Paul Ryan retired from Congress in January 2019 after 20 years of service culminating in his 3+ years of service as Speaker of the House.

Ryan was the chief cheerleader for the Tax Cuts and Jobs Act, and he left D.C. touting it as the greatest accomplishment of his political career.

Ryan repeatedly exclaimed how this new legislation (TCJA) would unleash unprecedented U.S. economic prosperity, by providing:

  1. Tax relief for middle-income families;
  2. Simplification of the tax code for individuals;
  3. Economic growth; and
  4. Repatriation of $3+ Trillion of profits U.S. companies have parked overseas would generate more investment and jobs in the U.S.

16 months after passage of the TCJA, it should be crystal clear that:

  1. Almost none of the tax cut benefits have reached the low- and middle income Americans who were promised tax relief;
  2. The TCJA legislation is some 1,097 pages itself, and it states very clearly that it is an Amendment to (the existing) Internal Revenue Code of 1986 (not a simplification);
  3. Economic Growth? The jury is still out on this one, but there seems to be no evidence of growth above or beyond the existing growth trend line which began in mid-2009;
  4. American companies have returned some (+/- $500 Billion) of their profits held overseas as a result of the tax holiday which was part of TCJA. Much of that money was used for stock buy-backs and debt reduction.

In fact, 16 months following the passage of the TCJA, U.S. companies are still waiting for final guidance from the Treasury Department on many of the final rules relative to repatriation.

And, despite continued U.S. economic growth and record corporate profits, a record 60 Fortune 500 companies avoided paying any federal income tax in 2018.

Federal tax revenues have declined during a period of economic expansion and our government spending has increased, thus the verifiable result from Paul Ryan’s signature accomplishment – the TCJA — is an increase in our federal deficit, an extra-special gift to our children and grandchildren.

The Treasury Department announced in March 2019 that the deficit for the first four months of the 2019 budget year (which began Oct. 1, 2018) totaled $310.3 Billion, up from a deficit of $175.7 Billion in the same period the year prior.

The Congressional Budget Office is projecting that the annual federal deficit between revenues and expenses will hit $897 Billion in fiscal year 2019, up 15.1 percent from the $779 Billion deficit recorded in FY 2018.

The end result: Our total federal debt will reach $22 Trillion this year – about 105% of GDP.

Why is that important? A comprehensive study by the World Bank examined economic data from 100 developing and developed economies spanning a time period from 1980 to 2008, concluding that a public debt/GDP above 77% begins to create a drag on economic growth.

The World Bank analysis concluded that for each additional percentage point of debt above the 77% threshold costs 0.017 percentage points of annual real growth.

If the World Bank study is correct, we are currently missing about 0.5% of our economic growth potential due to misguided public policy decisions, in addition to the future burden of repaying federal debt which was incurred unnecessarily.

Paul Ryan achieved his personal goal of shepherding record tax reform through Congress resulting in the passage of TCJA.

Although his personal goal was achieved at the expense of American society, Paul Ryan clearly is a winner.  So, please join me in sending a note of thanks and congratulations to Paul Ryan.  He left us a legacy.

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Paul Ryan & Tax Cuts

April 16, 2019

Dear Paul Ryan,

In 1998 – at the age of 28 – you were first elected to the House of Representatives to represent the 1st District of Wisconsin.  You were re-elected a number of times, and you served for 20 years in Congress.

After John Boehner announced his intention to resign from the House and the Speakership in 2015, you were selected by your colleagues to become Speaker of the House.

You were involved in some very positive legislative accomplishments during your 20 year tenure as a Congressman representing the 1st District of Wisconsin, and during your tenure as Speaker of the House.

Unfortunately, your legacy will forever be connected to the Tax Cuts and Jobs Act (TCJA) which was passed into law at the end of 2017.

Although the TCJA provided the Trump Administration with an accomplishment relative to their campaign platform, it is a highly flawed piece of legislation which was created on a foundation of fictitious and inaccurate assumptions.

Just 16 months following the passage of TCJA, we can clearly see the adverse impacts.

Business and corporate tax cuts have resulted in: stock buy-backs; excessive executive compensation and bonuses; acquisitions and consolidations resulting in plant closings and layoffs.  All of these have been enabled by tax cuts which have resulted in 60 major corporations paying zero federal income taxes in 2018.

Whereas in times of economic expansion, the great majority of economists advise public sector entities to reduce deficits and aim for balanced budgets, the TCJA does just the opposite.

