted by Congress.  More laws mean more regulation. Fewer laws mean fewer regulations.

Unfortunately, every year, Congress avoids the review of hundreds of expired laws. In fact, between 25% -33% of all laws do not have congressional authorizations. Moreover, since Congress rarely passes all twelve appropriation bills by the October 1 deadline, it merely bundles hundreds of billions of dollars into a Continuing Resolution or Omnibus appropriation to fund hundreds of disparate laws. Since the fiscal year 1997, the budget deadline has never been met. Instead, Congress enacts Continuing Resolutions that fund the government at the prior years’ funding level. Between FY 1998 and 2022, Congress passed 125 Continuing Resolutions.

Within this mindless appropriations process, however, Congress performs one act that debases the legislative process, while sanctioning the perpetual growth of the bureaucracy. This mindless act is a parliamentary procedure that allows the House to waive its Rule XXI by deeming hundreds of unauthorized laws to be authorized for purposes of making appropriations. This simple waiver gives life to hundreds of laws that have expired and for which Congress did not have sufficient interest to determine the continued need for the law. (The Senate does not have a similar prohibition.)

The House’s frequent use of waivers is contrary to almost two centuries of legislative practice for funding the implementation of laws. While there was always an informal process that required Congress first pass a substantive law and then appropriate monies to implement the law, Congress formalized this process in 1837, when the House of Representatives provided by a rule that “no appropriation shall be reported in such general appropriations bills, or be in order as an amendment thereto, for any expenditure not previously authorized by law.”   

This prohibition continues today and it can be enforced by a point of order. Unfortunately, Congress has enacted mechanisms that allow itself to waive the rule by suspension, unanimous consent, or in the House by a special rule, which usually deems the unauthorized laws to be waived.

By circumventing its own rules, Congress avoids having to make the difficult decisions on which laws should continue in effect. It merely allows all laws to remain in effect. Though this charade is an easy way for Congress to avoid doing its job, it is a prime reason why Congress has institutionalized the growth of government.

CBO started collecting data on the funding of unauthorized appropriations as early as 1975 and prepared written reports to Congress starting in 1986. Notwithstanding the amount of excellent information collected and produced by the CBO, Congress has not acted on it even though the amount of funding for unauthorized appropriations increases every year. The tens of billions of dollars that could be saved is staggering. In FY 2015 Congress appropriated about $294 billion for programs whose authorizations of appropriations have expired. In FY 2020 Congress appropriated about $332 billion for programs whose authorizations of appropriations have expired. In FY 2021 Congress has appropriated about $432 billion for 1,068 programs whose authorizations of appropriations have expired.

For Congress to reclaim its lawmaking powers, it does not need to shut down the entire government. All it needs is for a few brave members to stand up and force votes to deny funding for programs that have not been reauthorized. Members of Congress have a choice to review each law and reauthorize, amend, or terminate it, or publicly waive the rules for expediency. Congress consistently chooses the cowardly way of “leadership.”

If members of Congress started raising points of order to stop the funding of expired laws or voted against the waiving of regular order, Congress would begin to assume responsibility for the legislative process by examining every law as each authorization period expires. This process will require Congress to examine what it has enacted and how each law impacts the American people. As this process moves forward, Congress will reduce its budget deficits by tens of billions annually, simply by pruning laws that do not achieve their purpose, or for which the costs greatly outweigh the benefits.

Congress is responsible to the American people. It now needs to act responsibly.

  • Home
  • Can a Massive National Debt Become an Unjust Law?

Can a Massive National Debt Become an Unjust Law?

William L. Kovacs

November 2021

Can a Massive National Debt Become an Unjust Law?

The last three presidents of the U.S. (George W. Bush, Obama, and Trump) have imposed  $22 trillion in additional National Debt out of a total of $29 trillion of debt. These three presidents are responsible for 76% of the nation’s entire National Debt from the founding of the Republic. Each person’s share of just the National Debt is $85,423 and for every household, it is $221,321. President Biden is now proposing many trillions more in new social programs. At what point does this massive national debt become so burdensome, it is an unjust law on the citizens of the U.S. by placing them in servitude to the federal government?

 

There is a passage in Martin Luther King, Jr’s Letter from Birmingham Jail, on unjust laws that should be mandatory reading for every lawmaker. It extends far beyond the heinous evils and unjust nature of racial discrimination. It is a timeless analysis of the fundamental attributes needed in 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 it is his two examples of the differences that 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 on itself. A just law is one that applies to all equally.

