June 23, 2016

County Board Says Hunt is on for New County Auditor

Last Friday, we growled that the resignation of the recently appointed County Manager was a victory for Arlington County's government bureaucracy.

In an online article today, the Arlington Sun Gazette reports:

"Six months after hiring their first internal auditor, Arlington County Board members are on the hunt for a new one.

"Jessica Tucker, who moved into the position in January after a career with the Fairfax County government, will be relocating to California, where she has accepted employment with the Marin County government.

“In her short tenure, she’s already laid a firm foundation,” said County Board member John Vihstadt, who made the hiring of an auditor or inspector general one of the themes of his two successful political victories in 2014.

"Tucker was hired after County Board members received permission in 2015 from the General Assembly to employ an auditor that reported directly to them rather than through the general government chain of command. Previously, the County Board only had the authority to hire and fire the county manager, county attorney and their clerk.

As we wrote last Friday, Growls readers are urged to write to members of the Arlington County Board to voice their concerns about the County Auditor's resignation, proper staffing of the office, and assurance there is no bureaucratic meddling in its proper functioning. See our June 17 Growls for background details. Just click-on the link below:

  • Call the County Board office at (703) 228-3130

And tell them ACTA sent you.

June 22, 2016

Social Security and Medicare "In Dangerous Fiscal Positions"

A week ago yesterday, we growled, based upon an Investor's Business Daily (IBD) editorial, and asked if Social Security reform was possible in the next four years. According to the lead editorial in the past weekend's IBD, the newspaper wrote, "No matter who wins in November, it’s a virtual guarantee that Social Security reform won’t happen over the next four years. And that only means that the changes needed will be far more painful."

It was no surprise, then, to read the analysis of the Committee for a Responsible Federal Budget when the Social Security and Medicare Trustees released their annual annual report today on the financial status of the two programs. They wrote:

"The projections show that both programs are in dangerous fiscal positions and prompt action is necessary to secure these programs."

In their analysis, the Committee focused "specifically" on Social Security, and identified five key findings:

  • Social Security is Heading Toward Insolvency.
  • Social Security’s Deficits are Large and Growing.
  • The Shortfall is the Same as Last Year, Despite a Short-Term SSDI Fix.
  • Failure to Act Will Lead to Large, Abrupt Benefit Cuts.
  • The Latest Projections Highlight the Need to Focus on Solvency First.

Writing about the march towards insolvency, the Committee points out, "When the Social Security trust funds are exhausted in 2034, beneficiaries will face an immediate across-the-board 21 percent benefit cut. The size of the cut will grow over time, to 26 percent by 2090." The following graph is from CRFB's analysis:

Growls readers can read the CRFB's entire analysis, which is supplemented with very helpful charts; it is available here. In their conclusion, they write:

"The Social Security Trustees once again show the need to reform Social Security to make it solvent for future generations. The combined Social Security trust fund will run out of money within 18 years – when today’s 49-year-olds are just reaching the normal retirement age. Failure to make any changes would result in a 21 percent across-the-board benefit cut, a cut that would grow over time.

"Fortunately, the Social Security’s finances can still be fixed without making drastic tax or benefit changes. If policymakers are willing to act soon, they can develop and pass a plan that strengthens the program’s finances while phasing in changes gradually to give workers time to prepare, improving benefits for vulnerable beneficiaries, and promoting long-term economic growth. However the cost of delay is substantial and would take away the opportunity to act more gradually and thoughtfully."

You can read the Trustees' "Summary of the 2016 Annual Reports," here.

The Concord Coalition also advocates for a fiscally responsible federal government, and also commented today on the Social Security and Madicare Trustees reports. In their press release today, the group said in part:

"Today’s reports from the trustees of Social Security and Medicare confirm once again that these critical programs are on unsustainable paths and will put increasing pressure on the rest of the federal budget in the years ahead, according to The Concord Coalition.

"Concord urges the American public, elected officials and candidates for federal office this year to carefully consider the warnings of the trustees, who each year emphasize the need to quickly start reforming these programs.

