The National Debt Just Hit $20 Trillion. Here’s How Congress Can Restore Fiscal Sanity.

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Our national debt just topped $20 trillion. That’s 13 zeros, or $20,000,000,000,000.

This also means that the federal government now owes almost $1.5 trillion more than the entire U.S. economy produced in 2016. To put this number into context, here are some other things that add up to $20 trillion:

So how exactly did we get here?

Simply put, massive government spending is the single largest driver of high national debt.

Of the entire federal budget, just four entitlement programs—Medicare, Medicaid, Obamacare, and Social Security—account for most of that spending. In fiscal year 2016, these entitlements consumed 52 percent of all tax dollars.

Without reforms, these programs and interest on the debt will be driving 83 percent of all spending growth projected over the next decade.

Entitlements continue to grow at this rate because they are on autopilot. The programs were enacted in law years ago so that agencies are authorized to spend whatever is needed to keep them running.

Congress has the final say about funding for these programs, but lawmakers choose not to reform them because it is politically difficult to cut popular programs—even if they are unsustainable.

Safeguards could prevent these programs from growing to unsustainable levels in the absence of political will.

Normally, Congress limits how much debt the government can take on by enforcing a debt limit. When the government reaches this limit, the Treasury Department no longer can borrow money to finance government operations.

Reaching the debt limit should be a wake-up call to lawmakers that their level of spending is unsustainable and that they need to enact budget reforms.

But that’s not the effect that reaching the debt limit has had in recent years.

Indeed, spending and debt have grown and the government has repeatedly hit the debt limit, only to be raised without making any reforms. Lawmakers have failed to adopt any long-term solutions.

The debt limit has been suspended since November 2015. Congress just suspended it again through Dec. 8 as part of the Trump-Pelosi-Schumer deal that provided relief for victims of Hurricane Harvey.

Suspending the debt limit lets the Treasury borrow unlimited funds to pay for governmental operations. Basically, this is a blank check for government borrowing. Once the suspension ends, the debt limit is raised based on how much debt was issued during the suspension.

For example, in February 2014, Congress raised the debt limit to $17.2 trillion and then suspended the debt limit until March 2015. When the suspension ended and Congress reset the debt limit, it set it nearly $1 trillion higher at $18.1 trillion.

The United States cannot afford to keep ignoring the debt limit and taking on more debt without serious reform. If the U.S. remains on the current fiscal course, publicly held debt will reach 90 percent of gross domestic product in 10 years.

As the debt grows, so will debt-servicing costs.

The Congressional Budget Office estimates that in 2027, net interest payments on the national debt will consume $768 billion tax dollars. When the government is forced to spend more money servicing the debt, there is less money available for other national priorities, like national defense or lower taxes.

This massive, now $20 trillion debt is a threat to the economy and the American people. Lawmakers and the new administration must reform entitlements, enforce the debt limit, and put the budget back on a path to balance to truly control the national debt.

Mollie McNeill

Mollie McNeill is a research assistant for economic and budget policy at The Heritage Foundation. Twitter: 

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EDITORS NOTE: Safeguards could prevent government programs from growing to unsustainable levels in the absence of political will (Photo: Ingram Publishing/Newscom). Americans need an alternative to the mainstream media. But this can’t be done alone. Find out more >>

After Trump Deals with Democrats, GOP Leaders Know How “Real” Black Republicans Feel

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There’s an old adage that says, “What goes around, comes around.” I couldn’t help but think about this adage when I saw the response of many congressional Republicans, after President Trump cut a deal with the congressional Democrats on raising the debt ceiling, Hurricane Harvey relief, and funding for the federal government.

Republican lawmakers were not only highly upset and insulted, they lost their damned minds. They were all over radio, television and newspapers whining and complaining. Many were too afraid to voice their outrage publicly, so they reverted to what all weak people do: they gave the media anonymous quotes.

“Real” Black Republicans go through this all the time and the party leadership doesn’t seem to give a damn. I have a record in my columns and in my other media platforms of publicly and privately expressing my displeasure with the party when they cut deals with Black Democrats at the expense of “real” Black Republicans.

To my congressional Republican friends and major party operatives: Now you know how “real” Black Republicans feel.

Now you know how “real” Black Republicans felt when you hired Roland Martin, a liberal Black Democrat journalist, to emcee my Black Republican Trailblazer Awards Luncheon. Roland, who is a good friend, never misses an opportunity to denigrate and diminish all things Republican with his liberal vitriol.

But hey, if Democrats were stupid enough to pay me to call them names, hell, I’d take the money too!

Now you know how “real” Black Republicans felt when Attorney General Jeff Sessions met with Al Sharpton and Marc Morial two weeks after he was sworn into office. To this day, he has never met with any Black Republicans. I worked on Session’s first senate campaign in 1996. Sessions is a great person, but I still wonder which White House staffer set up this disastrous meeting.

Sharpton and Morial have called Sessions everything, but a child of God since their meeting. So, what was the purpose of their meeting—race insurance? Enquiring minds want to know.

Now you know how “real” Black Republicans feel when in 2009, former Speaker of the House, Newt Gingrich cut a deal to go on a national speaking tour with Sharpton promoting educational reform.

Three years later, when Gingrich decided to run for president in 2012, Sharpton used some of the most vicious language to attack Gingrich in his efforts to diminish his presidential aspirations.

So much for thinking you can buy your enemy’s loyalty and affection by getting in bed with them.

So, to all the Republicans who are angry at President Trump: we “real” Black Republicans feel your pain.

It’s not fun, is it?

So, just maybe, next time you will think twice when you want to engage with the Black community by courting Black Democrats at the expense of Black Republicans.

Maybe, just maybe, your experience with Trump will make you a little more sensitive to our plight.

Nothing positive has ever come out of Republicans meeting with Black, liberal Democrats. But yet, you continue to meet with these liberal individuals and groups like the NAACP and the National Urban League. Why?

