Monday, December 19, 2011

True Respect For Diversity

Back in my university days, a friend of mine once proposed a drinking game in which we would read the student handbook and take a shot of liquor every time it mentioned "diversity." We ultimately rejected his proposal on the grounds that after the first few pages we would succumb to alcohol poisoning. The point of this anecdote is that "respecting" or "celebrating diversity," has become a basic mantra of most progressives. If we are unable to achieve "relativistic enlightenment" and understand that all cultures and traditions as equal, we must at the very least  accept the right of individuals and communities to express their culture and celebrate their traditions.

After much thought I become convinced that the greatest individual differences are found within rather than between groups. The aggregate statistical differences between (let's say) African-Americans and European-Americans are dwarfed by the diversity within each community. And at least within the United States, once we control for class and education, the greatest cultural differences are not found between different ethnic groups, but between different regions. For example, there is a greater probability that I (as a white) would have more in common with a secular, educated, middle class Hispanic-American of my native Chicago than I would with a deeply religious, working class white of rural Alabama. This leads me to determine that Southern Christians are as a"distinct piece" of the "gorgeous cultural mosaic" that makes up the United States as Asian-Americans, Jewish-Americans or any other group. 

For these reasons it strikes me as contradictory, if not hypocritical, when progressives voice contempt for devout, southern Christians, whom they refer to as "red necks," for it would be beyond the pale for them to criticize observant Muslims, Jews, etc. This demonstrates that they neither respect the cultural diversity found within their group nor the marked cultural differences that flourish between regions of the United States. This had led to instances in which school districts encouraged Muslim and Jewish students to set up displays of Crescents and Menorahs, while barring Christian students from presenting similar displays. In a recent case, the Supreme Court had to intervene to defend the right of a Christian student group from meeting after school. In this case, I do not believe that the administrations were motivated by a concern for the separation of church and state, but rather by their inability to include Traditional Christians in their "celebration of diversity."

In the political arena this is seen when activists and politicians seek to oppose uniform policies across the land, indifferent to the sentiments and desires of diverse states and regions. During the push for health care reform, the federal government largely ignored the Tenth Amendment by seeking to impose a single plan, rather than allow each state to pursue policies that reflect the cultural and philosophical inclinations of their residents. Implicit in the strong sense of Federalism present in the constitution is a respect for the principles of self governance and an affirmation of and respect for the pronounced regional diversity that already existed.. To allow a strong central government to impose uniform policies across the land, beyond the carefully enumerated powers granted by the constitution, would be a recipe for conflict. Individuals who objected to the laws that governed their state or community could seek to alter them through the democratic process or move to other localities that better reflected their political and cultural visions. Of course this is not to say that states rights are without limits; slavery and other egregious abuses of individual rights warrant federal intervention.  But, beyond that, we should respect the rights of diverse peoples and regions to enjoy their cultural and political traditions, even when we find them distasteful. That makes for a freer, stronger and more interesting nation. 

Sunday, December 18, 2011

Ron Paul: The Most Pro-Israel Candidate

Great article dispelling the myth that Ron Paul is against Israel.

