Earmark discipline

You want a Congressional achievement? Here's one.

The spending bill passed by the Senate on Wednesday contains not one shred of new pork. And the bill is not accompanied by a report, which in the past is how many earmarks found their way into the budget.

It's not that simple, of course. Sen. Tom Coburn charges that the bill still contains between $11 billion and $17 billion in hidden earmarks, and there apparently is a growing campaign to keep funding previous earmarks. And Congress has not yet done away with narrowly targeted tax breaks that by some measures cost up to three times as much as earmarks.

But even $17 billion is better than the $64 billion in earmarks that was larded into the budget bills that died with the 109th Congress. That cut dwarfs Bush's call to cut the number and value of earmarks in half. And while keeping previous earmarks alive is odious, at least Congress isn't adding more to the pile.

Even better, the White House is doing more than talking about earmark reform. The Office of Management and Budget has ordered federal agencies to ignore earmarks that are not written into law. That would appear, in one fell swoop, to solve the problem of hiding earmarks in reports, as well as eliminating the pressure to keep funding previous years' earmarks.

A previous OMB memo carefully defined earmarks and made rules for cataloging them, making them that much harder to hide.

Both are moves the administration could have made any time in the past six years, so let's mute the applause a little bit. And it's executive branch policy, not law, so it's rescindable at any time. But give credit where credit is due: it's a powerful and practical move that plugs the holes in Congress' earmark rules. I'll take this sort of hypocrisy any day.

budget, earmarks, politics, midtopia

Gary Miller pleads his innocence

Following up on Rep. Gary Miller's suspicious land deals, he pleaded his case to fellow Republicans this week.

Rep. Gary Miller (R-Calif.) passionately pleaded his innocence before GOP colleagues at a closed-door conference meeting Tuesday, nearly a week after several media outlets reported that the FBI is looking into his land deals.

Miller told colleagues that the press and Democrats had launched a smear campaign against him, singling out The Hill and the Los Angeles Times as perpetrators, as well as a former Democratic mayor of the Southern California city of Monrovia, Lara Larramendi Blakely, who now works for Rep. Hilda Solis (D-Calif.), according to GOP sources.

Ah, yes, the old "media smear job" defense....

So far, so unconvincing. He'll have to rebut the actual claims rather than attacking the messenger -- though to be fair, he might have done so and we just don't know it.

The comments came during an open-mic session at the end of a meeting designed as a discussion on House Republicans’ strategic plans to regain the majority in 2008, which were first laid out during a GOP retreat held the weekend of Jan. 24.

Before Miller spoke, House Minority Leader John Boehner (R-Ohio) noted that defining an ethics strategy is critical to winning back the majority and that members need to hold each other accountable, sources said.

The good news is the GOP knows they need to set some standards. The bad news is that Boehner is thus far letting Miller keep his seat on the Finance Committee's Oversight and Investigations panel, which oversees the IRS among other things. Considering the stories about Miller involve tax evasion, maybe that's not such a good idea.

Here's an additional revelation I didn't know about:

Since March of last year, The Hill has reported on various land deals involving Miller, including one in which he worked with Lewis to insert an earmark in the 2005 federal highway bill that shut down an airport in the Southern California city of Rialto. Even before the airport was shut down through the earmark, Miller’s business partner and top campaign contributor, Lewis Operating Corp., had an exclusive deal with the city to develop the airport land into a planned community consisting of 2,500 homes, parks and 80 acres of retail space.

Yeah, that looks good.

Gary Miller, corruption, politics, midtopia

The ultimate Brinks truck

Not much has come out of the widely anticipated grilling of Paul Bremer by Congressional Democrats. The WaPo's Dana Milbank attributes it to Dem rustiness in the art of holding investigative hearings, as well as Bremer's elusiveness.

Still, the one subject they did manage to bring up rather boggles the mind.

Near the end of 2003, as the United States prepared to hand over control of the country to the Iraqi government, the Iraqi finance minister expressed concern over his ability to pay government expenses during the first few months.

A fair concern. So what did we do? Perhaps we helped them set up accounting and finance systems. Or electronically transferred money to their accounts. Or let them channel payments through our own systems until theirs were up and running.

Well, no. Our solution was to airlift in $5.5 billion. In cash. On pallets. 363 tons of it.

The money belonged to the Iraqis, consisting of proceeds from oil exports and frozen Saddam-era assets. This wasn't U.S. aid, which usually has strings and financial controls attached. So perhaps outrage is misplaced. It was their money, and if they wanted it in cash, why not?

All well and good, but who really believes it all went to pay legitimate government expenses? How much of that, I wonder, has ended up helping finance the death squads and insurgents? How much of that disappeared into the pockets of corrupt officials? Dumping billions in cash into a war zone is akin to pouring gasoline on a raging fire. It was simply a dumb thing to do.

Then again, this is Paul Bremer we're talking about, and dumb (or even delusional) things seem to be his speciality. I guess we shouldn't be surprised.

Bremer, Iraq, politics, midtopia

Kerry bows out

Thank God. And I say that as someone who voted for the doofus in 2004. In my defense, I stated at the time that I would vote for a trained pig if the alternative was another four years of Bush. My vote was a vote against Bush rather than vote for Kerry.

Anyway, this isn't a big surprise; nobody wants Kerry to run, and any polling he did would have confirmed that. The real story would have been if Kerry was stubborn and tin-eared enough to run anyway.

One question remains: What will Kerry do with the $13 million in his campaign war chest? That's enough money to make a difference in either the primary or general elections. The question is, would anyone want the money bad enough to accept the "supported by John Kerry" tag that goes with it?