It reminds me of the movie classic, “The Wizard of Oz.” What you were looking for was right before you all along. The Tinman already had a heart, the Lion already had courage, the Scarecrow already had a brain; they just simply needed to be reminded of that which they already had.

The Black community already supports the policies of the Republican Party, but the party needs to awaken from their slumber and recognize that which they already have.

Historically, Blacks have spent more time in the Republican Party than they have in the Democratic Party. In the immortal words of my grandmother, “your actions speak so loud, I can’t hear a damn thing you are saying.”

The message is not the problem. The messengers that congressional Republicans use are the problem. The Blacks you try to promote have absolutely no standing in the Black community.

But congressional Republicans are comfortable with liberal, Black Democrats, because Republican lawmakers know that the Black Democrats will simply do whatever they’re told to do. Congressional Republicans, in essence, tell the Black Democrats how to be Black like the Black acting school scene in Robert Townsend’s classic movie “Hollywood Shuffle.”

So, to my Republican friends: come on back home to the Black community. You don’t have to continue to live in the fake world of Oz. To my Republican friends: if you awaken from your sleep, you will find a whole new world of possibilities waiting for you in the Black community.

RELATED ARTICLE: Most Voters Are Happy Trump’s Reaching Across the Aisle to Work With Dems.

EDITORS NOTE: This column originally appeared in Black Press USA.

Thousands of impoverished people arriving in the U.S. while Americans are homeless

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The image above is of Irma damage in Florida. The cost of hurricanes Harvey and Irma to the U.S. economy can be $290 billion or more.

As I have said until you are surely sick to death of it, President Donald J. Trump is expected to present to Congress a ‘determination’ within days about how many third world impoverished people will be admitted to the U.S. beginning on October 1.

But, here is the thing—he has complete authority to say that NO refugees will be admitted in FY18 because the Refugee Act of 1980 gives that power to the President!

In the last 2 days, three reporters (that I know of) wrote about suspending, or shutting down, the UN/US Refugee Admissions Program for this year.

Frank Sharry

Frank Sharry, open borders advocate.

First, Thomas Allen at VDARE wrote this (read it all, it is full of historical knowledge about the program).  Allen mentions this:

But even Open Borders activists recognize Trump has the legal authority to set the number at zero for 2018. Frank Sharry [Email him] a leading Treason Lobbyist, told a group of activists at the National Partnership for New Americans conference in September 2017 that Trump could “zero the program out” if he chose to. And Congress certainly could zero out the funding of the program if it chose to.

Not only did Sharry acknowledge this, but so did Bill Frelick from Human Rights Watch, here.

Bill Frelick of Human Rights Watch: “…there is no requirement that the U.S. resettle a single refugee….”

And, indeed HIAS executives reported (here) that George W. Bush delayed a Presidential determination in the wake of 9/11 without any legal consequences to him. (The administration must have been worried about Islamic terrorists getting in to the U.S. even then!)

Harvey leaves American homes in Texas ruined by flood waters. Maybe the refugee contractors could get their volunteers busy helping Americans first!

Harvey trash

Destruction from hurricane Harvey.

Next, read Daniel Horowitz yesterday at Conservative Review.

And, finally don’t miss Leo Hohmann at World Net Daily where I am quoted saying this:

Ann Corcoran, who has followed refugee resettlement for more than a decade, said Trump has plenty of reason to do just that and still come across as a great humanitarian by focusing on needy Americans.

“The public should be outraged to learn that in the wake of Hurricanes Harvey and Irma, which have left tens of thousands of Americans homeless, that we are poised to take in thousands of impoverished refugees when we now have our own refugees, struggling people who have lost their homes, lost everything, with their lives shattered, living in tents, shelters and RVs,” Corcoran said.

“To bring in more from other countries in a time like this would be the ultimate insanity.”

Read it all.

The refugee industry (the resettlement contractors and the cheap labor lobby) want you to think that the President must submit a determination of at least 50,000 for the upcoming fiscal year, but it just isn’t so!

Tell the President what you think by clicking here to get instructions…Tell your members of Congress and U.S. Senators too!

America First!

In Ending DACA, Trump Displays His Political Acumen

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U.S. Attorney General Jeff Sessions has announced that President Trump would be rescinding an unconstitutional Presidential Order granting amnesty to children of undocumented immigrants who are still living in the United States; the so called Deferred Action for Children Arrivals, or DACA.

My reaction, as an Hispanic?

Good riddance!

Of course, I’m ecstatic that the President of the United States, with a swipe of his pen, undid what a former President did in a like manner, offensive to the Constitution of the United States. In the words of Attorney General Sessions, by this action the President has restored “constitutional order” to a process that was supposed to involve all people living in the United States, not just President Obama and his cronies.

But there’s a catch.

The President’s order has a six-month delay provision so that nothing can happen for half a year. This delay represents an absolutely brilliant move on President Trump’s part who, by all accounts, favors some continuation of DACA. Now, the President has effectively placed the burden of solving this colossal Obama-created societal problem squarely on Congress — where it belongs. Additionally, his action has struck a massive cord of outrage throughout America with one predominant theme: “Congress has got to do something!”

Americans are right.

Congress (and only Congress) must do something on this if anything is to be done, which is exactly what the Framers intended — not the president acting imperially.

Listen to Dr. Gonzalez’s Podcast!

One of the great weaknesses of our legislative process is the legislature’s inability to address problems that are not considered to be in crisis. This is why Congress never addressed a solution to health care until the Democrats took advantage of their numerical superiority and rammed theirsolution down America’s throat. It is also why Congress failed to repeal Obamacare and why they are now at the precipice of not passing a comprehensive reform package for our nation’s taxation system.

Well, now, President Trump has just unleashed a massive humanitarian, political crisis equipped with a time certain. Congress knows the magnitude of the problem. It know the raw humanity of it, and it knows the consequences of not acting. Yes, it is time for Congress to act, and woe to all incumbents obstruct the passage of a solution.