Ron Paul: The Most Pro-Israel Candidate

86 Responses

Day after day we receive many questions aboutRon Paul’s stance on Israel and Iran. And while as grassroots supporters we do not speak for Ron Paul himself in any way, here’s how we understand his position.
Ron Paul: The Most Pro-Israel Candidate
First of all, it may come as a surprise to many that Ron Paul is actually the most pro-Israel candidate in the presidential race.
With hundreds of nuclear weapons in her possession, Israel has become the most powerful state in the Middle East. She could easily take on her neighbors and eliminate any and all threats to her existence.
Ron Paul would not stop Israel from defending her interests in any way she saw fit. When Israel attacked a nuclear reactor in Iraq in 1981, almost the entire U.S. Congress voted to condemn the act. Ron Paul was one of the few dissenters: he voted against the condemnation and in favor of Israel’s right to self-determination.
Ending Foreign Aid Sets Israel Free
Ron Paul has also been criticized for wanting to “end foreign aid to Israel.” He had in fact called for an end to all foreign aid in general. Foreign aid acts like an entitlement: eventually the recipient grows dependent on it and will do everything in his power to continue the flow of funds. This might even involve spending some of the already-received payments to “lobby” for more money.
Ron Paul believes this is a bad thing. Not only does foreign aid lead to corruption on both sides; it is inherently immoral. Ron Paul said that “foreign aid is taking money from the poor people of a rich country and giving it to the rich people of a poor country.”
If foreign aid to all countries were stopped immediately, Israel would be the biggest net beneficiary. This is because the U.S. pays much more foreign aid to Israel’s enemies combined than to Israel.
Like a discouraged unemployed person whose welfare payments are about to run out, Israel would finally have the motivation to take care of herself, for example by ending socialist domestic policies within Israel. This in turn would make Israel much stronger and more independent. Ending all foreign aid would indeed set Israel free.
Iran Is a Big Nobody
Iran is a large country, but from a military point of view they are a big nobody. They are surrounded by nuclear powers, they have no air force, no navy, and they are even incapable of producing as much gasoline as they need. Iranian officials are relegated to grudgingly hoping that “the Zionist regime will collapse”, which is the real meaning of Ahmadinejad’s infamous phrase frequently mistranslated as “we will wipe Israel off the map”.
It is understandable that Iran wants to gain the international respect they deserve as a country of 75 million people. But according to U.S. intelligence reports there are no indications whatsoever that Iran is actively working on creating or obtaining a nuclear weapon.
Israel Can Do What She Wants – But Leave America Out of It
If Israel believes that Iran might one day become a nuclear power and that such a development would be against her interests, Ron Paul would not stop Israel from doing whatever she deemed necessary to defend herself. Israeli assassination squads are already operating within Iran, and several Iranian nuclear scientists found themselves torn apart by mysterious explosions over the past few years. Ron Paul did not interfere. In fact, he would not even prevent Israel from initiating a devastating nuclear attack on Iran.
However, neither would Ron Paul allow American lives to be sacrificed for Israeli interests. If Israeli officials knew that American kids will not throw themselves into the line of fire whenever Israel feels threatened by the boastful words of some wannabe dictator, Israel will act more responsibly when dealing with her neighbors – and grow much stronger for it.
Ron Paul Will Allow Israel to Blossom
Like it or not, Ron Paul is the most pro-Israel candidate out there. His wise policies – not by design, but by pure logical consequence – will permit Israel to grow and blossom as a truly free, independent and powerful state.
This article does not claim to represent Ron Paul’s official position on Israel and Iran. It’s just a summary of how we – as his grassroots supporters – interpret his statements on the issue. Please post a comment if you believe we misinterpreted Ron Paul’s position.

Nothing Is Loathsome As a Bully

Pictured Above: Mitchell Wilson

My articles usually focus on questions of economic policy and not my personal feelings, but I must declare that Nothing Is Loathsome As a Bully. It broke my heart to read about how Mitchell Wilson, an 11 year old who was battling muscular dystrophy was bullied to death. My G-d be with him and his bereaved family. I hope that this serves as a wake up call to the parents and schools who have failed to teach their children basic decency and compassion, especially for those weaker than themselves.

Why The UN Is Worthless

In principle I support the concept of international legal bodies as a means of promoting peace and order. But, in practice, the United Nations and many other international legal bodies have shown such appalling bias that they have completely negated their credibility. Approximately 40% (223) of the human rights condemnations issued by the United Nations have been directed against Israel, while only 10 condemnations were levied against North Korea, a nation that allowed over 1,000,000 of its people to starve to death and to the best of knowledge, no condemnations have been directed against China whose one part state still maintains slave labor labor camps, engages in forced abortions, religious repressions and the systematic abuse of its minority (Tibetan and Uighur) populations. Check out this interesting video that explores this mind boggling hypocrisy of the United Nations.

When Labor Unions Become A Public Burden...