Assuming he gives it to anybody -- as opposed to, say, using it for his own Senate re-election campaign or donating it somewhere -- I see two intriguing possibilities. He could give it John Edwards, framing it as a donation to his former running mate, which would take away some of the "Kerry supports me" stain. Or he could give it to Dennis Kucinich, who doesn't stand a chance of winning the nomination but could do some interesting things with $13 million in his pocket.

Or he could just donate it to the DNC or one of the Congressional campaign funds.

Update: Just musing here, but consider what might have been had Kerry won in 2004. We might have begun an earlier withdrawal from Iraq (although there's a good chance Kerry would have tried to show he could fight the war better than Bush). But outside of that, assume he was as terrible a president as his critics feared. His power would have been hobbled by the Republican majority in Congress, so there would be a limit to how much damage he could do. Further, Congressional Republicans would have had a good foil to work against, and not been borne down by the lead weight of Iraq. So conceivably a Kerry presidency might have left the GOP in charge of Congress in 2007, and positioned them well to recapture the White House in 2008, since Kerry would presumably run again.

Thoughts?

Kerry, politics, midtopia

Not serious about war, Part II

A month or so ago, I wrote about how the Future Tactical Truck (FTT) program shows that the Pentagon is not taking the war in Iraq seriously.

Now, we've got yet more evidence.

After nearly four years of war in Iraq, the Pentagon's effort to protect its troops against roadside bombs is in disarray, with soldiers and Marines having to swap access to scarce armored vehicles and the military unsure whether it has the money or industrial capacity to produce the safe vehicles it says the troops need....

Even if the Pentagon can find millions of dollars not currently budgeted, and even if it can find factories to produce the armored vehicles, most U.S. troops in Iraq will not have access to the best equipment available, as President Bush has often promised.

The Army acknowledged last week, for example, that it is still 22 percent short of the armored Humvees it needs in Iraq despite heated criticism in 2004 and 2005 over the lack of armored vehicles.

Army officials said it will be another eight months before that gap can be filled.

Wait, it gets better. Unable to actually protect the troops, the Army is putting a Band-aid on a gaping wound:

The Army is shipping 71,000 sets of fire-resistant uniforms to Iraq so that soldiers will have a better chance of surviving the fires that often consume Humvees that hit roadside bombs.

It's not just armored Humvees. The military plans to largely replace Humvees with V-shaped vehicles call MPVs -- a class of armored car that has been produced and used for years by other countries that are very good at surviving explosions. We're not talking about having to develop a new vehicle from scratch; we're talking about buying or modifying an existing design.

Even so, the first MPVs aren't expected to reach Iraq until March 2008.

The Pentagon says it is doing all it can. Apparently "all it can" means that even four years into this fight we haven't ramped up development, production or purchasing of vehicles everyone knows we need. Just like with the FTT, we're still on a peacetime development cycle.

As I said a month ago, if this mentality had prevailed in World War II, we would have fought the whole thing with Grant tanks and 37mm antitank guns -- and lost.

military, Iraq, politics, midtopia

Senate passes ethics bill

Second time was the charm, as Republicans (rightly) withdrew their attempt to attach a line-item veto amendment to the package, which derailed an earlier attempt at passage. The unamended bill passed 96-2.

Democrat Robert Byrd, the main obstacle to a compromise, found himself isolated.

For nearly two days, Sen. Robert C. Byrd (D-W.Va.) -- who jealously guards the Senate's prerogatives on spending matters -- single-handedly blocked efforts to come to an accord on that line-item veto vote....

But Reid found a path around Byrd, offering Republicans a chance next week to add the spending control measure to a bill to raise the minimum wage if they can find the votes. That broke the logjam, and the Senate then began debating several amendments to the bill, with an eye toward completing work late last night.

A good compromise. The minimum wage bill has plenty of momentum, too, and attaching the veto to it could actually increase support by drawing in Republicans who otherwise would oppose the wage bill. That could end up giving the bill a Byrd-proof majority (and veto-proof, too, though that's not a real risk).

The ethics bill is pretty good, but there are still some problems. For instance:

Lobbyists for the American Israel Public Affairs Committee, or AIPAC, also talked to lawmakers about excluding from the measure's travel ban trips to Israel sponsored by the group's nonprofit foundation affiliate. The legislation, as written, would allow those trips to continue.

So as long as a lobbying group has a nonprofit affiliate, they can still pay for legislator travel? That's stupid.

And the story notes a big loophole related to fundraising events, which aren't mentioned at all.

It's a good sign, though, that lobbyists worked so hard to derail the bill. It's not a solution, but it's a step forward.

corruption, politics, midtopia

Unpleasant math

What can $1.2 trillion buy?

Less than half of that would let us double cancer research funding, treat every American who has diabetes or heart disease and immunize every child on the planet against measles, whooping cough, tetanus, tuberculosis, polio and diptheria -- all for a decade.

$350 billion would provide a decade of universal pre-school.

$100 billion over a decade would be enough to fully implement the 9/11 Commissions recommendations and provide more aid to Afghanistan.

Or you could choose, as we have, to blow it all on Iraq. And that's a relatively conservative estimate.

The sheer scale of waste and forgone opportunities boggles the mind.

Iraq, budget, money, politics, midtopia

Another Democratic fumble

For an example of why earmark reform is going to be messy, consider this: Senate Democrats were forced to delay a vote after nine Democrats joined with Republicans to back a reform bill that is stricter than the Democrat version.

The measure, an amendment to an ethics and lobbying bill, would have adopted a wider definition of "earmarks," specific projects inserted in bills, to include Corps of Engineer water projects, Pentagon weapon systems and items from other federal entities.