RELATED ARTICLES: 

Top Bill Clinton Campaign Strategist Breaks Down Why “Trump’s DACA Move Is Brilliant”

Full Scholarships for DREAMers at University of Miami

Trump Correct to Put ‘Dreamers’ in the Hands of Congress, GOP Lawmakers Say

This Is Why A Liberal Law Professor Thinks Trump’s DACA Decision Is A Win For The Constitution

2,139 DACA Recipients Convicted or Accused of Crimes Against Americans – Breitbart

Father of Murdered Florida Mother Reveals Suspected Killer Was DACA Recipient

14 Things the MSM Won’t Tell You About DACA

POLLAK: Trump’s DACA Decision is the Right Move, the Right Way

EDITORS NOTE: This column originally appeared in The Revolutionary Act. The feature image is an AP Photo by Alex Brandon.

Black Leaders Should Focus on Lifting People Out of Poverty, Not Purging Statues

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Many blacks and their white liberal allies demand the removal of statues of Confederate generals and the Confederate battle flag, and they are working up steam to destroy the images of Gens. Stonewall Jackson and Robert E. Lee and President Jefferson Davis from Stone Mountain in Georgia.

Allow me to speculate as to the whys of this statue removal craze, which we might call statucide.

To understand it, we need a review of the promises black and white liberals have been making for decades.

In 1940, the black poverty rate was 87 percent. By 1960, it had fallen to 47 percent. During that interval, blacks were politically impotent. There were no anti-poverty programs or affirmative action programs. Nonetheless, this poverty reduction exceeded that in any other 20-year interval.

But the black leadership argued that more was necessary. They said that broad advancement could not be made unless blacks gained political power.

Fifty years ago, there were fewer than 1,000 black elected officials nationwide. According to the Joint Center for Political and Economic Studies, by 2011 there were roughly 10,500 black elected officials, not to mention a black president.

But what were the fruits of greater political power?

The greatest black poverty, poorest education, highest crime rates, and greatest family instability are in cities such as Detroit, St. Louis, Oakland, Memphis, Birmingham, Atlanta, Baltimore, Cleveland, Philadelphia, and Buffalo.

The most common characteristic of these predominantly black cities is that for decades, all of them have been run by Democratic and presumably liberal politicians. Plus, in most cases, blacks have been mayors, chiefs of police, school superintendents, and principals and have dominated city councils.

During the 1960s, black and white liberals called for more money to be spent on anti-poverty programs. Since the Lyndon Johnson administration’s War on Poverty programs, U.S. taxpayers have forked over $22 trillion for anti-poverty programs.

Adjusted for inflation, that’s three times the cost of all U.S. military wars since the American Revolution.

Despite that spending, the socio-economic condition for many blacks has worsened.

In 1940, 86 percent of black children were born inside marriage, and the black illegitimacy rate was about 15 percent. Today, only 35 percent of black children are born inside marriage, and the illegitimacy rate hovers around 75 percent.

The visions of black civil rights leaders and their white liberal allies didn’t quite pan out. Greater political power and massive anti-poverty spending produced little.

The failure of political power and the failure of massive welfare spending to produce nirvana led to the expectation that if only there were a black president, everything would become better for blacks.

I cannot think of a single black socio-economic statistic that improved during the two terms of the Barack Obama administration.

Some have become tragically worse, such as the black homicide victimization rate. For example, on average in Chicago, one person is shot every two hours, 15 minutes, and a person is murdered every 12 1/2 hours.

So more political power hasn’t worked. Massive poverty spending hasn’t worked. Electing a black president hasn’t worked.

What should black leaders and their white liberal allies now turn their attention to in order to improve the socio-economic condition for blacks?

It appears to be nearly unanimous that attention should be turned to the removal of Confederate statues. It’s not only Confederate statue removal but Confederate names of schools and streets.

Even the Council on American-Islamic Relations agrees. It just passed a resolution calling for the removal of all Confederate memorials, flags, street names, and symbols from public spaces and property.

By the way, does the statue of Union Gen. William Tecumseh Sherman qualify for removal? He once explained his reluctance to enlist former slaves, writing, “I am honest in my belief that it is not fair to our men to count negroes as equals … (but) is not a negro as good as a white man to stop a bullet?”

It’s difficult to determine where this purging of the nation’s history should end.Portrait of Walter E. Williams

Walter E. Williams

Walter E. Williams is a professor of economics at George Mason University.

RELATED ARTICLES:

Tax Reform Will ‘Help Everyone,’ This Small-Business Owner Says

Liberals in a Tizzy

A Note for our Readers:

The Hill is full of debates over the future of economy. Everything from spending cuts to tax reform to free trade agreements to tax competition are hotly debated.

The Daily Signal is here to ensure you receive clear, concise, and reliable facts on all issues impacting our economy.

We are a dedicated team of more than 100 journalists and policy experts funded solely by the financial support of the general public. And we need your help! The media today is resorting to marketing ploys and clickbait tactics to spread news not steeped in fact.

Your financial support will help us fight for access to our nation’s leaders and report the facts. Because you deserve the truth about what’s going on in the economy. No amount of pressure is going to stop us from maintaining the integrity of the news. You deserve to hear the facts.

Make a gift to support The Daily Signal today!

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EDITORS NOTE: The feature image is of Baltimore Mayor Catherine Pugh who chose to remove several Confederate statues following the violent events in Charlottesville. (Photo: Sait Serkan Gurbuz/Reuters/Newscom). Americans need an alternative to the mainstream media. But this can’t be done alone. Find out more >>

Trump Says Tax Reform Could Create ‘Millions and Millions of New Jobs’ by Fred Lucas

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President Donald Trump hit his campaign themes of bringing back American jobs and raising wages in launching his quest for tax reform, while blasting special interest loopholes.