In principle, I am supportive of labor unions. They were instrumental in improving the wages and working conditions for millions of Americans. In the private sector, a dynamic give-and-take occurs between unions and businesses, as seen in recent negotiations between automobile worker unions and the major auto markers. Faced with the clear reality that the domestic auto industry would go under if they did not become more globally competitive, the unions made major wage, pension and work rule concessions. Conversely, during industry wide booms, when labor markets tighten, unions can and should push for an increased share of the profits. But, this salubrious dynamic is entirely absent from unions that have embedded themselves into corrupt political systems. A recent Chicago Tribune Investigation documented how working with the Chicago Democratic Machine, politically connected unions heads were able to loot Illinois's already broken pension system. For example, Dennis Gannon, the former president of the Chicago Federation of Labor earned $55,474 a year, but now sucks $158,258 a year off the public pension system. So, before you indiscriminately go to bat for unions, I urge you to make a distinction between private and the public unions that partake in Chicago's tradition of graft and outright corruption.

Yes, this is corrupt.

Pension rigging this egregious demands three investigations — and an Illinois Truth Commission.

September 25, 2011
As Chicago's 1991 municipal elections approached, Mayor Richard M. Daley was consolidating power for his first re-election campaign. In Springfield, two state senators — Daley's brother John and his political ally Jeremiah Joyce — introduced a "shell bill," an empty vessel into which lawmakers later would stuff an astonishing public pension giveaway to Chicago union officials.
That pension giveaway was among more than 100 provisions eventually added to the shell bill, but never debated by either chamber of the General Assembly. Instead, 10 members of a bicameral "conference committee" that evidently never held a meeting shaped the legislation to achieve their political goals. By the time the heavily larded bill was ready for passage by the two chambers, another Chicago Democrat, state Sen. Emil Jones, assured his colleagues that the bill wasn't controversial. "These provisions incorporated within this bill have been agreed to by the (city) administration and the pension system and the laborers," Jones told his Senate colleagues the day the bill passed in January 1991. "The people in the city of Chicago came together and agreed."
That wasn't true. As with most Illinois sweetheart deals, only the insiders who would benefit from this looting of city pension funds "came together and agreed." Nobody consulted "the people in the city" who, as taxpayers, would foot the exorbitant cost of this legislation for decades to come. Nor did anyone ask rank-and-file union members who someday would rely on city pension funds.
Twenty years later, as the Tribune and WGN-TV reported last week, 23 retired union officials from Chicago stand to collect about $56 million from two ailing city pension funds, thanks to the 1991 law. More union officials evidently are in the pipeline to receive the lavish benefits included in that legislation.
Sure enough, two days after the pension changes passed the Legislature — departing Gov. James Thompson signed it into law — the city's unions lined up to endorse Mayor Daley's re-election campaign. He would serve another 20 years with organized labor's support and acquiescence.
Always, though, the mayor would owe a debt for the 1991 legislation to his brother John, his pal Joyce and the 10 members of that conference committee: Senate Democrats John D'Arco, Emil Jones and Phil Rock; Senate Republicans John Friedland and Calvin Schuneman; House Democrats Ralph Capparelli, John Cullerton and Sam Wolf; and House Republicans Gene Hoffman and Terry Parke.
Only Cullerton, now president of the Illinois Senate, is in the Legislature today.
Pensions and political gain
That is the essence, but by no means the extent, of the cronyism that binds Illinois public officials and public employee union leaders. The officials — in Chicago, its suburban collar, downstate and in state government — have exploited public pension funds as huge pools of money that enable them to wieldpower. Many of those public officials have arranged enormous pension benefits for themselves and their peers in electoral politics from the executive, legislative and judicial branches. But buying labor peace, and labor union political support, also has been high on their priority list.
This is yet another classic saga of how Illinois power brokers take from the many to line the pockets of a chosen few. Legislators awarding free tuition at state universities to the children of their contributors, school boards inflating superintendents' late-career salaries to raise their pension calculations, politicians awarding one another pensions for part-time jobs — like those three traditional scams, this pension-rigging for union officials fits the definition of "corrupt": contaminated, morally unsound, debased, venal.