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

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

Republicans and Democrats are equally responsible for the National Debt. Actually, Republicans, for all their righteous calls for fiscal restraint, are actually responsible for about 60% of the National Debt. Both parties relish spending our money and using budget gimmicks to impose more debt on us while lying to our faces. For example, Congress and past administrations lie about the increasing debt by keeping the cost of continuing wars off the books or passing Continuing Resolutions.

It is highly unlikely to present politicians and voters will pay off this debt in their lifetimes. This means we citizens are living on the future productivity of those who have no ability to participate in creating the debt.

Other than the writings of Dr. King, and a few leaders of peaceful resistance movements, the discussion of “unjust laws” is left for philosophers and ethicists. The immenseness of the national debt and its impact on future generations, requires discussion today, especially by federal candidates.

The national debt could become so burdensome to future generations that it undermines democracy. We can no longer separate questions of morality from the consequences of legislative actions like thoughtless increases in the debt ceiling and new open-ended programs.

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, those borrowed funds go to “good causes” supporters claim must be addressed; arguing it would be immoral not to take care of the least among us.

If the state-imposed the full amount of taxes on citizens needed to pay for all the programs it provides, there would be a tax revolt against “unjust taxes.” Tax revolts have happened since the government first imposed taxes on people. But the accumulation of massive debt is different from imposing taxes on people. Accumulating and deferring the payment of debt allows the state to avoid taxing voters by shifting the cost of our wants to future generations.

Each dollar expended by us today without earning that dollar is a dollar our posterity will have to repay for us. Is there a point at which the debt imposed on future generations is so massive that it converts the social obligation of paying reasonable taxes into involuntary servitude to the government?

Citizens in a democracy are responsible for the actions of the state. Those taking state action are our servants. We have the ability through our vote to control them.  As we continue to amass debt, we are telling future generations “they have no rights.” This is the essence of an “unjust law.”

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 D.C. law firms, and his book Reform the Kakistocracy is the winner of the 2021 Independent Press Award for Political/Social Change.

 

 

  • Home
  • Wake Up America, One US Until National Debt Tears Us Apart

Wake Up America, One US Until National Debt Tears Us Apart

William L. Kovacs

May 2021

Wake Up America, One US Until National Debt Tears Us Apart

There is no polite way to say this – “Wake Up America,” a federal default on the national debt will directly hurt anyone who has or expects some form of retirement income. Don’t expect government to look out for you. Government will do what is best for it, citizens be damned. Citizens are mere commodities that send money, in the form of taxes, to the government for its discretionary use.

To remain in power the government will do whatever it takes to retain power, including incurring more debt, printing as much money as needed, notwithstanding its value, devaluing its currency, or even defaulting on its debt. If debt reaches astronomical proportions and the federal government is forced to take action, it will take the easiest path which is to default on the debt owed to the general public, which is most likely, you the reader.

Part I of this series uses a chart to illustrate that the National Debt is bipartisan, both parties engage in massive spending without any known way to pay for it. Part II discusses the underlying assumption of the Progressives Modern Monetary Theory, i.e., massive debt is irrelevant if it is in the currency of the sovereign. The sovereign merely needs to print money from “thin air” to pay it off. This Part III identifies who will be directly impacted by a default.

Identifying who is impacted by a federal default is a critical piece of information that should be given directly to citizens.  Unless our government addresses the issue, the national debt will continue to increase. The Congressional Budget Office estimates the debt will be double the nation’s GDP by 2051, or $ 42 trillion or more.

Interest payments in 2020 were $ 325 billion. They are estimated to rise to $928 billion by 2029. If the Fed raises rates only 1%, that will increase add another $19 trillion over ten years to the national debt.

Our elected representatives are doing nothing to address the national debt, not even bloviating about it. Even the Modern Monetary Theorists recognize that inflation is the one event that could upend their theory that debt does not matter to a country with its own currency. Inflation is starting to rise at a fierce pace. Interest rates hit 20% in the late 1970s under President Carter. A twenty percent interest rate on bonds today would require the federal government to pay $6 trillion a year in interest, an amount larger than the budget of the U.S. The U.S. would be crushed by debts it could not pay. It would have to default or render the dollar worthless against world currencies.

So, who gets hurt if the federal government defaults on its debt obligations?