The language favored by Reid would require disclosure of only targeted funds directed to nonfederal entities such as city parks, state universities and private contractors.

Good as far as it goes; the Republican bill essentially mirrors language passed by House Democrats. But here are the two most interesting details:

DeMint insisted that the Senate definition would catch about 5 percent of earmarks, saying that in most instances lawmakers insert their pet projects not into the bill itself but into the explanatory report language that accompanies the bill and is not subject to a vote.

Sen. Tom Coburn, R-Okla., said that of 12,852 earmarks found in bills last year, 534 would be subject to Senate disclosure rules....

Democratic Whip Dick Durbin, D-Ill., also said the DeMint provision was "unworkable" because it was so broad it could be applied to thousands of projects included in federal spending bills.

This illustrates a common Congressional trick: passing laudable bills, but writing key exceptions into the instructions for federal bureaucrats who actually come up with the regulations and formulas for turning the bill into workable law.

And if Durbin's right, it means lawmakers must first agree on a meaningful definition of "earmark."

But legislation that only catches 5 percent of such deals isn't worth the effort. Congress should come up with an effective rule or stop pretending it cares.

earmarks, ethics, politics, midtopia

Implementing the 9/11 Comission recommendations

One of the Democrats' "100 hours" promises was to implement all of the 9/11 Commission's recommendations, notably a push to screen every cargo container that enters the country, plus mandates to distribute security funds by need rather than geography.

The latter is a no-brainer, and it has been a badge of shame for Congress that up until now such spending has been subject to the same "every Congressmember gets a share" mentality that has so poorly served the country.

On cargo inspection, however, conservatives are pushing back.

The bill requires that within three years, all cargo on passenger jets be inspected for explosives, as checked baggage is now. The House bill also requires that within five years all ship cargo containers headed to the United States be scanned overseas for components of a nuclear bomb.

Homeland Security Department officials say there is no proven technology for such comprehensive cargo screening, at least at a reasonable cost or without causing worldwide bottlenecks in trade. The screening for air cargo is estimated to cost $3.6 billion over the next decade, and ship inspections could cost even more. “Inspecting every container could cause ports to literally shut down,” said Russ Knocke, a Homeland Security spokesman.

First off, reasonable cost? We've spent or authorized about $400 billion on Iraq thus far, with credible estimates putting the long-term cost at up to $2 trillion. $3.6 billion for a decade of cargo screening is a bargain by contrast.

Maybe conservatives are bad at math.

The more credible criticisms are whether 100 percent screening should be a mandate rather than a goal, and whether the proposed methods would actually work efficiently.

I totally understand cumbersome bureaucracies using ineffective technology: consider the Transportation Security Administration. It would be pointless to spend billions installing a system that doesn't work. For instance:

The radiation detection equipment now in use, for example, probably would not pick up a crucial radioactive substance for a nuclear weapon if the material was shielded. And even if all cargo containers were checked, terrorists could find other ways to smuggle weapons into the United States, including on private boats or ships that carry cars, which would not be not covered by the inspection mandates.

But that's a criticism of a specific technology. And smuggling in radioactive materials in cars or boats opens would-be terrorists to detection by other means, as well as simply making it more difficult. A working nuke, even a small one, weighs a ton and fits in a pickup truck bed. That's a difficult thing to transport, much less move across the border undetected.

In any event, such reservations should be an excuse to ignore the gaping cargo hole in our security net.

Is it worth several billion to improve cargo inspections? Yes. Can we do it without shutting down international commerce? Yes, even if we have to resort to such low-tech methods as hiring thousands more inspectors to physically search more containers, both randomly selected and those identified as suspicious based on port of origin, destination, the shippers involved, paperwork problems, etc.

Such inspections would pay other dividends as well, helping fight both smuggling and illegal immigration. So the cost could be justified on broader grounds than "finding nukes."

Speaking of bureaucracy, consider this beauty:

Homeland Security Department officials said they were researching ways to inspect more air and sea cargo. The agency has tests planned this year at three ports in Pakistan, Honduras and England, where all ship containers headed for the United States will be checked for radioactive substances or dense objects that might be hiding a bomb.

Got that? Five years after 9/11, the agency is researching ways to inspect more cargo. Way to go, guys. Nimble and flexible, that's you.

I'll accept that 100 percent screening should be a goal rather than a mandate. But intermediate steps -- say, 50 percent or 75 percent -- should be mandates, with the specific methodology and timetables emerging after discussions with Homeland Security. Such a two-pronged approach would provide increased security now and the promise of a more thorough and efficient process later as technology matures.

Update: Here's a nice explanation of the difficulties involved in detecting enriched uranium. Plutonium's easy; uranium, much less so.

terrorism, security, politics, midtopia

Now in session

The Minnesota Legislature opened its session today, with a situation mirroring the national one: both chambers controlled by Democrats (or the DFL, as they're known here) and the governor's seat occupied by a Republican.

One major difference, though, is in that Republican: Tim Pawlenty has already acknowledged the need to change course on several things, and he was always more clueful and willing to compromise than Bush is. So there's actually some hope that this legislature will be able to get some good things done.

Here are some of the things I've asked my elected representatives to do. A lot of the big issues (like civil liberties, health care, education or Iraq) are missing, and that's deliberate: I consider these items that need addressing, but are at risk of being lost in the shuffle.

To my local representatives:

1. Fund transit projects like the Central Corridor and Northstar, and start looking at ways to expand it into the western suburbs.