Calculating labor leaders' city pensions on their union salaries means Liberato "Al" Naimoli, president of Cement Workers Union Local 76, draws an annual city pension of $157,752 for a city job that paid him $15,264 a year. Then there's Dennis Gannon, former president of the Chicago Federation of Labor. He resigned from his city job, which topped out at $55,474, in 1993. But, because an accommodating Chicago City Hall rehired him for one day in 1994, he's drawing a city pension of $158,258.
Was this legal?
If you haven't read the Wednesday and Thursday news stories in which the Tribune's Jason Grottoexplained how city and state lawmakers enabled these outrages, you'll find them at Fascinating reads, don't miss them.
rotto's stories may expose the tip of a deep and wide iceberg. There are indications that this pathology — taxpayer-funded pensions based on huge union salaries — extends well beyond 23 labor leaders from Chicago. We hope members of the affected unions note that, on average, these privileged few have accrued pension benefits nearly three times what typical retired city workers receive. Those workers ought to be furious that their leaders are raiding their funds. Just as taxpayers should be furious about union bosses depleting city pension coffers that are underfunded by $20 billion or more.
We on the Tribune editorial board don't practice criminal law; perhaps every action described in Grotto's stories was, and is, legal.
That said, the exposés suggest three avenues for investigators: FBI agents can assess whether any pensioner fraudulently claimed benefits in asserting his eligibility to qualify for this deal. The conduct of city pension fund officials — and of other city officials who directed payments into those funds — also is open to scrutiny. Separately, the office of Chicago's inspector general has authority to explore the use, and potential misuse, of city funds. And the U.S. Department of Labor has responsibility to help protect union pension funds. Any improper claim on those funds not only diminishes what remains for other retirees; withdrawn assets also deprive the funds of future growth possibilities.
For Mayor Emanuel …
Chicago's current mayor, Rahm Emanuel, didn't cause this pension debacle, but he can begin to address it. City Hall needs to reform policies that permit labor leaders to take essentially indefinite leaves of absence from city jobs, one factor permitting big city pensions for the long-departed. He also should be asking why nobody in city government, or at the pension funds, blew a loud whistle over these egregious practices.
But Emanuel is correct that Illinois needs thorough, rather than scattershot, pension reforms. To that end:
In Springfield, House Republican Leader Tom Cross plans to push for a repeal of the 1991 law that allowed this particular abuse. Cross also says he will explore strengthening enforcement of provisions against fraudulently claiming eligibility for public pensions.
And Cullerton, who says the pension law he helped pass is a relic from a bygone era, has instructed his staff to draft legislation "that would address the concerns that have been the focus of these media reports." Cullerton says the Legislature should address the problems in the fall veto session or in January.
Let's make that the fall veto session, Senator.
We hope House Speaker Michael Madigan will aggressively contribute. He was in full control of his chamber in, yes, 1991, when this noxious bill was approved.
… and for Illinois:
Citizens awakened to pension scandals at many levels of governance in this state deserve an Illinois Truth Commission to investigate all that's wrong and how lawmakers can correct it. Nobody will fight this idea more than the lawmakers, who have incredibly sweet pension deals themselves, and who have awarded generous deals to others. (Question from Illinois Pensions 101: Why do legislators give fantastic pension perks to judges? Answer: A lot of the actions legislators take wind up being challenged and then … evaluated by judges.)
At every turn, we the people are learning about insider deals and, yes, corruption. We realize that suggesting formation of an investigative panel risks a customary Illinois fate: Public officials here love to bury their problems in committees. But a group headed by, say, a former federal judge or prosecutor could unearth the many special deals that suffuse Illinois pension laws. A model here might be the so-called CLEAR Commission, which has been streamlining and updating the state's criminal code. Its distinguished members have done good work while largely avoiding politics.
A Truth Commission, then, could cast light on these rampant abuses by pols and union leaders of rank-and-file workers and Illinois taxpayers. Then the rest of us taxpayers can apply whatever heat is necessary to enact significant reforms.

Sunday, December 11, 2011

Another Ron Paul Prophecy (Comes True)

In 2008 Ron Paul offered a clear prediction that beyond rhetoric, Obama would offer no real change. Rather, an Obama Administration would maintain the same broken monetary, military and social policy status quo.

Saturday, December 10, 2011

No, You Are The Special Interest!