“Let’s put, or at least try to put, the partisan posturing behind us and come together as Americans to create the 21st century tax code that our people deserve,” Trump told the audience Wednesday at the Loren Cook Company in Springfield, Missouri.

“If we unite, in the name of common sense and the name of common good, then we will add millions and millions of new jobs, bring back trillions of dollars, and we will give America the competitive advantage it so desperately needs and has been looking for so long,” Trump continued.

“Instead of exporting our jobs, we will export our goods.”

Democrats have framed past Republican efforts at tax reform as a gift to the rich, but Trump put his own populist stamp on the issue by talking about how the current complex tax code harms average Americans, leading to fewer jobs, and how a new system would be fairer, expand economic growth to more than 3 percent, and make America more competitive.

“If we achieve sustained 3 percent growth, that means 12 million new jobs and $10 trillion dollars of new economic activity over the next decade,” Trump said.

Trump noted that Springfield, Missouri, was the birthplace of Route 66.

“This is the place where the main street of America got its start, and this is where America’s Main Street will begin its big, beautiful comeback that you are seeing right now,” Trump said.

“This is a comeback of historic proportions. You’re seeing it happen right now. We’re here today to launch our plans to bring back Main Street by reducing the crushing tax burden on our companies and on our workers.”

Referencing the slow pace of Congress on other issues, Trump said, “I don’t want to be disappointed by Congress. I think Congress is going to make a comeback.”

In the speech, Trump laid out his four principles for tax reform.

The first is to greatly simplify the tax code. Currently, as studies show, more than 90 percent of individuals and businesses use either paid tax preparers or special software to file their taxes. According to the IRS Taxpayer Advocate Service, taxpayers spend 6 billion hours per year complying with the tax code.

Trump wants Americans to be able to file taxes on a single page.

The second is to slash corporate taxes, which he said would bring back jobs to the United States, which would mean more companies competing for U.S. workers, and “a pay raise Americans have been looking for, for many, many years.”

Trump later said that under tax reform, Americans would get a “big, fat, beautiful paycheck.”

The United States corporate tax rate is 16.4 percentage points higher than the worldwide average, according to the Tax Foundation. The United States has the highest corporate tax rate among the 35 advanced economies in the Organization for Economic Cooperation and Development, and according to OECD data, the combined corporate tax rate is 39 percent compared to the average of 24 percent among member countries.

“The strategy of our economic rivals has worked. They’ve made their taxes lower and far lower in many cases than ours, and jobs left our country,” Trump said.

He added, “We have totally surrendered our competitive edge to other countries. We’re not surrendering anymore.”

Trump’s third principle was middle class tax relief.

“They’ve been the forgotten people, but they’re not forgotten anymore, I’ll tell you that,” Trump said.

He added that one of his goals was helping parents afford child care, an issue that is “so important to my daughter [Ivanka Trump], it’s one of her very big beliefs.”

The fourth principle is to bring back trillions of dollars from companies that do business overseas and park their profits offshore. Fortune 500 corporations are holding more than $2.6 trillion in profits offshore to avoid $767 billion in U.S. federal taxes, according to the Institute on Taxation and Economic Policy.

House Minority Leader Nancy Pelosi attacked Trump’s proposal as “flawed logic.”

Others were more supportive, such as Alfredo Ortiz, CEO of the Job Creators Network.

“The president is determined to energize the American economy, especially with the necessary tax cuts for job creators – small businesses all across the country who create 70 percent of all new jobs,” Ortiz said in statement.

Trump and Congress should go all in to fix the tax code, said Brent Gardner, chief government affairs officer for Americans for Prosperity.

“We deserve a tax code built for growth. For too long, the tax system has been rigged to favor the powerful and well-connected, but tax reform will level the playing field and allow for the growth of family paychecks, the growth of jobs, and the growth of the American economy.”

About Fred Lucas

Fred Lucas is the White House correspondent for The Daily Signal. Send an email to Fred. Twitter: @FredLucasWH

A Note for our Readers:

The Hill is full of debates over the future of economy. Everything from spending cuts to tax reform to free trade agreements to tax competition are hotly debated.

The Daily Signal is here to ensure you receive clear, concise, and reliable facts on all issues impacting our economy.

We are a dedicated team of more than 100 journalists and policy experts funded solely by the financial support of the general public. And we need your help! The media today is resorting to marketing ploys and clickbait tactics to spread news not steeped in fact.

Your financial support will help us fight for access to our nation’s leaders and report the facts. Because you deserve the truth about what’s going on in the economy. No amount of pressure is going to stop us from maintaining the integrity of the news. You deserve to hear the facts.

Make a gift to support The Daily Signal today!

SUPPORT THE DAILY SIGNAL

RELATED VIDEO: Full speech of President Trump in Springfield, Missouri on August 30th, 2017.

EDITORS NOTE: The featured image of President Donald J. Trump talking about his principles for tax reform during a rally Wednesday in Springfield, Missouri. (Photo: Kevin Lamarque/Reuters/Newscom)

College: What Are You Paying For?

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Randall Smith on the explosion of college tuition costs. Education is very expensive, and it’s important for parents and students to know exactly what they’re paying for.

It’s late August, and young adults across the country are headed to college, and parents across the country are writing large tuition checks.

Americans worry incessantly about the inflation in medical costs – and with good reason. But over the past fifteen years, the inflation in college and university costs has been even greater.  Colleges and universities across the country have been raising tuition at a rate four times faster than the overall inflation rate.

What does that money pay for? A little thought experiment may help. Let’s imagine, for a moment, educational institutions in which the buildings are modest and fully financed so that, not only are the costs of their construction paid off, but their financing has been sufficient to cover depreciation and maintenance. Since such financing is rarely included in the costs of new buildings. When they are opened (to great fanfare and praise for administrators), what should be an asset becomes a liability, and a further drain on general operating expenses.

