Tag Archives: Congress

Congress Quickly And Quietly Rolls Back Insider Trading Rules For Itself

Mike Masnick at Tech Dirt writes about recent legislative changes that may allow members in Congress to engage in questionable activities:

So… with very little fanfare, Congress quietly rolled back a big part of the law late last week. Specifically the part that required staffers to post disclosures about their financial transactions, so that the public could make sure there was no insider trading going on. Congress tried to cover up this fairly significant change because they, themselves, claimed that it would pose a “national risk” to have this information public. A national risk to their bank accounts.

The Most Expensive Weapon Ever Built

Mark Thompson from Time Magazine wrote the following report, concerning the recently launched “most expensive weapon program” in human history. The Pentagon is planning the acquisition of 2,457 F-35 jets, becoming the costliest of any military acquisition ever conceived, amounting to $400 billion. The program poses severe problems to the Pentagon at the moment Congress is looking for a Pentagon budget reduction of at least $500 billion.

The F-35, designed as the U.S. military’s lethal hunter for 21st century skies, has become the hunted, a poster child for Pentagon profligacy in a new era of tightening budgets. Instead of the stars and stripes of the U.S. Air Force emblazoned on its fuselage, it might as well have a bull’s-eye. Its pilots’ helmets are plagued with problems, it hasn’t yet dropped or fired weapons, and the software it requires to go to war remains on the drawing board.

The sad irony is that cutting the F-35 at this point won’t save much money in the near term, because the Pentagon recently pushed nearly $5 billion in F-35 contracts out the door. Yet sequester-mandated cuts will push both the purchase of additional planes and their required testing into the future with an inevitable result: the cost of each plane will rise even higher. Unfortunately, that won’t be anything new for the F-35 Lightning II.

George Will: Shackling the spenders

George Will writes an opinion piece in the Washington Post about the fact that politicians are naturally self-interested, and to prevent reckless spending and cronyism he recommends “shackling the spenders” with a constitutional amendment:

The political class is incorrigible because it is composed of — let us say the worst — human beings. They respond to incentives of self-interest. Their acquisitiveness is not for money but for the currency of power, which they act to retain and enlarge. This class can be constrained, if at all, not by exhorting them to become disinterested but by binding them with a constitutional amendment.

Sen. Menendez contacted top officials in friend’s Medicare dispute

Carol D. Leonnig and Jerry Markon write a report in the Washington Post about some questionable favoritism shown from a US Senator towards a friend:

Sen. Robert Menendez raised concerns with top federal health-care officials twice in recent years about their finding that a Florida eye doctor — a close friend and major campaign donor — had overbilled the government by $8.9 million for care at his clinic, Menendez aides said Wednesday.

Summary of Fiscal Cliff Cronyism

A list of tax preferences in the fiscal cliff bill and other related content are at the bottom of this article.

The “Fiscal Cliff deal,” finally approved on January 3rd, not only kicked the can down the road concerning our massive federal spending problems, but also perpetuated another problem: cronyism.

We see this cronyism in the form of $76 billion of special interest tax breaks which were going to expire or were defunct, but now are once again extended and resurrected for another year or two.

What was supposed to be a legislation to fix poorly-crafted policy problems is now rather a 157-page bill full of cronyism and pork that instead prolongs bad policies as well as preserving exemptions and other corporate “help”. This is just another clear example of how the federal government and Congress have no intention of reestablishing sound economic policies and responsible fiscal reforms; they are actually perpetuating the worst practices of corporate welfare and extending the crony capitalist system in which we live.

According to this article by Timothy P. Carney from the Washington Examiner, “The Family and Business Tax Cut Certainty Act of 2012, which passed through the Senate Finance Committee in August 2012, was copied and pasted into the fiscal cliff legislation, yielding a victory for biotech companies, wind-turbine-makers, biodiesel producers, film studios – and their lobbyists.” Timothy Carney shows that this massive amount of pork incorporated in the approved “Fiscal Cliff Bill” was not a classic last minute lobbyist inserting provisions into legislation; but rather it was a big corporate welfare lobbying campaign that dated half a year ago. Consequently the fiscal cliff legislation is now a replication of the Family and Business Tax Cut Certainty Act of 2012, but unlike this act, the fiscal cliff bill had the certainty of congressional approval and lack of scrutiny.

Within the legislation we see egregious examples of special interest tax breaks. Among those who benefit include General Electric, Siemens, $78 million tax write-off for Nascar track owners, $430 million tax exemptions in two years for Hollywood movie producers, $222 million tax rebate to rum producers in Puerto Rico, $62 million for companies in American Samoa, the American Wind Energy Association, Goldman Sachs and several other renewable energies. In sum nearly every single special interest group that lobbied for a tax benefit got one. Ironically they got this government “help” through a bill that was supposed to deal with government waste and reckless spending.