Who of good conscience doesn't find the $4 Billion tax break for the oil industry$3 Billion tax break for corporate jets and $126 Million tax break for the horse racing industry obscene examples of corporate welfare? However, since they only account for 8% of the tax breaks, from the point of deficit reduction, they are largely meaningless. A great article in The Washington Post demonstrated that by far the most costly  tax credits are directed towards households, which in 2011 had a negative fiscal impact of over $1 Trillion. For example, the cost of the exclusion of employer contributions for medical insurance premiums grew to $173.7 Billion, mortgage interest write-offs amounted to $88.8 billion and the 401K provision was worth $62.9 Billion. The author correctly points out what many (so called) fiscal conservatives like Grover Norquist fail to see: indirect government spending via tax credits holds the same negative fiscal impact as direct expenditures. The only real difference is that politically "stealth spending" is always easier, because it allows politicians to take credit for expanding government benefits, while also reducing taxes; a temptation that few Democrats or Republicans can resist. But, if we are too tackle our spiraling national debt and avoid the development of hazardous market distortions (housing bubble, college debt bubble, etc.) we must begin to wind down the regiment of tax credits to corporations and households alike. We can no longer afford a system in one man or group is expected to pay for another's special interest.

Ever-increasing tax breaks for U.S. families eclipse benefits for special interests

As President Obama and congressional Republicans argue over how to rewrite the U.S. tax code, the debate has revolved around “loopholes” for corporate jets and ending “carve-outs” for well-heeled special interests. But if the goal is debt reduction, that’s not where the money is. Broad tax breaks granted to millions of families at all income levels dwarf the corporate giveaways. Over the past two years, largely because of these popular benefits in the federal income tax code, the government has reached a rare milestone in tax collection — it has given away nearly as much as it takes in.

The number of tax breaks has nearly doubled since the last major tax overhaul 25 years ago, with lawmakers adding new benefits for children, college tuition, retirement savings and investment. At the same time, some long-standing breaks have exploded in value, such as the deduction for mortgage interest and the tax-free treatment of health-insurance premiums paid by employers.

All told, federal taxpayers last year received $1.08 trillion in credits, deductions and other perks while paying $1.09 trillion in income taxes, according to government estimates.
Only about 8 percent of those benefits went to corporations. (The write-off for corporate jets equals about .03 percent of the total.) The bulk went to private households, primarily upper-middle-class families that Obama has vowed to protect from new taxes.
“The big money is in the middle-class subsidies,” said Syracuse University economist Leonard Burman, former director of the nonpartisan Tax Policy Center. “You’re not going to balance the budget by eliminating ethanol credits. You have to go after things that really matter to a lot of people.”
These tax breaks weave an invisible web of government benefits that now costs nearly as much as the Pentagon and all other federal agencies combined. But “tax expenditures,” as they are known in Washington, get no routine oversight. Congress and the Treasury Department both track them but use different rules to count them and estimate their value. The congressional Joint Committee on Taxationlists more than 300 breaks, while Treasury tallies 172.
No one regularly assesses whether tax expenditures accomplish the goals they were created to serve. Yet, with the rise of an ideology within the Republican Party that shuns big government and vilifies taxes, they have become virtually untouchable.
For those reasons, the tax code is a popular venue for both parties to pursue costly policy goals.
Edward Kleinbard, a University of Southern California law professor who served until recently as chief of staff to the Joint Committee on Taxation, says tax breaks are now the dominant instrument for creating new spending programs. Policymakers can give taxpayers a government benefit and get credit for lowering their tax bills — a combination lawmakers find “irresistible,” Kleinbard said, because they can portray themselves as tax cutters rather than big spenders.
Every president since Ronald Reagan has learned that lesson. In 1997, after a Republican Congress refused to increase spending for federal student loans, President Bill Clinton turned to the tax code to create a slew of higher-education credits. Initially worth around $10 billion a year to the nation’s college students, those benefits have been expanded to more than $20 billion annually.