2. Legalize instant-runoff voting, both as an option for local elections and as a requirement for statewide contests.

3. Allow grocery stores to sell wine. It's a small thing, but I strongly dislike it when an industry (liquor stores, in this case) uses the law to insulate itself from competition.

4. Stop balancing the state budget on the backs of property taxpayers.

Nationally, I've asked my representatives to:

1. Sign on to tighter ethics rules and more transparent government.

2. Adopt "pay as you go" rules and aggressively reduce the deficit.

3. Reform Social Security by eliminating the earnings cap (thus replenishing the "trust fund" by recouping money from the taxpayers who most benefited from raiding it) and indexing benefit increases to inflation.

The list is hardly exhaustive. Feel free to list your political priorities in the comments.

Minnesota, politics, midtopia

How much should you give?

Ethicist Peter Singer has an interesting article in the New York Times magazine on charitable giving. It's largely a discussion of "how much should one give?" and makes the argument that it is perfectly defensible, on moral grounds, to tax the rich more heavily than the poor and to expect them to donate more.

I've been looking for an article like this for some time. I'm nearing 40, and my wife went back to work this year. So we're starting to hit that point in midlife where our discretionary income is high enough to make serious charitable giving a possibility. Up until now our monetary donations have been small and irregular -- several hundred dollars a year, generally. Most of our charity has been about deeds: donating blood, helping neighbors, sending our excess belongings to nonprofits rather than throwing them out or holding a garage sale.

But now we're starting to think about charity in a more organized way, and Singer's article offered some thought-provoking ways to think about it.

Some of his more interesting observations:

1. Of the top four charitable givers in United States history, three were/are atheists or agnostic: Bill Gates, Warren Buffett and Andrew Carnegie (John D. Rockefeller, the fourth member of the group, was a Baptist). Further, Buffett's charitable pledges -- about $37 billion -- more than double that of Carnegie and Rockefeller put together -- after accounting for inflation. Bill Gates' donations are nearly as large: about $30 billion.

That says nothing, of course, about whether believers or nonbelievers as a group are more generous. But it's food for thought, as well as demonstrating the scale of modern philanthropy.

2. A lot of people argue that the rich owe much of their wealth to the society that helps them create it, but I've never seen the argument laid out in detail. Singer does. He cites Nobel-winning economist Herbert Simon, who estimates that social capital -- the prevailing social, governmental and economic conditions -- accounts for about 90 percent of what people earn in wealthy societies like ours. "On moral grounds," Simon adds, "we could argue for a flat income tax of 90 percent." Simon notes that that would be economically disastrous, but there's nothing unethical with taxing more heavily those who can most afford to pay.

Warren Buffett explicitly agrees with that logic. "If you stick me down in the middle of Bangladesh or Peru,” he said, “you’ll find out how much this talent is going to produce in the wrong kind of soil.”

3. Further, the better off have an ethical obligation to help the poor, because part of our affluence comes at their expense. This according to Columbia University professor Thomas Pogge, who points to everything from trade barriers that protect rich-but-inefficient American farmers from poor-but-efficient African ones, to corporations that buy natural resources from any government willing to sell -- thus providing a market incentive for civil war and corruption that acts as a tax on the developing country's poor. So helping the poor is not charity; it is compensation for some heretofore externalized costs of our own actions.

4. While Americans as individuals are among the most generous in the world, our government aid is so paltry that when we add the two together we still come in well behind countries like Denmark, Sweden and the Netherlands, who give three or four times as much total foreign aid (expressed as a share of GDP) than we do.

5. If, Singer says, we define "charitable obligation" as "shoulder our fair share", what does that mean? Singer cites the UN Millenium Development Goals, which hopes, by 2015, to: halve the percentage of people living in extreme poverty; halve the percentage of people who suffer from hunger; halve the percentage of people without access to safe drinking water; provide a primary school education to all children; reduce child-mortality rates by two thirds; reduce maternal mortality by three-quarters; and reverse the spread of AIDS, malaria and other major diseases.

The estimated cost of reaching those goals is $121 billion in 2006, rising to $189 billion a year by 2015. Much of that is already pledged, leaving an annual shortfall of about $48 billion this year and $74 billion by 2015.

If the top 0.01% of U.S. taxpayers (14,400 of them, earning at least $5 million and an average of $12.8 million) gave away 33% of their annual income, they would suffer no hardship and generate $61 billion a year.

If the rest of the top 0.1% of taxpayers (130,000 of them, earning at least $1.1 million and an average of $2 million) gave away 25% of their income, they would suffer no hardship and generate another $65 billion.

Either group alone could fund the Millenium Goals shortfall entirely by themselves. Both groups together could fund the entire program without government help.

You can keep stepping down the income scale, with the top 0.5 percent donating 20% and raising $72 billion; the top 1 percent donating 15% and yielding $35 billion; or the top 10 percent donating 10% and raising $171 billion.

As Singer notes, the most remarkable thing about those numbers is that a scale of donations that is unlikely to impose hardship on anyone would yield an annual total of $404 billion -- from just 10 percent of American families.

Throw in other countries, and the world's wealthy could easily provide $808 billion annually for development aid -- a staggering and world-changing amount.

When the choice is portrayed thus -- buy a yacht, or save 1,000 children from death -- it's not really a defensible decision to buy the yacht; the trickle-down effects of yacht-buying fall far short of the direct effects of charity.

That does not mean the rich should don hairshirts. Singer's numbers leave the wealthy with plenty of money to buy the yacht, and he argues that it's perfectly fine that they do so -- provided they have met their ethical obligations first.