“The trustees do not issue these reports for their own amusement,” says Concord Executive Director Robert L. Bixby. “The annual reports are required by law with the expectation that responsible lawmakers will heed their warnings and take appropriate action.”

“For the past several decades,” Bixby added, “that has been a vain hope. Time is now running short. The longer we delay corrective actions, the more difficult they will become and the more onerous the burden will be for future generations.”

"Today’s reports again show that Social Security and Medicare Part A (Hospital Insurance) are paying out more than they take in from their designated payroll taxes.

"In addition, still more general federal revenues are required to support Medicare Part B, which provides various medical services, and Part D, which helps pay for medication. The premiums that older Americans pay for these parts of Medicare only cover a fourth of the costs."

Earlier today, Forbes columnist Tim Worstall concluded:

" . . . The first major US political fight I can remember observing was the Social Security reforms of the 80s. All sorts of plans were put forward and bandied about. And what happened then was the result of exactly what I’ve diagnosed here – promises that politicians didn’t raise the cash to meet. So, the solution was to raise the taxes paid by those still in work so as to meet the promises to the earlier generation.

"This is what will happen again. The working young will be forced to pay more taxes for the things that were promised to their elders. It might even be true that most would be happy to do so to keep Grandpop independent and out of their spare bedroom. But it will still be the culmination of what some have been stating for decades. Contribution rates simply haven’t been high enough to pay for the benefits promised. On the very simple grounds that this is how politicians get elected, by promising sweeties and only charging half price for them. And as long as such systems, just like public sector pensions, are run by politicians that will always be our problem."

Other news coverage of the Trustees annual reports included:

  • CNN * Money, which said, "If lawmakers don't act, Social Security's trust fund will be tapped out in about 18 years," was "one takeaway."
  • Wall Street Journal (beware paywall). The lede said, "Medicare and Social Security will begin to spend more than they earn by the end of this decade, new projections showed Wednesday, putting a spotlight on an issue that has seen scant discussion in an election year—the programs’ solvency challenges facing the next president."
  • Reuters chose to focus on the Medicare program, and began with the lede, "The U.S. federal program that pays elderly Americans' hospital bills will exhaust its reserves in 2028, two years sooner than last year's estimate, trustees of the program said on Wednesday, but spending growth remained within forecasts."

Unfortunately, a Bing search produced very few stories in the so-called mainstream media.

At the moment, some Democratic members in the House of Representatives are holding a sit-in over gun legislation while Democrats in the Senate held four votes earlier in the week, according to CNN*Politics. Guess such political displays are the modern day version of "Bread & Circuses" held in Rome 2,000 years ago. Apparently, it's easier to stage such political displays rather than find ways to solve the promises made by earlier members of Congress, as noted by Tim Worstall above.

So take a few minutes to write your representatives in Congress. Find out what they are doing to ensure that Social Security and Medicate are sustainable for the children and grandchildren of today's Americans. Contact information is available at the Library of Congress' Thomas website (use left-hand column). Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -   write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

June 21, 2016

Diagnosing an 'Economic Sickness'

As I growled on May 9, 2016, "Frequent Growls readers know that economic growth is a frequent topic discussed here." I then linked to four past Growls. I growled again on May 28 about the need for tax reform to kickstart GDP. While economic growth will not solve every one of America's economic problems such as the national debt, a higher level of GDP growth would certainly make it easier.

Consequently, the June 17, 2016 New York Times column by Gregory Mankiw, professor of economics at Harvard and chairman of President George W. Bush's council of economic advisers, caught your scribe's attention. His lede paragraph said, "Economists, like physicians, sometimes confront a patient with an obvious problem but no obvious diagnosis. That is precisely the situation we face right now."

He puts the the problem into perspective this way:

"There is no simple way to gauge an economy’s health. But if you had to choose just one statistic, it would be gross domestic product. Real G.D.P. measures the total income produced within an economy, adjusted for the overall level of prices.

"Here is the sad fact: Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double.