Similarly, when President George W. Bush wanted to help victims of the Sept. 11, 2001, attacks, he turned to the tax code. He backed the Victims of Terrorism Tax Relief Act, which wiped out two years of tax liability for survivors and created a continuing exemption for annuities paid to families of public-safety officers killed in the line of duty. Estimated 10-year price tag: $360 million.
In 2009, when Obama wanted to boost the flagging economy, he offered a massive new tax break as the centerpiece of his stimulus package. The Making Work Pay credit put about $60 billion a year in people’s pockets in 2009 and 2010, including $18 billion in “refundable” payments to low-income families whose tax bills were so small that the government had to write them checks to make sure they received the full value.
This week, Obama is expected to offer an outline for revising the tax code to weed out special tax breaks. At the same time, he is pressing Congress to create several more.His $447 billion jobs package includes a $4,000 credit for hiring people who have been out of work more than six months and a $5,000 credit for hiring returning war veterans.
Administration officials say targeted tax cuts are an easy way to quickly put money in people’s pockets. But they also acknowledged the political reality that lawmakers are more inclined to support a plan that cuts taxes than one that increases spending.
Once a tax break is ensconced in the code, it is hard to dislodge. Beneficiaries become fierce defenders, as do anti-tax conservatives, who view the end of a tax break as an impermissible hike in overall tax collections. About 95 percent of Republicans in Congress, and a few Democrats, have signed a pledge circulated by GOP strategist Grover Norquist vowing to “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”
The pledge, which Norquist has been circulating for 25 years, promotes “a nonsensical debate that says we’re not going to talk about spending in the tax code like we talk about other spending said Eugene Steuerle, an architect of the 1986 tax overhaul while working in the Reagan Treasury Department and now a senior fellow at the Urban Institute. “Spending in the tax code is granted a superior status, and if you get rid of it, it’s called a tax increase.”
Simply limiting the cost of a tax break can be politically perilous. Norquist’s group, Americans for Tax Reform, recently issued what it called a “comprehensive list of Obama tax hikes.” Among the items: The reversal of a 2003 Internal Revenue Serviceruling that allowed people to use pretax health spending accounts to pay for over-the-counter drugs. The group has dubbed the change the “medicine cabinet tax.”
Even temporary tax breaks have proved remarkably resilient. Congress routinely passes a “tax extender” bill that renews a host of expiring provisions worth about $30 billion a year. One of the most expensive: a break for residents of states that levy no income tax, including Texas and Florida. Congress has agreed to let them deduct sales taxes instead, at an annual cost to the Treasury of about $1.8 billion.
Congress generally renews the breaks for a year or two, preserving the illusion that they are temporary. But of dozens of breaks created since 1986, lawmakers have permitted just 18 major ones to expire, according to a recent Joint Committee report. Half were stimulus measures enacted by Bush and Obama during the recent recession.
Making Work Pay is among the fallen. But before it expired in December, Congress replaced it with a more generous provision that reduced payroll taxes by two percentage points this year. The payroll tax holiday will put an estimated $80 billion in workers’ pockets — a perk that comes on top of the breaks that reduce their income tax bills.
Combined with traditional rate cuts in 2001, proliferating tax breaks have left people at all income levels paying a shrinking share of their earnings in income taxes, the primary federal revenue source. Nearly half of all households no longer pay any income tax. Meanwhile, a middle-income family of four paid just 4.7 percent of its income, on average, to the IRS last year, according to the Center on Budget and Policy Priorities — the third-lowest percentage in 50 years.
If policymakers hope to raise enough cash from tax loopholes to help tame the nation’s debt, tax experts say individual taxpayers will have to pay more.
Even the Bush tax cuts of 2001 and 2003, while infamous for providing disproportionate benefits to the rich, showered far more money in absolute terms on the middle class. The legislation doubled Clinton’s child credit, wiped out the marriage penalty for joint filers and expanded refundable credits. Of the approximately $4 trillion that would be lost if the Bush cuts stayed in place through the next decade, only about $800 billion would go to the wealthiest households making more than $250,000 a year, according to government estimates.
Georgetown University law professor John Buckley recently estimated that 95 percent of the revenue lost to tax expenditures is concentrated in 10 categories that aid families and advance popular policy goals. The “special-interest stuff,” he said, such as write-offs for corporate jets, is minuscule by comparison — “unless we’re all special,” he said.
In the mid-1980s, Reagan administration officials and a Democratic Congress also confronted a tax code eroded by multiplying tax breaks. They concluded that costly breaks, such as a credit that encouraged people to shelter income in unprofitable investments, were keeping tax rates artificially high for everyone.
The resulting overhaul was the most extensive in U.S. history. It repealed or modified dozens of tax expenditures, trimming their overall cost by nearly 40 percent. The resulting savings were not directed to deficit reduction, but used to lower rates across the board, pushing the top rate down from 50 percent to 28 percent.
Huge breaks survived, however. People could still get health insurance from their employers without being taxed, a benefit that originated with wage controls during World War II. And while taxpayers could no longer deduct interest on credit cards, they kept the break for mortgage interest. Policymakers did not want to hurt the real estate and construction industries, and they theorized that the break would continue to encourage people to buy homes.