What does that mean for those of us closer to the bottom of the scale? Do what you can. As evangelist Dan Stratton said in the same issue, God's 10 percent (the traditional Christian tithe) should come off net income, not gross. "A tithe isn't supposed to bankrupt you," he explains.

I suggest charitable deeds when your net income is low, scaling up the monetary giving as your net income grows. My wife and I haven't yet figured out what percentage we're aiming for; we're still trying to establish what our true net income is, once we subtract child care and commuting expenses. I don't know if we'll give until it hurts, but Singer has motivated me to make sure we give something meaningful -- and keep giving for the rest of our lives.

ethics, charity, politics, midtopia

Are large sums of cash illegal?

Apparently, yes.

A federal appeals court ruled yesterday that if a motorist is carrying large sums of money, it is automatically subject to confiscation. In the case entitled, "United States of America v. $124,700 in U.S. Currency," the U.S. Court of Appeals for the Eighth Circuit took that amount of cash away from Emiliano Gomez Gonzolez, a man with a "lack of significant criminal history" neither accused nor convicted of any crime.

Clearly, the details are important here. But shouldn't the money -- or at least the owner -- be actually connected to a crime before police can seize his property?

crime, midtopia

Government on the cheap

First, Gov. Tim Pawlenty wanted contractors to front their own money in order to get contracts to work on the Crosstown Commons project. The result? Nobody submitted a bid, and the project is now delayed for at least a couple of months.

Now Pawlenty wants private businesses to lend the state their top IT experts for a year -- for free.

The state is asking high-tech firms and large corporations to lend their computer experts for as long as a year to the Office of Enterprise Technology. The private companies would continue to pay their employees' salaries and benefits.

The computer experts would be put to work on an ambitious project to reinvent the government's computer network. The proposal lists 14 categories of work, ranging from cyber security to systems development to government Web site design.

The first question that jumps to mind is, "why would the private sector agree to this?" The answer to that, the state hopes, is civic-mindedness and the chance to guide the direction of state government.

That's a beautiful thought. And if it works without murky quid pro quos, great; I'll admit I was wrong.

But consider these other thoughts:

1. Why would a party that routinely demonizes government as "the problem" suddenly expect companies to respect government enough to donate their top people?

2. There is no free lunch. Why is it better to effectively tax a few individual companies in order to fill a statewide need, rather than spreading the pain around by simply hiring the necessary experts with taxpayer money?

3. What kind of example do we set when our government keeps trying to find ways to not pay for what it wants?

The article calls this a "grand experiment." But it doesn't strike me as grand so much as chintzy, an attempt to chisel the private sector for something that should simply be paid for like any other government obligation. This isn't the Peace Corps; this isn't an attempt to change the world. It's computer infrastructure. We would not expect Dell to give the state free PCs, nor would we expect AT&T to provide free high-speed data links. So why should we expect free IT design services?

A "grand experiment" would be a project designed to help citizens directly, like a statewide WiFi network or an education initiative or something like that. Modernizing the government's computer network just doesn't fit the bill. It's small-bore thinking wrapped up in gaudy language.

Drive to Excellence, Pawlenty, Minnesota, politics, midtopia

Estate tax lunacy

That's what Harold Meyerson calls it. And he's right.

If enacted, Kyl's bill would plunge the government another trillion dollars into the red during the first decade (2011-2021) that it would be in [/quote]effect....

A decades-long campaign by right-wing activists (brilliantly documented by Yale professors Michael Graetz and Ian Shapiro in their book "Death by a Thousand Cuts") has convinced many Americans that the estate tax poses a threat to countless hardworking families. That was always nonsense, and under the estate tax revisions that almost all Democrats support -- raising the threshold for eligibility to $3.5 million for an individual and $7 million for a couple -- it becomes more nonsensical still. Under the $3.5 million exemption, the number of family-owned small businesses required to pay any taxes in the year 2000 would have been just 94, according to a study by the Congressional Budget Office. The number of family farms that would have had to sell any assets to pay that tax would have been 13.

On the other hand, an estate tax repeal would save the estate of Vice President Cheney between $13 million and $61 million, according to the publicly available data on his net worth. It would save the estate of Defense Secretary Donald Rumsfeld between $32 million and $101 million. The estate of retired Exxon Mobil chairman Lee Raymond would pocket a cozy $164 million. As for the late Sam Walton's kids, whose company already makes taxpayers foot the bill for the medical expenses of thousands of its employees, the cost to the government for not taxing their estates would run into the multiple billions.

Is now really the time to blow another $1 trillion hole in the budget? If we decide the answer is "yes", is this the cause we should blow it on? I don't think so.

"Republicans" and "fiscally responsible" don't belong in the same sentence any more. And Democrat Max Baucus should be ashamed of himself:

Behind the scenes, the action has been on the Democratic side in the Senate, as the party's leadership has sought to dissuade Montana's Max Baucus, ranking Democrat on the Finance Committee, from forging a halfway-house compromise with Kyl that would deplete revenue by only $500 billion to $600 billion during that decade.

"Only" $500 billion? Boy, what a relief.

Before we repeal the estate tax, how about fixing AMT and eliminating the budget deficit? Just for starters, I mean. The list of things that should be ahead of "repeal estate tax" on the priority list is a long one.

budget, estate tax, politics, midtopia

Bush on pensions

You might not know it, but I'm not a big fan of President Bush. However, he occasionally does something right. And his proposals for pension reform are one of them.

The basic problem is this: pensions are underfunded by a staggering amount -- $450 billion or so. This puts workers' retirements at risk, but it also threatens the survival of weaker companies. And when those companies shed their pension liabilities in bankruptcy, taxpayers pick up the tab.

