TRUMPING THE ESTABLISHMENT

[Also published in http://www.newsmax.com/ScotFaulkner/lobbyist-politicians/2016/08/31/id/746090/]

The Washington Establishment has a visceral hatred for Trump because he promises to put them out of business.

Why does the Washington Establishment hate Donald Trump? It is not because of his positions on immigration or trade.  Pat Buchanan and Ross Perot advocated similar stands in 1992 and they did not generate the obsessive hatred being displayed in 2016.

Trump has declared war on the Establishment itself.  In his June 16, 2015 Presidential announcement Trump asserted:

“So I’ve watched the politicians. I’ve dealt with them all my life…They will never make America great again. They don’t even have a chance. They’re controlled fully by the lobbyists, by the donors, and by the special interests…it’s destroying our country. We have to stop, and it has to stop now.”

The Washington Establishment sees Trump as serious about them being the primary impediment to making America “great again”.  Trump sees the Establishment as lining their pockets, and their friends’ pockets, as beneficiaries of the status quo.  As long as nothing changes, the Establishment will have their mansions, limousines, VIP tables, and ego trips.

There is much at stake.

Think of Washington, DC as a mass of “cookie jars” each containing delicious treats.  There are those who control the cookie jars, those who want the cookie jars, and those who can get the cookie jars.  Officially, these treats are distributed based on legislative mandates, open competition, and documented needs.  In fact, the treats are almost always handed out to friends, and friends of friends.  Friends can be purchased.  It is Washington, D.C.’s “golden rule” – those with the gold rule.

Welcome to “crony capitalism”.  Someone knowing someone who can hand out favors has been around since the first tribes shared the first harvest.  The term “lobbyist” came from favor seekers hanging out in the lobby of Washington, DC’s Willard Hotel during the Grant Administration in the 1870s.  In 1905, George Washington Plunkett, a ward boss in the Tammany Hall political machine, coined what could be the motto of Washington, D.C. – “What is the Constitution among friends?”

Today, things have gotten way out of hand.  Spending for Washington lobbyists has tripled since 1998 to over $3.22 billion a year.  $24 million is spent for lobbyists each day Congress is in session. 

Campaign fundraising is another dimension of how the Establishment stays in power.  Over $750 million has been raised for House races and $520 million for Senate races this election cycle. Leaders of Political Action Committees (PACs), and individual bundlers who raise funds, dominate this ultimate game of “pay for play”.

Those brokering power become gatekeepers for funding and favors throughout the Federal Government. This power comes from a truism overlooked by everyone in the media – all discretionary federal money is earmarked.  The popular myth is that earmarks vanished once the Republicans banned them when they returned to power in 2011.  They only banned legislative earmarks, and there are still ways to work around that system.  The President, and his appointees, earmark funds as standard operating procedure.  Even career bureaucrats play favorites. 

Favorites can be based on institutional, Administration, and ideological biases.  Favoritism can also go to the highest bidder.  This is federal money flowing out the door as grants, programs, contracts, buildings, leases, and employment.  Other “treats” to be dispensed include regulatory relief, tax waivers, and subsidies. Favoritism is rarely purchased with money directly changing hands, that kind of corruption occurs more in state and local government.  Washington level corruption is true “quid pro quo”.

The Washington Establishment swaps favors more insidiously.  How many times does a military officer get a major position with a defense contractor years after he favored them with a multi-million dollar contract?  A Reagan aide granted a building height waiver near the White House and quadrupled his salary when hired by the developer.  Grant and contract officers obtain slots at prestigious colleges and prep schools for their children for making the “right” choices or being a little lax on oversight.  Bush era National Park officials refused to prosecute the destruction of park land in exchange for Redskins tickets.  Everyone has their price, save for those true public servants.

Trump promises to smash the cookie jars and end the reign of the Establishment. 

Normal Americans are rallying around Trump.  They are enraged at the lies and duplicity of those in power.  Many see a reason to vote for the first time since Reagan. They want November 8, 2016 to be America’s “Bastille Day” marking the end of Washington, DC’s arrogant and unaccountable ruling class.

Billions of dollars are at stake.  Perks, prestige, and power are at stake.  The future of representative government is at stake. Is it any wonder that the Establishment is doing everything and anything to stop Trump?