But let’s say the buildings are fully financed and that the endowment has been developed sufficiently to cover operating expenses. What, then, on our little ideally financed campus, would the basic costs of instruction be? Let’s say we set the salary for faculty at $75,000 per year, which is near the current average. To that rather generous salary, we’ll add another 20 percent to pay for benefits – also generous, but this is what private contractors are required by the government to put aside. The total would be $90,000 dollars per year. Let’s say that we asked our professors to teach three classes per semester, with an average of twenty students per class (a low number for many college classes). In that case, faculty members would be teaching roughly 120 students per year.

Here’s where it gets interesting. To make the $90,000 we need to pay our faculty – and remember, we’ve got the lights and electricity and all the rest taken care of – we would only need to charge each student $750 per course. If each student took five courses per semester, tuition per student would be $3,750 per semester or $7,500 per year. That’s it.

Now if you’re paying more than $7,500 per year in tuition – and everyone is – what, you might wonder, is all the rest of the money being used for? I teach at a university, and I don’t know. Nor do any of my colleagues. We regularly ask to inspect the budget figures, but they are not forthcoming.

Click here to read the rest of Professor Smith’s column . . .

 

Man On the Street: Income Inequality

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We know progressives deplore income inequality and believe the idea of income equality will bring about a better world, one that is more “socially just.” But do they know anything about what actually happens when their dream comes true?

Like, what do “income equality” societies (like Venezuela) look like?

Which society should the U.S. model itself after?

Documentary filmmaker Ami Horowitz asks progressives what they know about income equality. Turns out, not that much. Watch Ami’s video here.

RELATED ARTICLES: 

Illegal Immigration Drives Income Inequality

Busting Myths about Income Inequality by Chelsea German

Can Soaking the Rich Reduce Income Inequality? by Karen Walby, Ph.D.

PROGRESSIVE ABSURDITY #43 – “Income Inequality Is the Great Economic and Moral Crisis of Our Time” by Ron Robinson

U.S. Pays $50 Mil for Luxury Cars, Weapons, Booze to Mentor Afghan Intel Officers

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A foreign company hired by the U.S. government to mentor and train Afghan intelligence officers billed Uncle Sam for more than $50 million in luxury cars — including Porsches, an Aston Martin, and a Bentley — and the lucrative salaries of executives and their spouses (who didn’t do any work). The firm also spent $1,500 on alcohol and $42,000 on automatic weapons prohibited under the terms of the contract, according to figures provided by a U.S. Senator from a federal audit that has not been released to the public. It marks the latest of many scandals involving the free-flow of American dollars to controversial causes in Afghanistan, where fraud and corruption are rampant in all sectors.

In this latest case, the Department of Defense (DOD) hired a British firm called New Century Consulting (NCC) to operate a program called “Legacy East” that was supposed to provide counterinsurgency intelligence experts to mentor and train Afghan National Security Forces. Instead, NCC billed the Pentagon millions of dollars in questionable or unallowable expenses, including seven luxury cars and exorbitant $400,000 average salaries for the “significant others” of corporate officers to serve as “executive assistants.” Other prohibited expenses include severance payments, rent, unnecessary licensing fees, extensive austerity pay, and the cost of personal air travel. The outrageous figures became public when the top-ranking Democrat on the Senate Homeland Security and Governmental Affairs Committee, Claire McCaskill, wrote a letter to Defense Secretary James Mattis demanding answers. As a federal lawmaker McCaskill had access to the information after viewing a report from the Defense Contract Audit Agency (DCAA), which provides financial oversight of government contracts for the Pentagon and operates under the Secretary of Defense.

McCaskill discloses that the British firm continued receiving lucrative DOD contracts despite having “many previous problems,” involving billing and performance practices. The senator also questions why the Pentagon kept pouring money into a “troubled” program that a separate federal audit had determined was likely ineffective. That assessment, made by the Special Inspector General for Afghanistan Reconstruction (SIGAR), came after investigators found that a lack of performance metrics makes it nearly impossible to assess whether the hundreds of millions of dollars spent on the mentoring and training programs for Afghan intel personnel are effective. “Despite all of the listed issues with NCC’s performance and billing practices, the Army continued to engage in contracting with NCC for sensitive work in Afghanistan,” McCaskill states in her letter to Mattis.

Afghanistan reconstruction has been a huge debacle that continues fleecing American taxpayers to the tune of billions and Judicial Watch has reported extensively on it over the years. Many of the details are regularly disclosed in provoking reports published on the SIGAR website. Highlights include the mysterious disappearance of nearly half a billion dollars in oil destined for the Afghan National Army, a $335 million Afghan power plant that’s seldom used and an $18.5 million renovation for a prison that remains unfinished and unused years after the U.S.-funded work began. Among the more outrageous expenditures are U.S. Army contracts with dozens of companies tied to Al Qaeda and the Taliban. The reconstruction watchdog recommended that the Army immediately cut business ties to the terrorists but the deals continued. Another big waste reported by Judicial Watch a few years ago, involves a $65 million initiative to help Afghan women escape repression. The government admits that, because there’s no accountability, record-keeping or follow-up, it has no clue if the program was effective.

Back in 2013 Judicial Watch reported that, despite multiple warnings of fraud and corruption inside the Afghan Ministry of Public Health, the U.S. keeps sending hundreds of millions of dollars to support the Islamic republic’s scandal-plagued healthcare system. In that infuriating case, the money—$236 million over nine years—flowed through the scandal-plagued U.S. Agency for International Development (USAID), which is charged with providing economic, development and humanitarian assistance worldwide. It was supposed to fund prenatal care for women, hospitals, physicians’ salaries and other medical costs. Instead, a federal audit found pervasive, waste, fraud and abuse that warranted an immediate cutoff of U.S. assistance. In a scathing report SIGAR called it a reckless disregard toward the management of U.S. taxpayer dollars.