Why the underfunding? Some of it can be blamed on corporations promising more than they could afford, or chintzing on their contributions. But some of it results from the complexity of trying to estimate how much money you will have 30 years from now.

Such a calculation requires assumptions about what the economy as well as specific investments will do over that time span. No one really knows what will happen that far out, so all you can do is make educated guesses. Change your guess, and you change the result: a pension fund that is paid up under one set of assumptions could show up as deeply in the red under another set.

Then you have complications, like when companies make their contribution in stock instead of cash or other assets. Enron's pension fund, for instance, would have been fully funded right up until the day it collapsed.

We could simply require companies to make up the difference immediately. But there are trade-offs there, too. If United Airlines had been forced to retain its pension liabilities when it declared bankruptcy it would have been liquidated, throwing 57,000 employees out of work and sending additional shockwaves through the broader economy. Would that have been a preferable result?

So it's not a simple question of forcing companies to pay up. And the administration's proposals reflect that.

They have three basic ideas:

1. Strengthen minimum funding rules. This would replace the current hodgepodge of funding methods with a single set of acceptable procedures. It would require healthy companies to fund the full normal liability, while weaker companies would have to cover "at-risk" liability -- the amount that would have to be paid out if the plan terminated early and resulted in accelerated payment of benefits. They would also set minimum payments for plans that are underfunded, and not allow underfunded plans to increase benefits. In the worst cases, benefits would be frozen until the company made up the shortfall.

Improve disclosure. Requires that plan participants be notified of any underfunding.

Raise pension insurance premiums. This is a direct effort to fix the financing of the Pension Benefit Guaranty Corp., which is $23 billion in the red after absorbing the pension liabilities of several large corporations.

The cumulative effect should be more reasonable funding of pension benefits and less exposure for taxpayers.

The one glaring hole in this proposal is that government pension plans remain exempt from the rules. There's a reason for that: it lets the government buy off its workers with ever-increasing pension benefits without having to account for the true cost of those benefits. Taxpayers 30 years from now will find themselves on the hook for huge pension costs that were never properly discussed or provided for. That's inexcusable; the government should have to abide by the same rules it imposes on the private industry.

In the end, though, this whole discussion -- and the spate of pension fund failures -- should probably convince workers that pension promises are largely worthless, a form of deferred payment that is not guaranteed. Lucrative as they can be for workers who qualify for maximum benefits -- working their entire careers at companies that last long enough to pay up -- they're much less valuable to today's workers, who move around from job to job and work for companies that likely won't survive 30 years.

With defined-contribution pensions, workers get the money now, and they can take it with them when they change jobs. Though we need protection for older workers as we transition to a system without defined-benefit plans, the new global economy makes clear that trusting your retirement to your company has become a foolish gesture indeed.

retirement, pensions, politics, midtopia

"Beyond reason"

The planned 9/11 memorial at Ground Zero in New York City is expected to cost -- are you ready? -- nearly $1 billion.

I'm not making this up.

Rebuilding officials concede that the new price tag is breathtaking — "beyond reason" in the words of one member of the World Trade Center Memorial Foundation board — and it is sure to set off another battle over development at the 16-acre site, with calls to cut costs, scale back the design or even start over.

This is just the memorial, not the commercial development going up at the site. And that's not counting an $80 million visitors' center being built by the state.

The new estimate, $972 million, would make this the most expensive memorial ever built in the United States.... It is likely to draw unfavorable comparisons to the $182 million National World War II Memorial in Washington, which opened in 2004; the $29 million Oklahoma City National Memorial, which opened in 2000; or the $7 million Vietnam Veterans Memorial in Washington, which opened in 1982.

Much of the problem is that the memorial would be underground, necessitating lots of expensive steel, concrete and labor. But that's hardly an excuse. Some of these estimates are dramatically higher than they were just a few months ago.

The report estimates the cost of just the memorial and its related museum at $672 million, up 36 percent from $494 million only four months ago. In addition, the latest projections include $71.5 million for an underground cooling plant, up from $41.5 million four months ago.

How does a cooling plant's cost go up 72 percent in just four months, except through really bad planning?

If the memorial foundation were able to raise that kind of money privately, then no problem. I'd still think it reflected seriously misplaced priorities, but it's private money. However, in perhaps a sign of good sense among the American public, the foundation has collected just $130 million so far.

New York's mayor and the governors of both New York and New Jersey have said the memorial shouldn't cost more than $500 million. That's still a bit mind-boggling, but as an upper limit it seems quite reasonable.

We need a memorial, and it should be tasteful, impressive and thought-provoking, as befits such a history-changing event. But turning its construction into an enormously expensive boondoggle would not do justice to the memories of the victims. Set a reasonable price tag, and then design the best memorial that fits the budget.

New York, WTC, memorial, Ground Zero, politics, midtopia

The wealth gap and the estate tax

From the New York Times comes yet more evidence of the growing concentration of wealth in America, this time from an analysis of inheritances.

In 2004 median inheritances — half were bigger and half were smaller — amounted to about $29,000 in today's money, according to a Federal Reserve analysis of the Survey of Consumer Finances. That is enough for the heirs to buy a new Pontiac Coupe. But for almost all, it is hardly life-changing money.

Nor are inheritances likely to increase. According to the analysis of the Fed data by Mark Zandi of Moody's Economy.com, 30 years ago the median inheritance was about $10,000 more, adjusted for inflation.

Yes, big money is being passed down. According to the Fed data, the overall pie of inheritances has grown to nearly $200 billion annually — more than three times the amount that was passed down in the mid-1970's, after accounting for inflation. ... But the typical American is seeing little of this wealth. Mr. Schervish and Mr. Havens found that most money would go to a few lucky heirs: 7 percent of the estates would account for half the aggregate bequests.