[Scot Faulkner served as the first Chief Administrative Officer of the U.S, House of Representatives and on Reagan’s White House Staff.  He advises global corporations and governments on strategic change and leadership.]

Raising Revenue Responsibly

This article was published on the History News Network

 http://hnn.us/articles/how-solve-fiscal-cliff-problem-responsibly

There are three legs to the stool of Federal Fiscal Solvency - Cut spending, entitlement reform, and revenue generation. Few of the Washington power players are realistically discussing any of these, but revenue has generated the most polarized rhetoric.

All our lives are impacted by the way our Federal Government raises the $2.9 trillion it needs to function. That is why it is important that any revenue element of a “Fiscal Cliff” deal is weighed not only for the amount, but for its “tax incidence”.

“Tax incidence” charts the various ways government amasses its revenue and how these ways impact individuals, industries, demographics, and “geographics”. Our current “progressive rate” income tax system and the strategic reform proposals of the flat tax, fair tax, and Value Added Tax (VAT) all generate significantly different impacts on our individual spending habits and our overall national economy.

Tax policy punishes or promotes economic activity either with intended or unintended consequences. Government tax policy has become social policy, resulting in an amazingly complex and voluminous tax code. The federal tax code is over 5.6 million words or 3,458 pages – seven times longer than the Bible, depending on the edition. Each page, sentence, phrase, and punctuation of this Tax Code, and its countless regulations, instructions, and manuals, determine winners and losers within the economy. These regulations are further subject to equally voluminous interpretation through administrative and judicial rulings.

There are nearly an infinite number of ways individuals, companies, and an array of other entities, can navigate this tax landscape. Lost in this morass is the original intent for many of these pathways and how they are supposed to positively guide economic behavior while raising desired revenue.

Democrats obsess over raising tax rates on the wealthy, and Republicans remain vague about “tax reform”. Thankfully, one person has conducted a detailed review of the Federal Tax Code and found $992 billion in possible tax saving/new revenue over the next ten years – without raising tax rates.

In July 2011, Senator Tom Coburn (R-OK) issued his “Back in Black” report. http://www.coburn.senate.gov/public/?p=deficit-reduction

“Back in Black” is a 624-page detailed, line by line, analysis of how the Federal Government can cut waste, achieve operational efficiency, and find the revenue needed to get out of debt.

Coburn’s final section (pages 558-624) addresses how decades of tax policy decisions have created a multitude of opportunities for special interests to avoid taxes, or obtain tax incentives and subsidies, while harming the general populace (pushing the tax burden onto others and driving up the debt).

Reviewing some of Senator Coburn’s examples of how our tax code runs amok is instructive and sobering. Coburn’s ideas represent the most economically neutral opportunities for new revenue and should be part of any strategic “Fiscal Cliff” agreement.

Subsidizing millionaires - Individuals with over a million dollars in income benefit from more than $7 billion in tax relief annually through the mortgage interest deduction. Under current law, homeowners can deduct the interest paid on home mortgages for primary residences and vacation homes loans of up to $1 million, resulting in lost federal revenue of nearly $88 billion. Even a yacht can be considered a second residence—as long as the luxury boat has a “sleeping, cooking, and toilet facility” and an individual lives in it for at least two weeks a year.

Subsidizing foreigner gamblers - Americans must pay taxes on their winnings at horse and dog tracks in the United States, but not foreigners. This deprives the Federal Government of $30 million over the next ten years.

Subsidizing Hollywood – In order to encourage Hollywood to produce feature films and television programs in the United States, entertainment companies may deduct up to $15 million in certain costs associated with the production of television episodes and movies where at least 75 percent of the compensation costs are for work performed on U.S. soil. Allowing Hollywood to benefit from this accelerated cost recovery results in federal revenue losses of at least $30 million a year.

Allowing fraud - Within the Additional Child Tax Credit (ACTC), individuals without a valid Social Security Number (SSN) claim $1.780 billion a year, or $17.8 billion over ten years. Congress has not provided the IRS with adequate authority to deny these fraudulent claimants.