President Trump to ‘cut all military aid to Pakistan’, thinks U.S. is being ‘ripped off’

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I had just about given up on Trump, and then he says this. We can only hope that he will follow through, and not be persuaded by McMaster that all Pakistan needs is a few more U.S. billions to turn it into a reliable ally.

“Trump to ‘cut all military aid to Pakistan’, thinks Washington is being ‘ripped off’ by Islamabad: report,” Reuters, August 19, 2017:

US President Donald Trump is mulling cutting off all military aid to Pakistan because ‘Washington is being ripped off by Islamabad’, claims a Foreign Policy report….

The FP report quoted a White House official as saying that “the President thinks we’re being ripped off by Pakistan. The president wants to cut off all military aid to Pakistan. That’s part of the strategy”….

During the discussions at Camp David, there were differences of opinion over taking a harder line on Pakistan for failing to close Afghan Taliban sanctuaries and arrest Afghan extremist leaders. US officials say the Afghan Taliban are supported by elements of Pakistan’s military and top intelligence agency, a charge Islamabad denies.

Pentagon has already frozen support to Islamabad under the coalition support fund, which provides Pakistan with payments to finance counter-terrorism operations. Mattis claims he could not find evidence that Pakistan had taken enough action against the Haqqani network.

Amid relentless criticism of Pakistan from the Trump administration, army chief General Qamar Javed Bajwa has told a top US military commander that Pakistan doesn’t need aid, all it wants is acknowledgement of its efforts in the fight against terrorism.

“More than financial or material assistance, we seek acknowledgement of our decades-long contributions towards regional peace and stability, understanding of our challenges and most importantly the sacrifices the Pakistani nation and its security forces have rendered in [the] fight against terrorism and militancy,” he told Centcom chief General Joseph L Votel during a meeting at the GHQ on Friday….

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Tax Withholding Is Miracle-Grow for Government by Daniel J. Mitchell

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The internal revenue code is a reprehensible mess that torments taxpayers and undermines American competitiveness.

The good news is that Americans don’t like the tax system.

The bad news is that they don’t dislike it nearly as much as they should. At least in my humble opinion.

There are two reasons for the inadequate level of disdain.

  • First, nearly half of all households are no longer are subject to the income tax. Indeed, the system is actually a revenue generator for some households since the EITC wage subsidy is a redistribution program laundered through the tax code.
  • Second, many people get a warm and fuzzy feeling when they file their taxes because of the expectation that they will get a sizable refund, even though that payment from the IRS is simply a reflection of having paid too much tax during the prior year.

For those of us who want to scrap the tax system, this is a challenge.

And I’m not shy about admitting the problem.

About three-quarters typically get money back, with refunds so far this year averaging almost $3,000. For many, it will be the single biggest payment they receive all year. …the fact that so many people are getting paid by the IRS, and not the other way around, takes some of the edge off a day when they’re trying to stoke public anger at the tax system. “The fact that people are looking forward to tax time rubs me the wrong way,” said Dan Mitchell, a tax expert at the libertarian Cato Institute. “I would like them to be upset.”

I also have a good idea of why the problem exists.

It’s withholding. And it started back during World War II. Here’s some background.

During the war, tax rates went up, and a broader number of people were expected to pay them. Professor Anuj Desai from the University of Wisconsin Law School said there was a saying that income tax went from “a class tax to a mass tax.” …“The thought was that if we withhold a little bit every bit every paycheck, people won’t have to worry about the problem of coming up with a huge chunk of money,” Desai said. But withholding is also a remarkably efficient way for the government to raise money, and policymakers knew that. …“You could never have the taxes that were levied during World War II without withholding. It was absolutely essential for that purpose,” economist Milton Friedman said in an interview… Friedman worked with the Treasury Department at the time withholding was introduced. Withholding stuck around after the war, much to Friedman’s chagrin. “Unfortunately, once you got it installed, it’s almost impossible to get rid of it,” Friedman said. “It’s too useful to the people in power.”

Jeffrey Tucker of the Foundation for Economic Education elaborates.

The problem is…the withholding tax. Instead of being collected directly from the payer, the government collects them “at the source,” which is to say that they are collected from the institution that pays wages and salaries — on behalf of the taxpayer. …one of the most amazingly brilliant innovations of the modern state. This tinkering with the system — the creation of the institution called withholding — has created an illusion that paying taxes is really about getting free money! When the check arrives from the government a month or so later, the taxpayer is actually tempted to think: wow, this is really great! A pillaging has been spun to look like a gift. …Withholding dramatically changed the psychology of paying taxes. It almost feels like you aren’t paying any at all. The worker gets used to how much after-tax income she makes and adapts to it quickly. Then when tax time arrives, there is no more to pay. Instead you file and find yourself on the receiving end of what seems like an unexpected gift of a check from government. Yet in reality your refund is nothing more than the belated return of a zero-interest loan you were forced to provide the government.

Exactly.

Every time I talk to somehow who is happy about a refund, I ask them whether they will give me an interest-free loan instead. After all, I’d be happy to collect money from them all year long and then return it the following April.

But I’m digressing.

Jeffrey points out how the political dynamics of tax day would change in the absence of withholding.

If we really wanted to make a wonderful change in favor of transparency and decency, one that would mark a shift in people’s perceptions of the costs of government, the withholding tax could just be repealed completely. …every taxpayer would pay the full amount owed to the government every April 15 and otherwise receive full compensation the rest of the year. Such a seemingly small change would have a dramatic effect on public perceptions of taxation and government. Even from the age of 16, every citizen would have a more pungent reminder of the costs of government. We would no longer live the illusion that we can all get something for nothing and that government isn’t really expensive after all.

Ben Domenech of the Federalist agrees.