For example, the deal extends the $5 billion per year program of direct government payment to growers of grain, cotton and soybeans for another 9 months. This extension is aimed at help not small farmers but big profitable agricultural companies that don’t need government help. The situation for this case seems paradoxical since there was a bi-partisan consent to end this unnecessary benefit to wealthy farming companies. The Senate did not reach an agreement to renew the five-year farm legislation but surprisingly enough the negotiations on the fiscal cliff managed to introduce the farm payments extension into the bill. (See related article here)

In addition the cliff deal has not only perpetuated energy tax policies that should have ended but it also resurrected old energy crony policies that had been dead for a year. The energy handout extensions that were programed to end were extended even further and several tax breaks for renewable energies that expired in 2011 were resurrected. According to this article of The Foundry, these energy tax exemptions and credits will reduce revenue by $18 billion over 10 years. Tax credits concerning wind energies totaling $12 billion were extended for another year and were made even more substantial.

Additionally the “Fiscal Cliff Bill” rewards a production tax credit for biofuel and biodiesel production, expired in 2011, extending it throughout 2013. Tax credit energy extensions also recognize electric motorcycles, alternative fueling stations, and coal facilities on Native American lands, cellulosic ethanol, and energy efficient windows, appliances, and new homes as those among the “beneficiaries.”

According to an article in Politico, the electric and natural gas “beneficiaries” were also part of a massive coalition that combined with big companies like Coca-Cola and Wal-Mart, which scored a huge win in the “Cliff Bill” by keeping dividend tax rates on par with capital gains taxes. The coalition spent millions on lobbying on Capitol Hill to protect their share of corporate welfare by leveraging the fiscal cliff deal to their advantage by perpetuating and maintaining their tax schemes. According to Politico, “Wind, biomass, geothermal, hydropower and other facilities that receive the production tax credit are also now offered the choice instead to elect to receive a 30 percent investment tax credit the solar industry has used.”  

The fiscal cliff has been temporarily “avoided.”  Or we could say that the cliff has been postponed and the lesson once again has not been learned. We have not yet understood the harm and consequences of ever increasing federal government and its capability of involvement with big crony corporations. This relationship is harmful for America because it carries huge waste, massive careless spending and cronyism.

Congress missed another chance to end or at least diminish corporate welfare.. Tax reform was also supposed to be a part of resolving the fiscal cliff problem but taxes were used here to help their well connected “friends” by directing tax relief to special interest groups. Healthy tax reforms are made by reducing the amount of loopholes in the tax system; these new special tax breaks, exemptions and tax credits, enlarged loopholes by more than $70 billion. True tax reform – eliminating tax preferences and lowering rates – is made more difficult with this deal.

Whatever your thoughts on the tax increases, most Americans out there must be irritated and completely opposed to the near $76 billion tax payoffs that the government is giving to their crony capitalist associates.

Here is a list of some of the biggest tax credits incorporated into the bill (Sources: here, here and here):

 

Business Tax Extenders

  • $14.3 billion to subsidize research and development
  • $119 million for companies to hire Native Americans
  • $1.79 billion to promote business investment in low-income communities
  • $331 million for railroads to perform track maintenance
  • $5 million for mining companies to use for rescue training
  • $222 million in accelerated depreciation for businesses located on Native American reservations
  • $3.71 billion for “leasehold, restaurant, and retail improvements”
  • $430 million over two years in tax breaks for film and television producers who incur production costs incurred in the United States, with a special bonus if the costs are incurred in economically depressed areas in the United States
  • $358 million for “domestic production activities in Puerto Rico”
  • $222 million for rum production in Puerto Rico and the U.S. Virgin Islands
  • $62 million for economic development in American Samoa
  • $78 million to retain an accelerated tax write-off for owners of NASCAR tracks

Energy Tax Extenders

  • $7 million in consumer tax credits for buying plug-in motorcycles, or two or three-wheel electric scooters
  • $59 million in tax credits for cellulosic biofuels and algae-grown for fuel
  • $2.2 billion in tax credits for biodiesel and “renewable diesel”
  • $12.1 billion for the wind production tax credit
  • $154 million for energy efficient home upgrades
  • $650 million in tax credits for builders of energy-efficient homes
  • $360 million for alternative fuels