There are several reasons for shrinking inheritances, starting with basic demographic changes: parents are living longer and spending more of their money themselves, and most people do a lousy job of saving for retirement at a time when fewer and fewer people can rely on pensions and other traditional sources of retirement income. So what money they do save gets spent.

But simple demographics cannot explain the increasing concentration of wealth reflected in the statistic that 7 percent of estates account for half of the money being passed down.

The story notes that wealthy heirs are seeing more and more money:

"We are seeing bigger-sized estates," said Myra Salzer, president of the Wealth Conservancy in Boulder, Colo., which helps heirs manage their inherited wealth.

"Wealth is just exploding," said Daniel FitzPatrick, chief executive of Citigroup Trust, whose clients typically have hundreds of millions of dollars.

Add this to all the other evidence of wealth concentration in America, and other measures of disparity such as CEO pay, which now averages 500 times the wages of average workers. 15 years ago the ratio was 140 to 1; 40 years ago it was 40 to 1.

I don't believe in "punishing the rich" simply for being rich; I'd like to be rich someday, after all. But I do think that it's fair to tax someone's second $300,000 at a higher rate than everyone's first $300,000. And I think we all have an interest in the ill effects of excessive wealth concentration.

Tie up too much wealth in the hands of the few and you damage the economy, limiting opportunity and driving social unrest. For extreme examples look at France during the runup to the French Revolution, or Victorian and Edwardian England, or parts of South America today, where the wealthy live in fortresses, drive armored cars and employ bodyguards while the poor scavenge for food in city dumps. This is how revolutions are born.

Which brings us to the estate tax -- or, as Republicans like to spin it, the "death tax." Along with the Bush tax cuts that provided disproportionate relief to the wealthy, the gradual repeal of the estate tax plays a large part in increasing the concentration of wealth.

Republicans cast it as simple fairness: why should someone's money be taxed twice? It's a fair argument, but it ignores several things:

1. A lot of money is taxed twice, through sales taxes, for example. Or consider the gift tax. Give someone more than $10,000 a year and it's subject to tax. Why, then, does it make sense to exempt a gift from taxation simply because the giver has died?

2. The estate tax brings in about $70 billion a year. In a time of war and budget deficits, is it really good policy to blow another gigantic hole in the budget for a law that only benefits the very very rich?

3. What is the social benefit of allowing heirs to receive millions of unearned dollars tax-free?

4. The government taxes nearly every transfer of money. What is the rationale for refusing to tax this transfer of money? What separates it from all the other transfers of money that we do tax?

It makes no sense to worsen our budget situation in order to provide a tax benefit to the least needy -- especially when doing so actively harms society and the economy. I'll give Bush the benefit of the doubt and call it a case of following a principle out the window instead of simply pandering to wealthy supporters. But it's a move we simply cannot afford -- in any sense of the word.

economy, estate tax, taxes, politics, midtopia

Debt and stimulus

Bush supporters credit the President with cutting taxes (and, mumble mumble, boosting spending) in order to stimulate economic growth and dig us out of recession. "Works every time!" they say.

Well, duh. Borrowing $1.9 trillion and injecting it into the economy should certainly provide some stimulus. The real question is: does the extra economic growth justify the debt incurred? How long will it take to pay that debt?

To answer that question I've put together a spreadsheet that (hopefully) is downloadable via this link. It lets you input relevant variables and see the effect on the deficit, the debt Bush has incurred during his term, and the total national debt.

(If the link doesn't work, please e-mail me and I'll fix it.)

I start with FY2005. The numbers come from Treasury Department data.

For instance, Bush has incurred about $1.9 trillion in debt through the end of FY2005. If we assume that inflation averages 2.2%, revenue grows a fairly robust 2% above inflation, and spending grows a relatively restrained 1% above inflation, we see three things:

1. It will take until 2021 to run a budget surplus;
2. It will take until 2033 to pay off the Bush debt;
3. It will take until 2041 to pay off the national debt.

This assumes the government uses *all* of its extra cash to pay down the deficit, rather than to pay for new programs. The history of government is, shall we say, not encouraging in that regard. When a budget surplus appears, we tend to spend it.

It is therefore doubly irresponsible to borrow huge amounts of money in order to stimulate the economy. First, because the debt will take so long to pay off; and second, because we lack the fiscal discipline to avoid spending the eventual largesse.

For those of you praising Bush for cutting taxes without cutting spending: think fondly of him in 2020, when you're still paying off the debt he rang up on your behalf.


economy, Bush, tax cuts, deficit, budget, politics, midtopia

The cost of ignoring civil liberties

The United States has agreed to pay $300,000 to an Egyptian man detained after 9/11.

NEW YORK -- The U.S. government has agreed to pay $300,000 to an Egyptian man who was detained for nearly a year following the Sept. 11, 2001, attacks but was never linked to terrorism, his lawyer said.

The settlement was filed in Brooklyn federal court on Monday, said attorney Haeyoung Yoon, who represents Ehab Elmaghraby. She said she believed it was the first settlement involving the claims of people detained after Sept. 11.

Elmaghraby, a former restaurant worker, was held at the Metropolitan Detention Center in Brooklyn from Oct. 1, 2001, until August 2002, Yoon said.

(snip)

Elmaghraby said he was shackled, shoved into walls, punched and called a terrorist and epithets at the facility. Yoon said he was subjected to repetitive strip searches and a correction officer penetrated his anal cavity with a flashlight.