The overwhelming majority of Americans pay their taxes by having them extracted from their paychecks before they ever see the money. Operating under the fiction that the government is giving you money as opposed to returning what it has already taken is damaging to the psyche of the nation’s taxpayers. …Withholding was originally mandated as a wartime step, but its continuation since then disguises the property rights involved, essentially offers the government an interest free loan, and shields taxpayers from the ramifications of federal spending. The country would be better off if everyone experienced what entrepreneurs and business owners do: writing the most sizable checks every year to the government, and watching that hard-earned money walk out the door.

By the way, this isn’t merely impractical libertarian fantasy.

There’s a real-world example of a tax system where people actually write checks to the government and are much more aware of the cost of the public sector. It’s called Hong Kong, which is – not coincidentally – an economic success story in large part because of a good fiscal system.

And I would argue that good fiscal system exists because taxpayers are directly sensitive to the cost of government (it also helps that there’s a spending cap in Hong Kong).

Let’s close with some government propaganda. This Disney cartoon was produced before withholding. As you can see the government basically had to make the case that people should set aside money out of their paychecks so they would have enough money to make periodic tax payments.

This was a plausible case when seeking to finance a war against National Socialism and Japanese imperialism. It wouldn’t be nearly as persuasive today when the government seems to specialize in financing waste, fraud, and abuse.

P.S. At the bottom of this column, you can watch a much better cartoon from the 1940s.

Reprinted from International Liberty.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

Everything You Need to Know about Government, in One Story by Daniel J. Mitchell

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Every so often, I run across a chart, cartoon, or story that captures the essence of an issue. And when that happens, I make it part of my “everything you need to know” series.

I don’t actually think those columns tell us everything we need to know, of course, but they do show something very important. At least I hope.

And now, from our (normally) semi-rational northern neighbor, I have a new example.

This story from Toronto truly is a powerful example of the difference between government action and private action.

A Toronto man who spent $550 building a set of stairs in his community park says he has no regrets, despite the city’s insistence that he should have waited for a $65,000 city project to handle the problem. 
Retired mechanic Adi Astl says he took it upon himself to build the stairs after several neighbours fell down the steep path to a community garden in Tom Riley Park, in Etobicoke, Ont. Astl says his neighbours chipped in on the project, which only ended up costing $550 – a far cry from the $65,000-$150,000 price tag the city had estimated for the job. …Astl says he hired a homeless person to help him and built the eight steps in a matter of hours. …Astl says members of his gardening group have been thanking him for taking care of the project, especially after one of them broke her wrist falling down the slope last year.

There are actually two profound lessons to learn from this story.

Since I’m a fiscal wonk, the part that grabbed my attention was the $550 cost of private action compared to $65,000 for government. Or maybe $150,000. Heck, probably more considering government cost overruns.

Though we’re not actually talking about government action. God only knows how long it would have taken the bureaucracy to complete this task. So this is a story of inexpensive private action vs. costly government inaction.

But there’s another part of this story that also caught my eye. The bureaucracy is responding with spite.

The city is now threatening to tear down the stairs because they were not built to regulation standards…City bylaw officers have taped off the stairs while officials make a decision on what to do with it. …Mayor John Tory…says that still doesn’t justify allowing private citizens to bypass city bylaws to build public structures themselves. …“We just can’t have people decide to go out to Home Depot and build a staircase in a park because that’s what they would like to have.”

But there is a silver lining. With infinite mercy, the government isn’t going to throw Mr. Astl in jail or make him pay a fine. At least not yet.

Astl has not been charged with any sort of violation.

Gee, how nice and thoughtful.

One woman has drawn the appropriate conclusion from this episode.

Area resident Dana Beamon told CTV Toronto she’s happy to have the stairs there, whether or not they are up to city standards. “We have far too much bureaucracy,” she said. “We don’t have enough self-initiative in our city, so I’m impressed.”

Which is the lesson I think everybody should take away. Private initiative works much faster and much cheaper than government.

P.S. Let’s also call this an example of super-federalism, or super-decentralization. Imagine how expensive it would have been for the national government in Ottawa to build the stairs? Or how long it would have taken? Probably millions of dollars and a couple of years.

Now imagine how costly and time-consuming it would have been if the Ontario provincial government was in charge? Perhaps not as bad, but still very expensive and time-consuming.

And we already know the cost (and inaction) of the city government. Reminds me of the $1 million bus stop in Arlington, VA.

But when actual users of the park take responsibility (both in terms of action and money), the stairs were built quickly and efficiently.

In other words, let’s have decentralization. But the most radical federalism is when private action replaces government.

Reprinted from International Liberty

Editors Note: Since this article was originally published, the local government tore down Astl’s $500 stairs, citing “safety standards,” and plans to replace it with a $10,000 set.

Daniel J. Mitchell

Daniel J. Mitchell

Daniel J. Mitchell is a senior fellow at the Cato Institute who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

This is How You Make Health Care Affordable by Jay Bowen

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As the debate continues to rage in Washington, D.C., and around the country regarding the fate of Obamacare, one elegantly simple concept that would have a dramatic impact on healthcare costs is being drowned out by inflammatory rhetoric.

The One Area of Health Care That’s Defying Massive Inflation

Out-of-pocket payment (OPP) by consumers for routine medical care would transform the system from one dominated by third party payers toward a model that would put consumers in charge of their healthcare dollars, and for the first time unleash market disciplines into the equation.

After all, we can all only imagine what our grocery carts would look like, not to mention our restaurant tabs, if a third party was paying for our food. Unfortunately, out-of-pocket payments have steadily trended down over the last 60 years and now account for only 10.5% of healthcare expenditures.

It is both stunning and disconcerting that the myriad of benefits that flow from a competitive, market driven system have never, in any substantial way, penetrated the healthcare and medical services arena. However, one striking exception to this competitive wet blanket is the $15 billion cosmetic surgery industry, the poster child for out of pocket payments, where innovation and price disinflation have been hallmarks for decades. Examples abound.