No documented impact – The 1993 Government Performance and Results Act (GPRA) is supposed to hold every federal activity accountable for actually achieving intended results. GPRA is routinely ignored, not only for federal expenditures, but for tax expenditures. Two examples are Empowerment Zones (EZs) and Renewal Communities (RCs). EZs and RCs are federally designated poverty or distressed areas where businesses and local governments receive federal grants and tax incentives in exchange for locating and developing in these zones. Nearly $1.8 billion in grant incentives provided to EZs and RCs have been allocated since 1993. However, the Government Accountability Office (GAO) and the Inspector General at Department of Housing and Urban Development (HUD) have not found any tangible improvement in community outcomes.

Bailouts without end - The IRS has excluded major Troubled Asset Relief Program (TARP) recipients from certain tax obligations for potentially the next 20 years. These TARP recipients may avoid paying more than $90 billion combined in taxes because of this special tax treatment. This includes AIG, which has accumulated over $25.6 billion in carry-forwards and other tax-deferred assets; New GM, which will avoid as much as $45.4 billion in taxes because of the Treasury Department‘s exemptions; and Citi, which will use $23.2 billion in carry-forwards and other credit carryovers in just one year.

Malfeasance - The Internal Revenue Service found nearly 100,000 civilian federal employees were delinquent on their federal income taxes, owing over $1 billion in unpaid federal income taxes. The federal government has also failed to collect more than $62 billion in penalties owed by swindlers, criminals and others cited for violating federal laws and regulations and this amount has increased dramatically.

It is truly sad that none of these issues were discussed during the 2012 campaign. Republicans, in particular, could have avoided being branded as coddling millionaires. Each side is equally guilty of over politicizing these serious management and economic issues. The fact that Senator Coburn’s published report has remained in the policy wilderness for the last seventeen months is unconscionable.

Breaking Bad – Avoiding the Fiscal Cliff

A shorter verison of this column appeared in the Washington Examiner

http://washingtonexaminer.com/breaking-bad-avoiding-the-fiscal-cliff/article/2512227

The impending “fiscal cliff” is the most thoroughly predicted disaster since the end of the Mayan Calendar. The problem is no one is willing to design and implement a real solution that has any chance of bipartisan support.

The cycle of dysfunction has existed for decades. The Federal Budget Act of 1974 created what was supposed to be a rational process for planning, approving, and implementing government spending. It quickly became an empty paper exercise as appropriations ignored the Budget Resolutions. When the difference became embarrassingly stark, the Senate simply gave up on passing one at all. Additional budget reform legislation was passed and immediately ignored. Gramm-Rudman-Hollings, Budget Reconciliation, and the Government Performance and Results Act (GPRA), all gather dust. Annual budget deals, and continuing resolutions, put off the day of reckoning. Reagan’s 1982 budget deal resulted in more revenue and no spending cuts.

Administrations annually create a new budget. Hidden inside the hundreds of pages is the “Current Services Budget”, or “Baseline”. This outlines how much it costs to maintain existing services at current levels. It factors in various cost drivers - cost of living increases, escalation clauses in contracts, etc. Budget battles are fought over the increase above current service levels. When officials propose budget cuts they are talking about cutting the increase, not cutting current service funding levels. Therefore, there is a built in “ratchet effect” to expanding government spending.

The latest looming cliff is supposed to wrench the Washington policy players out of denial and avoidance, forcing them to actually do something real. This will not happen unless certain things change.

Start with the basics – Use the “Current Service Analysis” levels as the budget framework. Administration and opposing budgets can be aspirations compared against the true baseline. That will level the playing field and keep everyone honest about what is really an increase and what is really a reduction.

Rise above ideology - Both Democrats and Republicans contributed to the cliff. Both sides spend like there is no tomorrow. Both sides embrace “sacred cows”. Both sides live in a world where their people are angels and their opponents are demons. A good first step is to admit that each side has some good ideas and each side has looney ones.

Democrats need to understand that even their most cherished domestic assistance programs are riddled with waste and inefficiency. Republicans need to realize that the Departments of Defense and Homeland Security are just as bloated and dysfunctional as the liberal programs they assail.