"It may be tempting to blame the Great Recession of 2008-9 for the paltry 10-year growth rate. Indeed, this recession was a deep one.

"Yet the explanation for the poor long-run performance is not that simple. The recession of 1982 was also a deep one. The unemployment rate peaked at 10.8 percent in 1982, compared with a peak of 10 percent in 2009. But by the first quarter of 1989, as Ronald Reagan was leaving the White House, the 10-year growth rate was up to 2.1 percent.

"The difference: The 1982 recession was followed by a robust recovery, whereas the recession of 2008-9 has been followed by a meager one.

"So what’s wrong with the economy? No one knows for sure. But numerous theories are being bandied about."

He identified five such theories. I won't try to describe them, but here they are:

  • A statistical mirage
  • A handover from the (2008-2009) crisis
  • Secular stagnation
  • Slower innovation
  • Policy missteps

In conclusion, he writes, " So there they are. One sickness, five diagnoses. Unfortunately, I have no idea which one is right. The truth may well involve a bit of each."

On the last theory, Mankiw writes "there were reasons to doubt" the Keynesian intervention of the Obama administration, and points to "(a) 2002 study of United States fiscal policy by the economists Olivier Blanchard and Roberto Perotti found that “both increases in taxes and increases in government spending have a strong negative effect on private investment spending.” They noted that this finding is “difficult to reconcile with Keynesian theory.”  He links to this paper in The Quarterly Journal of Economics. He also points to a more recent study that suggests "tax cuts" over "spending increases."

Take a few minutes to write your representatives in Congress. Find out what they are doing for economic growth and jobs by promoting tax reform and reducing the regulatory burden. Contact information is available at the Library of Congress' Thomas website (use left-hand column). Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

June 20, 2016

A Thought about the 'Politics of Kindness'

"All conservatives are painfully aware that liberal activists and publicists have successfully weaponized compassion. “I am a liberal,” public radio host Garrison Keillor wrote in 2004, “and liberalism is the politics of kindness.” Last year President Obama said, “Kindness covers all of my political beliefs. When I think about what I’m fighting for, what gets me up every single day, that captures it just about as much as anything. Kindness; empathy—that sense that I have a stake in your success; that I’m going to make sure, just because [my daughters] are doing well, that’s not enough—I want your kids to do well also.” Empathetic kindness is “what binds us together, and . . . how we’ve always moved forward, based on the idea that we have a stake in each other’s success.”

"Well, if liberalism is the politics of kindness, it follows that its adversary, conservatism, is the politics of cruelty, greed, and callousness. Liberals have never been reluctant to connect those dots. In 1936 Franklin Roosevelt said, “Divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted in different scales. Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference.” In 1984 the Democratic Speaker of the House of Representatives, “Tip” O’Neill, called President Reagan an “evil” man “who has no care and no concern for the working class of America and the future generations . . . . He’s cold. He’s mean. He’s got ice water for blood.” A 2013 Paul Krugman column accused conservatives of taking “positive glee in inflicting further suffering on the already miserable.” They were, he wrote, “infected by an almost pathological meanspiritedness . . . . If you’re an American, and you’re down on your luck, these people don’t want to help; they want to give you an extra kick.”

"Small-d democratic politics is Darwinian: Arguments and rhetoric that work—that impress voters and intimidate opponents—are used again and again. Those that prove ineffective are discarded. If conservatives had ever come up with a devastating, or even effective rebuttal to the accusation that they are heartless and mean-spirited: a) anyone could recite it by now; and, b) more importantly, liberals would have long ago stopped using rhetoric about liberal kindness versus conservative cruelty, for fear that the political risks of such language far outweighed any potential benefits. The fact that liberals are, if anything, increasingly disposed to frame the basic political choice before the nation in these terms suggests that conservatives have not presented an adequate response."

~ William Voegeli

Source: from an adaptation of his October 9, 2014 speech at Hillsdale College, posted at Hillsdales's Imprimis website.