As Mark Perry has pointed out on his brilliant economic blog, Carpe Diem, over the past 19 years, the 20 most popular cosmetic procedures have increased at a rate 32% below the consumer price index (CPI) and 68% below the rate of medical services inflation.

Thus, the backbone of a productive reform plan must include a move away from third parties and employers controlling health care dollars toward individuals holding sway over their medical purse strings.

Removing Constraints

This would mean that the “employer contribution” that currently is used to fund corporate group policies would transition to an increase in an employee’s compensation, which would be funneled tax-free into a robust health savings account (HSA) that the employee would control for routine medical expenses.

As Michael Cannon of the Cato Institute has pointed out, “The employer contribution for health care is part of a worker’s earnings and averages $13,000 per family. Yet the tax code gives control over that money to employers rather than the workers who earned it.”

Importantly, this HSA would be paired with a high-deductible catastrophic policy and also be valid in the individual marketplace. Additionally, this would go a long way in helping to solve the portability issue that some employees face when changing jobs or careers.Essential to making these individual plans more attractive and affordable would be the abolition of both the “community rating” and “essential health benefits” mandates currently embedded in Obamacare policies. These concepts make a mockery of a legitimate, actuarially sound insurance market by shifting costs from older and sicker people to younger and healthier people, thus promoting adverse selection.

Without these constraints, families could focus on basic and affordable policies that would better match their needs and also begin building a “rainy day health fund” via their HSA accounts.

Regarding both Medicaid and pre-existing conditions, a strong dose of old fashioned, Tenth Amendment-oriented federalism is long overdue in dealing with these issues.

In fact, both from a philosophical and practical standpoint, they should never have come under the purview of the federal government and are best left to the individual states where diverse, vibrant, and innovative solutions could be implemented. This could include the establishment of reinsurance programs and high-risk pools for those with pre-existing conditions, and the phasing out of the open-ended federal entitlement status of Medicaid through a multi-year block grant program.

A Patient-Centered System

The current third party payment/community rating model for delivering healthcare is unsustainable and rapidly headed for the dreaded “death spiral,” which occurs when an escalation of sick people flock to the exchanges for insurance, while an increasing number of healthy people choose to leave the market. In fact, Aetna CEO Mark Bertolini has recently acknowledged as much.

Make no mistake, Obamacare was designed to invariably lead to a government-run, single-payer model, with its global budgeting, rationing of care, and long wait times for vital procedures in tow.

Without swift and decisive intervention with a system based on patient-centered choice and market mechanisms, the end result will be a Veterans Affairs (VA)-like model that would combine the worst aspects of government inefficiencies and substandard care.

A quick glance at the dismal state of Great Britain’s National Health Service (NHS), Canada’s single payer scheme, or our own insolvent Medicare and Medicaid plans provides Americans with an acutely unpleasant hint of what is in store if a single-payer model does indeed transpire.

Jay Bowen

Jay Bowen

Mr. Bowen joined Bowen, Hanes & Company, Inc. in 1986. As the firm’s Chief Investment Officer and economic strategist, Mr. Bowen is responsible for the formulation and implementation of the firm’s economic and investment strategies.

Steve Jobs Wanted to Break Up the Education Monopoly by Joe Kent

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Steve Jobs said in a 1995 interview, “The unions are the worst thing that ever happened in education.”

Jobs spoke with Computerworld’s Daniel Morrow in a 1995 interview, which covered a wide range of topics, but frequently delved into Jobs’s views on the American education system. As he said, “I’d like the people teaching my kids to be good enough that they could get a job at the company I work for making $100,000 a year.”

“Schools are not a meritocracy. They’re a bureaucracy.”

But Jobs blamed teachers unions for getting in the way of good teachers getting better pay. “It’s not a meritocracy,” said Jobs. “It turns into a bureaucracy, which is exactly what’s happened. And teachers can’t teach, and administrators run the place, and nobody can be fired. It’s terrible.”He noted that one solution is school choice: “I’ve been a very strong believer that what we need to do in education is go to the full voucher system.” Jobs explained that education in America had been taken over by a government monopoly, which was providing a poor quality education for children.

He referenced the government-created phone monopoly, broken up in 1982: “I remember seeing a bumper sticker with the Bell logo on it and it said, ‘We don’t care, we don’t have to.’ That’s certainly what the public school system is. They don’t have to care.”

Jobs said that one way to open up a free market in education would be to offer a voucher to families. He gave an example of the California public school system, which in 1995 spent $4,400 per pupil: “I believe strongly that if the country gave each parent a voucher – a check for $4,400 that they could only spend at any accredited school – that several things would happen.”

First, “Schools would start marketing themselves like crazy to parents, to get students.”

Second, many new schools would begin popping up. “You could have 25-year-old kids out of college – very idealistic, full of energy – instead of starting a Silicon Valley company, they would start a school, and I believe they would do far better than many of our public school teachers do.”

“A lot of competition forces providers to get better and better.”

Finally, the quality of education would rise in a competitive market: “A lot of schools would go broke, there’s no question about it. It would be rather painful for the first several years, but I think far less painful than the kids going through the system as it is right now.”Jobs said that the main complaint against school choice is that schools would cater only to rich kids, and the poor kids would be “left to wallow together.”

However, he said, “that’s like saying, well, all the car manufacturers are going to make BMWs and Mercedes and nobody’s going to make a $10,000 car. Well, I think the most hotly competitive market right now is the $10,000 car.”

In other words, Jobs said, all students would benefit from more school choice, as the monopoly in education was broken up.

“The market competition model seems to indicate that where there is a need, there is a lot of providers willing to tailor their products to fit that need, and a lot of competition which keeps forcing them to get better and better.”

Joe Kent

Joe Kent

Joe Kent is the Vice President of Research at the Grassroot Institute of Hawaii, a free market think tank. Joe previously worked as a public school teacher for eight years, both in Hawaii and in Minnesota.

Thank President Trump for Draining the Swamp

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