Burman, then a junior staffer at the Treasury Department, said he warned that it would also encourage people to shoulder ever-larger mortgages. When the housing bubble burst in 2006, he said, “instead of getting into trouble with Visa and MasterCard, people lost their homes.”
The breaks for health insurance and mortgage interest are the most valuable tax expenditures on the books, worth a combined $260 billion this year. They have soared in value, helped along by the increasing size of mortgages and the cost of health insurance.
But a recent effort to cap the value of the health-care exclusion was abandoned amid complaints from labor union officials, who have for years traded wage increases for richer health benefits. Democrats instead enacted a tax on insurers that sell high-cost policies, a provision some lobbyists predict will be further watered down before it is scheduled to take effect in 2013.
Meanwhile, top tax aides said the new debt-reduction “supercommittee” on Capitol Hill could look at capping the mortgage deduction or disallowing it for second homes. Neither is likely, however, and no one has expressed interest in ending the deduction for the vast majority of homeowners.
Caps on spending
After 1986, the tax code emerged leaner and more efficient. But as Norquist began circulating his anti-tax pledge to protect the changes, Congress decided to tackle rising budget deficits by imposing strict caps on spending.
With no place else to go, lawmakers — particularly Democrats — latched onto the tax code as a vehicle for new initiatives.
Buckley, who served until last year as chief Democratic tax counsel on the House Ways and Means Committee, said it started in 1986 with the low-income housing credit for developers and investors. As Reagan’s budget cutters were slashing direct spending on housing, Rep. Charles B. Rangel (D-N.Y.) won bipartisan support for the credit, which quickly became a primary source of financing for housing construction and rehabilitation.
The trend accelerated under Clinton, who found Republican lawmakers far more willing to finance his priorities in the form of tax cuts than as new spending. While Clinton ended traditional welfare programs, he shifted chunks of the social safety net to the tax code, creating an array of benefits for families, including a new credit for every child younger than 17.
“Politically, it was easier to get tax cuts dedicated to a purpose than to get spending dedicated to the same purpose,” said former Obama economic adviser Lawrence H. Summers, who also served as Clinton’s Treasury secretary.
The child credit and the Earned Income Tax Credit, a break for the working poor enacted in 1975, are now two of the federal government’s biggest anti-poverty measures, far larger than the modern welfare program, or even food stamps.
For Clinton, the Taxpayer Relief Act of 1997 had another advantage. It let him make good on a pledge to cut taxes for the middle class without enacting a more expensive rate reduction, said Eric Toder, who served in Clinton’s Treasury Department and is now co-director of the Tax Policy Center. Other Democrats took note.
“If you look at the [Al] Gore campaign or the Obama proposals, just about all their tax cuts are increased tax expenditures,” Toder said. “They really viewed this as the way to give tax cuts to the middle class.”
Rather than tackling these breaks one by one, experts such as Kleinbard and Harvard economist Martin Feldstein, a senior Reagan White House adviser, last week counseled Congress to eliminate or cap all tax breaks for everyone.
Obama has advanced a similar idea that would limit itemized deductions for families earning more than $250,000 a year. But lawmakers have repeatedly rejected it, fearful of antagonizing the industries and charities that benefit, as well as taxpayers themselves.
Kleinbard calls tax expenditures “the sacred tax cows.” But to tame the debt, he said, at least some of them must be led to slaughter. “There’s just no other way to make the numbers work.”