June 19, 2016

A Thought about Governments Operating Prudently

"If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the people’s power to pay and continued to pile up deficits, then it is on the road to bankruptcy.”

    ~ Franklin D. Roosevelt

Source: page 47, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

June 18, 2016

Cost of Federal Tax Complaince in Billions -- Dollars & Hours

The Washington Free Beacon's Ali Meyer reported on Thursday, "Americans will spend more than 8.9 billion hours and $409 billion complying with the tax code in 2016, according to a report from the Tax Foundation." She adds:

“One often overlooked issue in tax reform is complexity,” the report states. “For decades, the tax code has become more and more detailed, with thousands of additional pages of statutes, regulations, and case law. This added complexity imposes a real cost on the U.S. economy.”

:The Internal Revenue Service (IRS) tax code in 1995 totaled 409,000 words and since then it has increased to a total of 2.4 million words.

"In addition to the tax code, there are 7.7 million words of tax regulations and there are 60,000 pages of tax-related case law, which accountants and tax lawyers use to decide how much their clients must pay."

The Tax Foundation's report, "The Compliance Cost of IRS Regulations (Fiscal Fact No. 512, June 2016) was written by president Scott Hodge. The report's four key findings are:

  • The growing complexity of the U.S. tax code has led to large compliance costs for households and businesses.
  • Using data from the Office of Information and Regulatory Affairs and the Bureau of Labor Statistics, it is possible to estimate the total cost of tax compliance on the U.S. economy.
  • Americans will spend more than 8.9 billion hours complying with IRS tax filing requirements in 2016.
  • All in all, tax compliance will cost the U.S. economy $409 billion this year.

Hodge concludes the report with the following conclusion:

"The time it takes to comply with the tax code imposes a real cost on the economy. Individuals and businesses need to devote resources to complying with the tax code instead of doing other productive activities. For example, a business owner who needs to file a complex tax return each year may hire an accountant or tax lawyer to do it. This tax professional may cost $70,000 a year or more. This is $70,000 that this business owner cannot devote to purchasing equipment or hiring workers. Economists refer to this as an opportunity cost, and it results in lost productivity.

"Put in dollar terms, the 8.9 billion hours needed to comply with the tax code computes to $409 billion each year in lost productivity, or greater than the gross product of 36 states (Table 1).

Paul Caron, editor of TaxProf Blog references the Tax Foundation study, too. At the moment, two reader comments are posted.

Take a few minutes to write your representatives in Congress. Find out what he or she is doing to ensure that tax reform simplifies the Internal Revenue Code -- preferably ending up with a flat tax or the FairTax (Note 1). Contact information is available at the Library of Congress' Thomas website (use left-hand column). Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you!

Note 1. The Center for Freedom and Prosperity provides several informative pieces about both the flat tax and the FairTax.

June 17, 2016

A Victory for Arlington County's Government Bureaucracy?

Along with the Revenues & Expenditures Committee of the Arlington County Civic Federation, the Arlington County Taxpayers Association (ACTA) has had a long history of supporting the need for a strong, watchdog, internal audit function for the billion dollar plus county government.

On August 4, 2014, we growled, "Arlington County taxpayers may finally be able to see a light at the end of the proverbial tunnel as the county press office confirmed on Friday the county government has hired the first auditor for what is hoped to be an independent and fully-staffed internal audit function." Later in the Growls, we wrote:

"ACTA has growled repeatedly about the need for Arlington County government and its government schools, i.e., Arlington Public Schools, to have an independent and fully-staffed internal audit function. This includes our May 7, 2013 and October 2, 2013 Growls, and more recently the April 5, 2014 and May 10, 2014 Growls. (embedded links available in the original)

"Kudos to Arlington County Board member John Vihstadt and the Arlington County Civic Federation's Revenues & Expenditures Committee for their continuing support of a strong internal audit function. And kudos to the Arlington Sun Gazette's Scott McCaffrey for the clarity in his reporting on this subject."