As of March 31, 2021, the U.S. National Debt exceeded $28 trillion. $ 21trillion of the debt is owned by the public or 78% of the debt. $7 trillion of the debt is owed to foreign countries.

Put aside the $ 7 trillion in foreign debt, it will be renegotiated. The real concern is what happens to citizens whose retirement rests on the government’s promise to make payments on its financial obligations. Unfortunately, federal agencies collected trillions of excess dollars from federal programs like social security and loaned that money to the federal government to spend. The citizens paying these social security taxes only received promises from the federal government to repay the borrowed funds at some future time. That money or a large portion of it will be lost in a default?

There is nothing citizens can do about it if the federal government defaults. Yes, nothing! Government can change pension laws at will to relieve itself of a debt problem. Only the government is sovereign. Moreover, the doctrine of sovereign immunity protects the government from its citizens. Government wins, you lose. An easy proposition to understand.

The magnitude of what the federal government owes citizens is staggering:

$10.81 trillion is owed to the Federal Reserve and government agencies that gave cash from certain programs like Social Security to the federal government to spend.

$3.5 trillion is owed to mutual funds.

$1,.09 is owed to state and local government pension plans.

$ 784 billion is owed to private pension plans.

$253 billion is owed by insurance companies.

$147 is owed to owners of U.S. Savings Bonds.

$2.28 trillion is owed to a variety of individuals, government-sponsored enterprises, banks, and other investors.

Most of the beneficiaries of these debt instruments are Social Security recipients, pensioners, mutual funds investors, bondholders, and insurance companies. All these payments are long-term payments to individuals who depend on those payments for survival.

Would Social Security recipients, mutual fund investors, pensioners think the same about “free” federal money if they knew their retirement savings were being put at risk by their government?

The federal government is in a predicament that it cannot get out of without actually making fiscally sound decisions that address the long-term sustainability of the country. As the federal government creates new multi-billion- and trillion-dollar programs, it moves closer to a default. If the Federal Reserve can keep interest payments around zero, debt is manageable since there is little interest due. Every 1% increase in interest rates raises the debt over a few years by trillions.

. The federal government is pitting Americans against Americans as to who gets a piece of the pie and when the pie is divided. Does the federal government give away the entire pie now and let those who invested in the nation live without pensions? Does the federal government opt to forgive student loans, authorize child care and universal basic income for all? Should the federal government support illegal immigrants with food, shelter, clothing, health care, education and basic income by putting social security recipients at risk?  How high can taxes go before people abandon the country? How much can we cut from the military before the U.S. can no longer defend the USA?

Tough questions that must be answered.

The federal government is now an entity separate from its people. It lives in a world that does not exist for ordinary people who must survive without the ability to tax others. If the national debt is not addressed soon, “we the people” will live in involuntary servitude to the federal government.

  • Home
  • Modern Monetary Theory: A Banana Republic with No Bananas

Modern Monetary Theory: A Banana Republic with No Bananas

William L. Kovacs

May 2021

Modern Monetary Theory: A Banana Republic with No Bananas

Part I of this series charted the massive increase in the debt of the U.S., by both political parties, over the last twenty years. Now with the Progressives in total control of the federal government, far-Left economists and socialist politicians like Bernie Sanders advance Modern Monetary Theory (“MMT”) as a justification to continue unlimited spending without any consequences to the nation. If the Progressives are correct, there is a free lunch for all, most of the time. If the Progressives are wrong, the U.S. becomes a “Banana Republic.”

While our Constitution does not mandate any specific economic system, it does specify how government acquires, values, and spends our money. Politicians should understand how MMT squares with our constitutional structure before promising unlimited free money without increasing taxes or interest rates.

The U.S. recently finished an election for president, the entire House of Representatives, and one-third of the Senate.  Not one candidate for federal office in 2020 made serious mention of our $28 trillion national debt. $24 trillion or 84% of our $28 trillion national debt has been created since the presidency of George W. Bush. On top of the current debt, President-elect Biden is proposing $11 trillion in new spending. Every president has an excuse for massive debt. Trump had the pandemic; Obama the 2009 financial crisis; George W. Bush had 9/11. Biden just wants to spend for any cause.

MMT argues government debt is irrelevant

MMT asserts when a nation has a sovereign currency, debt can be accumulated since it is owed to itself.  Money can be simply credited to another’s account (printed in old-fashioned terms) without having to sell bonds that require interest payments. This magic process involves keystrokes on a computer. New digits are created electronically on a balance sheet allowing government to spend whatever it needs.