While in custody, Elmaghraby's thyroid condition was misdiagnosed as asthma, worsening it, Yoon said. He wanted to continue with the lawsuit but settled because of his mounting medical costs, she said.

This may well be just the first of many lawsuits, not counting a class-action suit that has been filed on behalf of all such detainees. It demonstrates once again the high cost of arbitrary detention and abuse of prisoners.

Ignoring civil liberties is a bad idea to begin with. And now it's going to become an expensive one.

Technorati tags
terrorism, detainees, elmaghraby, civil+liberties, civil rights, politics, midtopia

Why Iraq is a hideously expensive distraction, Part II

Today, for better or worse, Iraq is the central front of the war on terror.

Should it be? This is the second of two articles looking at the terror threat and the Iraq experience through a cost/benefit lens.

Part II: How big is the terror threat, and what should we do about it?

How much would you pay to avoid a 0.0000008% chance of dying?

It's not an idle question. When allocating limited resources, the first step has to be defining the risk. We spend a lot of money researching cancer cures because cancer kills millions of people every year. We spend almost no money researching a cure for mucopolysaccharidosis, which usually kills its victims by age 25 but only affects about 200 people nationwide. That stinks if you're one of the 200, but it makes perfect sense to spend more money on the biggest threats.

Such analytical methods were developed because, quite frankly, people suck at assessing risk. We tend to overemphasize the danger of rare but spectacular events and minimize the danger of common incremental events. That's why more people fear flying than fear driving, even though driving is many times more dangerous.

What happens if we apply the same logic to terrorism?

One way to measure the danger posed by terrorism is to compare the risk of dying in a terror attack to other causes of death in the United States.

Since 1990, there have been four major terrorist attacks in the United States: Oklahoma City, the first Trade Center attack, the Olympic bombing in Atlanta and 9/11.

That's four attacks in 14 years; hardly a crisis. Further, half of those attacks were the work of disgruntled individuals, unrelated to any broader terror movement. And they come against the background of a steady 20-year decline in the number of terror attacks worldwide. Attacks have increased in lethality and spectacle, but there are fewer of them.

Now let's look at casualties. Those four attacks caused roughly 3,175 deaths over 14 years, in a population of about 300 million. That's an average of 230 deaths a year -- far closer to mucopolysaccarhidosis than cancer. Put another way, the average American has a 0.0000008% chance of dying in a terror attack in any given year.

If you look at causes of death in the United States you'll find that terrorism is right up there with such national crises as falling from a ladder (406 deaths in 2002), drowning in your bathtub (352 deaths), riding a "special agricultural vehicle" (149 deaths) and "overexertion, travel and privation" (128 deaths). Heck, on average more people accidentally shoot themselves to death (243) than die at the hands of terrorists.

Put into perspective, terrorism isn't even close to a national threat. It does not threaten our national survival, and it does not threaten the life of average Americans in any meaningful way. One could plausibly argue that our response to terrorism has done more damage to Americans than terrorism itself. 9/11 killed 3,000 people and caused several billion dollars in economic damage. Our response has killed even more people and cost $400 billion, all of it borrowed. The terrorists could only dream of inflicting as much harm on us as we have inflicted upon ourselves.

Of course we still have to combat terrorism, and of course our response should be outsized; we don't just passively accept the murder of American citizens. And there are psychological and economic aftershocks from spectacular stunts like 9/11. But by any measure our response has been way out of proportion to the risk.

So how much effort should we put into fighting terrorism? That requires an honest national debate, but I think critics of the Iraq campaign had it right: terror is better handled as a law enforcement and intelligence matter than as a military one. Not only would that be more effective, it would be far cheaper.

When clear targets are identified, military force can be beneficial: the campaign in Afghanistan is a prime example of that. But the military clearly should play a supporting role, not a starring one. We are better served keeping our soldiers available as a credible deterrent and to fend off true threats to national survival.

So what works? In Part I, I explained why the "war on terror" justifications for Iraq are nonsense. Instead, I think four broad strategies offer the most chance of success:

Go after the terrorists directly. Continue the ongoing effort to boost our intelligence-gathering abilities, so we can root out terrorist cells and choke off terrorist financing. This includes the less noxious parts of the Patriot Act, allowing law enforcement and intelligence communities to share information. We also need to hone our strike and raid capabilities so that we can effectively act on the intelligence we receive.

A homeland focus. If they can't get in, they can't attack us, so the bulk of our anti-terror money should go to domestic security - ports, airports, borders, etc. Such spending pays other dividends as well, tightening the defenses against smuggling and illegal immigration. This category includes investing in alternative energies, mass transit and conservation, because reducing our reliance on oil (and especially foreign oil) will reduce our need to become enmeshed in volatile regions of the world, as well as reduce the political influence of oil-rich countries.

International cooperation. Work with foreign intelligence and law-enforcement agencies to infilitrate and destroy terrorist cells. Work with foreign militaries to spread the burden of military operations. Isolate and destroy regimes that are active supporters of terrorism, using a clearly-drawn definition so that every nation is aware which side of the line they are on.

Foreign aid. It does no good to kill terrorists if we don't change the conditions that generate them: oppression, poverty, hopelessness, lack of education, lack of opportunity. We spend a paltry $18 billion a year on foreign aid; we should double or triple that number and target it on areas and issues related to terror. This means ending support for repressive regimes in the Middle East and devoting money to promoting education, democracy and opportunity in the region. Even if we spend $50 billion a year on foreign aid, it would be cheaper than the staggeringly expensive war we're currently pursuing. And you get a lot more PR benefit out of building schools than you do from dropping bombs.

Technorati tags
terrorism, Iraq, politics, midtopia