Make Inspector Generals and the GAO “rock stars” – The Government Accountability Office (GAO) has 3,100 employees. There are also 73 Inspector General Offices embedded in Cabinet Departments and major agencies. All these offices are filled with highly trained, dedicated, objective civil servants who document waste, fraud, abuse, and inefficiency as well as recommend actions to eradicate and prevent future squandering of public resources. They document over $650 billion in waste annually. That is $6.5 trillion in cost avoidance and direct spending reductions over the ten years everyone uses to discuss the fiscal cliff. Except for a rare instance, these reports, and their detailed recommendations, are universally ignored.

The next Congress will be as grid locked as the last few. Partisan votes in the House will die in a Senate unable to muster sixty votes to move legislation. Then there are possible White House vetoes.

Therefore, why not check ideology at the door and embrace stewarding public funds? One hopes overwhelming numbers of Members from both parties, as well as the White House, would agree that waste is waste. Pass budget bills that specifically mandate GAO and IG recommendations are implemented and corresponding amounts of documented waste, fraud, and abuse are cut from programs and agencies. Resurrecting effective Congressional Oversight is long over due.

Having everyone discover that they can all agree on something will shift from the culture of confrontation to a culture of collaboration. Beginning swimmers start in the shallow end of a pool and then move into deeper waters as their skills and confidence improve. Congress and the White House could move into more complex and contentious waters as their ability to respectfully and constructively disagree improves.

Allow for public input - “Crowd sourcing” is being successfully used in several European countries to harness collective wisdom for public policy. Using either an ongoing “crowd sourcing” process, or an annual referendum tied to tax returns (like the Presidential Campaign fund check-off), citizens could either identify what to cut or what to fund. Their input would initially be advisory and mature into binding guidance as seriousness and sincerity are displayed by all involved.

If Congress, the White House, the agencies, and the media, do not explore these ideas, America faces a crisis that will dwarf the chaos in Greece.

[Scot Faulkner was Chief Administrative Officer for the U.S. House of Representatives. http://citizenoversight.blogspot.com/]



Running On Empty

Congress is stumbling towards one of its longest summer recesses. The Republicans, for the first time since losing the 2006 elections, are finally acting like a viable opposition party. Their issue is forcing a vote on offshore drilling. Speaker Pelosi is stalling any real action until her pollsters and operatives find a way for Democrats to respond to consumer pain at the pump while not alienating environmentalists.

Once again Washington politicians want Americans to turn to them for leadership, but hope empty rhetoric will suffice. They top Marie Antoinette – it is now “let them eat symbols” instead of “let them eat cake”.

Policy avoidance would be enough for Americans to dislike and distrust Congress. However, members from both parties are also proving they have not lost their appetite for graft and corruption. Rep. Charles Rangel (D-NY) is Chairman of the House Ways & Means Committee. He has admitted to raising $12.2 million from companies and individuals, associated with his committee, for the “Charles B. Rangel Center for Public Service”. He has also used his power to earmark tax dollars for his Center. Many of the “gifts” look like back door donations that skirt federal election and tax laws. This sordid paper trail was even too much for The Washington Post, which launched its own investigation and has bluntly editorialized about the whole matter not passing “the smell test”.

Not to be outdone, Senator Ted Stevens (R-Alaska) was indicted by a federal grand jury on seven counts of making false statements to conceal lobbyist gifts. It is the first criminal charges filed against a sitting Senator in fifteen years (when fellow Republican David Durenberger was indicted). This complex web of transactions and undocumented improvements to Stevens’ vacation home are part of a larger FBI probe into corruption within the Alaska state government. In 2006, the FBI raided the offices of six Republican state senators looking for evidence of bribes from the Veco Company. It is no wonder they attracted FBI attention. The six state senators had unfortunately called themselves the “Corrupt Bastards Club or Caucus” to the point of creating coffee mugs and baseball caps emblazoned with “CBC”. Equally unfortunate for Senator Stevens, his son, Ben Stevens was a member of the CBC.

Corruption, dysfunction, issue avoidance, and empty rhetoric have become the framework within which Congress operates. It is dismaying that the Democrat-led institution took less time to lose its way than when it was led by the Republicans. Americans deserve better. We have ninety-seven days before the November elections to demand better.