Other Exemptions

  • Subsidies for Goldman Sachs Headquarters – Sec. 328 extends “tax exempt financing for  York Liberty Zone,” which was a program to provide post-9/11 recovery funds. Rather than going to small businesses affected, however, this was, according to Bloomberg, “little more than a subsidy for fancy Manhattan apartments and office towers for Goldman Sachs and Bank of America Corp.” Michael Bloomberg himself actually thought the program was excessive, so that’s saying something. According to David Cay Johnston’s The Fine Print, Goldman got $1.6 billion in tax free financing for its new massive headquarters through Liberty Bonds.
  • $9 billion off-shore financing loophole for banks – Sec. 322 is an “Extension of the Active Financing Exception to Subpart F.” Very few tax loopholes have a trade association, but this one does. This strangely worded provision basically allows American corporations such as banks and manufactures to engage in certain lending practices and not pay taxes on income earned from it. According to this Washington Post piece, supporters of the bill include GE, Caterpillar, and JP Morgan. Steve Elmendorf, super-lobbyist, has been paid $80,000 in 2012 alone to lobby on the “Active Financing Working Group.” 
  • Tax credits for foreign subsidiaries – Sec. 323 is an extension of the “Look-through treatment of payments between related CFCs under foreign personal holding company income rules.” This gibberish sounding provision cost $1.5 billion from 2010 and 2011, and the US Chamber loves it. It’s a provision that allows U.S. multinationals to not pay taxes on income earned by companies they own abroad.
  • Bonus Depreciation, R&D Tax Credit – these are well-known corporate boondoggles. The research tax credit was projected to cost $8 billion for 2010 and 2011 and the depreciation provisions were projected to cost about $110 billion for those two years, with some of that made up in later years.

 Additional Content and Videos

  • The full text of the bill is available here in pdf.
  • Here is a short video from CBS News regarding the bill’s corporate welfare.
  • This is a CNN video in the State of the Union show with Candy Crowley interviewing Sen. Dick Durbin (D) Illinois, responding to why there are some questionable tax cuts and provisions in the fiscal cliff bill.
  • This is a video with Utah Republican Senator Mike Lee explaining how members of the upper chamber had – at most – six minutes to read the “fiscal cliff” bill before they voted on it.
  • The following CNN interview with Thomas Schatz President of Citizens against Government Waste discusses the egregious amount of pork inserted in the bill.
  • In the following video by the Huffington post, Alan Schreiber, Asparagus Growers Industry representative, defends the Fiscal Cliff Deal.
  • The Joint Committee on Taxation in 2010 did an analysis of what many of these tax extensions cost; you can find that report here.
  • The Joint Committee on Taxation released on January the 1st, the Estimated Revenue Effects of The Revenue Provisions Contained In “Fiscal Cliff Bill” H.R. 8, The “American Taxpayer Relief Act Of 2012;” you can read the report here.
  • The Washington post made a list of the top ten weirdest parts of the “fiscal cliff” bill.

Outside Groups Spent Big on Congressional Travel

Amanda Becker at Roll Call writes about outside groups paying for Congressional travel:

“Congressmen are frequently accused of living inside a bubble. So you can make a good case that members should be traveling and getting to see certain things overseas,” Boehm said.

“But all too often they have been arranged by groups that have very pronounced legislative interests,” he added. “And what’s more enticing than having the possibility of talking [to lawmakers] in a relaxed, vacation resort-type setting?”

Tim Carney: Max Baucus rewards ex-staffers with tax breaks for their clients

Tim Carney at the Washington Examiner writes an article about some revolving door cronyism surrounding the recent fiscal cliff deal and the staff of a particular Senator:

Tax breaks for Hollywood, NASCAR, windmills, algae and multinational corporations ended up in the “fiscal cliff” bill thanks to President Obama, according to Senate Republican sources. But they were spawned by a web of lobbyists, donors and staffers surrounding Democratic Sen. Max Baucus of Montana…

Pick any one of the special-interest tax breaks extended by the cliff deal, and you’re likely to find a former Baucus aide who lobbied for it on behalf of a large corporation or industry organization.

Crony Capitalist Blowout: A tax increase for everyone but the favored wealthy few

A Wall Street Journal editorial piece addresses the recent fiscal cliff deal, and how cronyism is rife in the new legislation:

There’s plenty to lament about the capital and income tax hikes, but the bill’s seedier underside is the $40 billion or so in tax payoffs to every crony capitalist and special pleader with a lobbyist worth his million-dollar salary. Congress and the White House want everyone to ignore this corporate-welfare blowout, so allow us to shine a light on the merriment.

Do interest groups reward politicians for their votes in the legislature?

Tyler Cowen at the Marginal Revolution blog writes about a new academic paper by Sungmun Choi, finding that:

I find evidence that the politicians who voted in favor of the Emergency Economic Stabilization Act (EESA) of 2008, one of the most significant pieces of legislation and possibly the biggest government bailout in U.S. economic history, received more monetary contributions from the interest groups in the financial sector after passage of the EESA.