The foundation for such MMT magic is the belief that government creates all wealth by spending money into existence. Government spends to incentivize citizens to want more of what government wants us to have. And by commanding that all taxes be paid in the currency controlled by the government, everyone needs to earn money to pay taxes for the government services they want.

MMT economists view money creation as a valuable economic tool that does not automatically devalue currency when used to address an underperforming economy. By creating new money, jobs are created, and productivity increases. According to Federal Reserve chairs, “…government can print all the money it needs, and nothing bad happens.” Simply, MMT economists posit that when an economy has unemployment, government is not spending enough money and can spend until full employment is reached.

Under MMT, inflation is the primary risk of spending more than needed to reach full employment. When inflation occurs, MMT recognizes it will need to raise taxes and interest rates to control inflation, yet proponents ignore the implications of such recognition. However, as long as the Federal Reserve keeps interest rates near zero, there is not a need to repay the debt since no interest is due. But is there a point where the accumulated debt is so great that it cannot reasonably be serviced if interest rates rise?

Our Constitution does not authorize free money by keystroke

Our constitution starts with the words “We the People of the United States”  have created a government with certain limited powers. As to currency, our government is authorized to coin money, and regulate its value and relation to foreign currency. Our government can borrow money on the credit of the United States however, money cannot be drawn from the treasury unless Appropriations are made by law and all expenditures accounted for. These limits impose constitutional accountability by limiting government action.

Since the currency of the United States is only as valuable as the credit of the government supporting it, there is no provision allowing government to magically create an unlimited money supply by a keystroke and then by another keystroke use the money for other purposes.

In the world of finance, MMT resembles a money-laundering scheme, i.e., concealing the origins of money, then passing it through a complex sequence of transfers to make the money appear legitimate. By illustration, the Federal Reserve creates money from” thin air” and transfers it to the Federal government through a series of transactions. It works like this – the Social Security Trust Fund collects more real money in taxes than it pays out. Social Security uses its excess money to purchase U.S. Treasuries from the federal government. This transaction immediately gives the federal government real money to spend. The Federal Reserve then buys the U.S. Treasuries from Social Security using the money it created out of thin air. The only real money is collected by Social Security and it goes to the Federal government which immediately spends it. The risk of this money laundering scheme is that Social Security, its pensioners, and the Fed own promises based on the creditworthiness of the U.S. which is constantly printing more money out of thin air and transferring it through the system.

As more dollars are made out of thin air, they become less valuable unless needed as a source of exchange in the U.S. Since the Constitution contemplates international commerce and a valuable currency supported by the credit of its government, MMT is far outside the Constitutional framework that requires a strong currency for trading with the nations of the world. In fact, MMT will force the U.S. to be an insular society to ensure its currency remains valuable to citizens.

It is easy to see why Progressives are so enthralled with MMT. They believe since government creates all wealth, it has the right to tax back all wealth, after all, it’s the federal government’s money. Citizens merely exist to do what the government wants them to do. Citizens merely buy the services government wants them to buy. Such a system could be termed communism but MMT is too misleading for such a serious term. A better description is that MMT promotes a Banana Republic without any bananas to back its currency.

  • Home
  • Are There Limits to National Debt? Part I, The Facts

Are There Limits to National Debt? Part I, The Facts

William L. Kovacs

April 2021

Are There Limits to National Debt? Part I, The Facts

With the end of the fiscal year (“FY”) 2020 and estimates for FY 2021, the facts are clear. Republicans cannot claim they are concerned about the national debt.  Republicans have incurred more debt than Democrats up to FY 2021. This fact could quickly change with the many massive spending proposals of the Biden administration. The calculations below are based on FY rather than annual spending, to calculate only debt attributable to the presidential budget responsible for it.

President Years Republican* Democrat* Total Debt        %inc
Hoover 1930-1933 $ 6 billion $ 6 billion               33
F. Roosevelt 1934-1945 $ 236 billion $ 242 billion      1048
H. Truman 1946-1953 $ 7 billion $ 249 billion         2.8
D. Eisenhower 1954-1961 $ 23 billion $ 272 billion         8.2
J. Kennedy 1962-1964 $ 23 billion $ 295 billion         7.8
L.B. Johnson 1965-1969 $ 42 billion $ 337 billion         13
R. Nixon 1970-1974 $ 121 billion $ 458 billion         34
G. Ford 1975-1977 $ 224 billion $ 682 billion         47
J. Carter 1978-1981 $ 299 billion $ 981 billion         43
R. Reagan 1982-1989 $ 1.860 T $ 2.841 T              186
G.H.W. Bush 1990-1993 $ 1.554 T $ 4.395 T                54
W. J. Clinton 1994-2001 $ 1.396 T $ 5.791 T                32
G.W. Bush 2002-2009 $ 5.849 T $ 11.640 T            101
B. Obama 2010-2017 $ 8.588 T $ 20.228 T              74
D. Trump

 

J. Biden

2018-2021

 

2021 est. add’l debt

   $ 8.627 Test.