Then, on January 15, 2015, we growled, we asked if Arlington County was closer to having an internal auditor. In addition, we observed, "It is difficult to understand just how the Arlington County government, with more than a billion dollar annual budget and Triple-A bond ratings, manages to pass its annual financial audits without a vibrant and dynamic internal audit function."

Several months later, on July 14, 2015, we growled that the Arlington County Board was "moving forward . . . slowly" in selecting a County Auditor. A week later, we growled, saying "Scott McCaffrey of the Arlington Sun Gazette reports this morning on the squabbling that occurred at the Arlington County Board's recessed meeting yesterday." But, we were pleased to report when we growled on December 16, 2015:

"After several years, the Arlington County Board finally voted last night to hire a County Auditor, according to a report today by the Arlington Sun Gazette."

Consequently, we were sorry to learn this week that Arlington County's new auditor is leaving the job," as reported Wednesday afternoon by ARLnow.com. According to the online local news site:

"Arlington is searching for a new auditor, the county announced this afternoon.

Jessica Tucker, the county’s first independent auditor to report directly to the County Board, is resigning as of July 8 and taking a new job in California.

"Tucker’s tenure at the county started on Jan. 25, and seemed to be going well. She announced that she was seeking audit suggestions from residents last month."

The county's press release announcing Ms. Tucker's resignation is here.

Your humble scribe first learned about the County Auditor's resignation last night in reading Mark Kelly's weekly The Right Note column. Admittedly, discerning a victory for the county bureaucracy requires a bit of reading between the lines, but here's what Kelly wrote about the County Auditor's resignation:

"Unfortunately, the efforts of Garvey and Vihstadt on the new audit function of the county took a blow this week when County Auditor Jessica Tucker announced her resignation. Tucker came to Arlington from Fairfax County and she brought a background as a government auditor from the local to the federal level.

"As the County Board re-opens the search, they should also use the opportunity to re-examine the charge for the position.

"First, the Board should consider candidates with a private sector background. If we truly want to evaluate the efficiency and effectiveness of our government operations, maybe we should consider someone with experience outside of other government bodies. It doesn’t mean we have to run government exclusively like a business, but running it more like a business could be helpful.

"Second, the Board should provide the budget for at least one or two additional dedicated staff members who report directly to the Auditor, not the County Manager. If we are going to have an independent audit function, the office needs to be able to have the capacity to operate independently.

"Third, the Board should consider removing the County Manager and Director of the Department of Management and Finance from the Audit Committee. If this function is to be truly independent and report only to the Board, then why does the county staff have a direct say in what will be audited?

"Starting over with a new person is an unfortunate step backward. Hopefully the Board will use the opportunity to move toward more independence while working diligently to fill the position as quickly as possible."

With one exception, I fully concur with Mark Kelly's advice for the county. Kelly says "the Board should provide the budget for at least one or two additional dedicated staff members who report directly to the Auditor, not the County Manager." Without doing a complete risk analysis, I don't know the appropriate staffing level for the County Auditor. However, a "back of the napkin" analysis using comparably sized government entities across the Commonwealth suggests "one or two" is too few although it would be a good start. In addition, I would urge the Board to seek to consolidate the County's and School's audit functions.

Several residents of McHenry County, Illinois were so irate at rising property tax bills that they "paid thousands of dollars of real estate taxes with $1 bills at the county treasurer's office and vowed to do so again in September and every due date afterward until the taxes stop increasing," according to the June 15, 2016 Chicago Tribune. Perhaps it's time for Arlington County taxpayers to make a similar statement about the need for Arlington County government to have a properly staffed County Auditor function.

Growls readers are urged to write to members of the Arlington County Board to voice their concerns about the County Auditor's resignation, proper staffing of the office, and assurance there is no bureaucratic meddling in its proper functioning. Just click-on the link below:

  • Call the County Board office at (703) 228-3130

And tell them ACTA sent you.

June 2016
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Items in Growls are written by individual ACTA members and do not necessarily represent the views of the Arlington County Taxpayers Association, Inc. Please send comments about Growls to The Growl Meister