 

 

 

 

$ 2.0 T

$ 27.816 T              34
Party totals $ 18.263 T $ 12.519 T $ 30.816 T

*The FY deficit numbers for each President are based on the FY deficits stated by The Balance, update in March 2021. For FY 2021, the estimate is for Trump through January 20, 2021, and thereafter the estimate is attributed to Biden.

What do these calculations show?

81% of our entire national debt was incurred by the last four presidents, George W. Bush, Obama, Trump, and now Biden. Two Democrats, two Republicans.

Republicans are responsible for 60% of the national debt; Democrats 40%. President Biden is proposing multi-trillion-dollar infrastructure plans that would increase the national debt by another $ 2-3 trillion. Estimates have the national debt rising between now and 2050 from 102% of GDP to 195% of GDP. Interest on the debt is estimated to rise from below 2% today to 2.5% by 2030. On a minimum of $30 trillion in debt, annual interest payments could easily reach $750 billion, about one-half of  FY 2020 discretionary spending. In FY 2021, each person’s share of the national debt is $85,049. The average household’s share of the national debt is $218,614.

All presidents have an excuse for their debt (Biden – the pandemic and need for more stimulus; Trump – pandemic and need to build-up the military; Obama – to address the financial crisis; Bush – 9/11, and on and on). The difficulty with excuses is that all presidents have them and none even try to address the growing national debt. Moreover, not one candidate for federal office in the 2020 elections even discussed the massive national debt.

Basic questions remain. Can the U.S. print money out of thin air and borrow at a near-zero interest rate forever? If not, what are the consequences if inflation or interest rates rise significantly? Is there anything concerned citizens can do to address what might be an existential threat to the nation? Should our government care about future generations? Why should politicians care about the debt and future generations since their sole goal is to be elected? Should citizens care? Perhaps the real answer will be found by re-asking Benjamin Franklin’s profound question  – “When the people find that they can vote themselves money, will that herald the end of the republic.”

Part II of the article will explore the reasonableness of the current assumption that a nation, with its own currency, can print an unlimited amount of its currency without consequence?

  • Home
  • Brewster’s Millions Is Funny; Who Pays for Big Fed Spending

Brewster’s Millions Is Funny; Who Pays for Big Fed Spending

William L. Kovacs

May 2020

Brewster’s Millions Is Funny; Who Pays for Big Fed Spending

If one needs a laugh in the last days of the stay-at-home orders, watch Brewster’s Million. The time will be well worth spending. And if you need more stress, think about a federal government spending at least $4 trillion in under 45 days. All that money will be paid by our kids. What are we doing to them?

Brewster’s Millions provides comic relief to generations of Americans. The massive national debt will provide long-term economic pain to generations of Americans.

Congress and the Federal Reserve’s spending spree to address the coronavirus pandemic is wasteful and poorly targeted. Some stimulus is necessary due to government action to shut down the economy, but thoughtlessly giving away trillions of dollars is a poor choice if the goal is to reinvigorate the economy. As seen, Federal Reserve intervention has created “zombie companies” companies, large publicly traded companies vacuumed up funds meant for Main Street, and the two trillion dollar stimulus is likely to become a hotbed of fraud.

Over at the Libertarian Republic, I compare the reckless government spending to Brewster’s Millions, a classic film starring Richard Pryor, where the plot highlights the difficulty of spending huge sums of money is a short period of time. A skill, politicians of all stripes have mastered.

In the post, I analyze the how the CARES Act and the Feds have decided to allocate trillions of dollars and note how quickly government can act when it involves frittering away taxpayer dollars.

Perhaps, a greater problem than poorly targeted stimulus, is how future generations will have to pick of the tab, a tab that is unlikely to do much good for Americans now. As I wrote:

Congress and the president certainly spent more money than anyone ever thought possible, in a few months. Whether these elected officials keep their jobs or needed to spend even more money for voters to be satisfied, is to be determined in November, 2020 by the recipients of the federal giveaways.

What is certain however, is that the children of this nation will inherit the debt. Lots and lots of debt. Seventy-seven percent of the U.S national debt was incurred by three presidents – George W. Bush, Barack Obama and Donald Trump. Simply, in 2001, at the end of the Clinton administration,     our national debt was only $5.791 trillion. When all the giveaways are completed, the national debt will be well over $26 trillion. The portion of every citizens’ debt today is about $ $72,000; and likely to exceed $82,000 per person in six months.

Since it is highly unlikely anyone alive today will offer to even start paying off the debt, yes, children, it is to a certainty, you will inherit the debt.

Brewster’s Millions provides comic relief to generations of Americans. The massive national debt will provide long-term economic pain to generations of Americans.

  • Home
  • A Modest Proposal to Stop Congress from Giving Our Money to Private Entities

A Modest Proposal to Stop Congress from Giving Our Money to Private Entities

William L. Kovacs

May 2020

A Modest Proposal to Stop Congress from Giving Our Money to Private Entities

Just a few days before Christmas 2019, Congress, in its 2020 fiscal year appropriations, resurrected from the grave, billions of dollars in expired tax extenders and spread the benefits to distilleries, race-horse and Nascar owners, short-line railroad, biodiesel blenders and other favored industries. Being Christmas, it even applied the tax credits retroactively.

Should Congress consistently give billions of our hard-earned dollars to private entities?

While common sense says NO, it is unfortunate that Congress fails the common-sense test.

The issue of Congress giving away our money to private entities has been debated since the founding of the Republic. Opponents of this giving argue taxpayer money can only be spent on matters enumerated in the Constitution. Government asserts it can spend it on anything that is for the general welfare.

Continuing this debate may seem 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. The federal government provides grants, loans, tax credits, tax deferments and guarantees risk to incentivize certain activities. State and local governments provide property tax relief, tax abatements, low interest bonds and outright grants, usually to attract business to an area.

Examples abound at the federal level:

  • Up to a $7,500 tax break for purchasers of the first 200,000 electric vehicles produced by an auto manufacturer;
  • Oil and gas industries receive $20 billion in annual subsidies;
  • Tax deferment on capital gains from Opportunity Zone investment which was to go to poor areas but is a boon to rich areas, e.g. high-end apartments with yoga lawns and pools surrounded by cabanas and daybeds;
  • The prescription drug industry benefited from $64 billion in federal research funding;
  • Flood insurance subsidies promote building high-end housing in flood prone areas. This insurance program is potentially liable for $1.24 trillion in claims while only collecting $3.5 billion in annual premiums. The program is already over $25 billion in losses that taxpayers will have to pay; and
  • Pension bailouts to coal miners while laying the groundwork for a massive bailout of the underfunded private, multi-employer pension system.

Presently the U.S. carries over $23 trillion in national debt and could be on the hook for over $200 trillion in unfunded liabilities. Yet Congress continues to give away billions to private entities.

 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. Over time, however, the courts defined public welfare to be anything that has a “public purpose.” Fitting within this definition is almost every type of government project conceived by a legislature, e.g. parking lots, sports facilities, corporate rent subsidies, politically favored forms of energy. Taxpayer money just flows, and the courts find it legal, based on legislated appropriations.

More troubling is that government gives taxpayer money to the largest and most profitable corporations in the world. “The Good Jobs First” report tracts the one hundred largest companies receiving government gifts (federal, state, local). First on the list is Boeing at $14.9 billion; number two is General Motors at $6.9 billion and number three is Intel at $6 billion. Most companies on the list are in energy, transportation or technology.

These large corporations persuaded our government that a tax cut would spur investment in new business and equipment. These corporations however, spent three times as much on additional dividends and stock buybacks than they invested in their businesses.

We the people need to clearly re-enact the wise-policies of the mid-1800s and demand all candidates running for office take a government gift-prohibitions pledge:

I pledge that, if elected, I will serve as a fiduciary of public money and will not vote to give, grant, or loan public funds or extend the credit of the public to any private corporation, association, or private undertaking.

By asking every candidate for public office to take this pledge, citizens can identify candidates willing to protect taxpayers. If the pledge is broken, the public will quickly know who is not trustworthy. The entire effort becomes self-policing by citizens.

A modest proposal, but it is a start!