Some of the loss of tax revenue from business and corporate entities has been replaced by increased federal tax liability on individuals (like me), the majority of the lost tax revenue has been made up through deficit spending.

The annual federal budget deficit is expected to reach $900 Billion in fiscal 2019 and to equalize in the range of $1 Trillion annually for the next decade, up from $779 Billion in 2018.

Mr. Ryan:  over the course of your service in Congress, you achieved national recognition as a conservative policy wonk and as a relentless critical observer of our federal budget. You seemed to be a relentless critic of federal deficits, winning acclaim from centrists for your detailed charts showing the dangers that fiscal shortfalls posed to America’s future.

You slipped out of Washington in January 2018 knowing that you led the American people down a dangerous and dead-end road.

In your defense, we can acknowledge that you reluctantly took on the role of Speaker knowing that it was an impossible responsibility to fulfill.  Despite this, we must hold you fully accountable for failing to disclose to your constituents – and the entire U.S. population – that the TCJA was a sham – a complete flim-flam designed to create a false reality.

Paul Ryan:  Let us hope that your family, your wife, your children – and your neighbors – are willing and able to forgive you for selling out the interests of the people of Wisconsin — as well as the people of the United States – for whatever benefits you personally gained from your treachery toward the end of your tenure in Congress when you became the champion of the fictitious Tax Cuts and Jobs Act.

Mr. Ryan:  Good luck to you, and God bless.

Dear President Trump:

It has been reported that you don’t want to see any additional federal aid directed to Puerto Rico.

The government debt crisis in Puerto Rico started in 1973 when the government began to operate on a deficit budget (i.e. spend more than what it collected). To cover the annual budget shortfall, the government issued bonds.

The impact of that decision had long range impacts, beginning with reduced capital spending resulting in deferred maintenance of public sector infrastructure (roads, bridges, public utilities, hospitals, electric power grid, ports, airports, etc.).

The practice of deficit spending in Puerto Rico continued for 4 decades!

In 2014 three major credit agencies downgraded several bonds issued by Puerto Rican government entities to “junk status” after the government was unable to demonstrate that it would be able to pay its debt from sustainable current cash flows. That action precluded Puerto Rico from access to the public debt markets, and forced them into the shadowy world of hedge funds and high-yield debt issuers.

I think you are punishing Gov. Ricardo Rosselló — and the people of Puerto Rico — for a situation which they inherited.

Meanwhile, there is a long-term lesson to be learned from the current Puerto Rico situation.

Fiscal responsibility requires discipline. In times of economic expansion, all eyes should be on reducing debt without creating abrupt changes in revenues or spending.
 
No responsible government should plan to operate on a deficit budget during times of economic expansion (prosperity).
 
The real job of our federal government is at a strategic level — looking into the future to create and support programs and policies which will help support a positive foundation for future Americans at the state and local base.
 
President Trump: I believe your fiscal priorities need to be revisited and carefully evaluated through an honest and open strategic filter.

I was looking forward to hearing the testimony of Michael Cohen before the House Oversight Committee, particularly interested to learn more about some of the ‘behind the scenes’ actions and activities which took place during Cohen’s ten year stint as a lawyer for Donald Trump, and as an executive of The Trump Organization.

It is clear that Michael Cohen is guilty of multiple frauds and felonies.

Cohen pleaded guilty to eight charges in August 2018, including several counts of tax fraud and campaign finance violations. He also pleaded guilty in November 2018 to a charge of lying to Congress from Special Counsel Mueller’s office.

Said Cohen, “I take full responsibility for each act that I pled guilty to:  The personal ones to me and those involving the President of the United States of America.”

In December 2018, Cohen was sentenced to a term in federal prison for the eight criminal counts he pleaded guilty to in August. The judge gave him an additional two months for the special counsel charge.

Despite pending imprisonment for his acknowledged bad behavior, Cohen agreed to provide public testimony to the House Oversight Committee on February 27, 2019.

It was my expectation that – during this public hearing – committee members would politely hear testimony from Mr. Cohen, followed by a question and answer session which might provide us with a broader understanding of the issues.

Upon completion of the public hearing, I anticipated that members of the committee would meet sometime in the near future to study, discuss and debate the findings of the hearing.

At a future date, I expected that I would learn from traditional media sources about next steps:  Further investigation?  Criminal referral(s)?  Case closed?

I appreciate and covet freedom of speech, and I am cognizant of special protections afforded to Members of Congress to ensure they are not censured for statements made in their official capacity.

That said, today I witnessed two members of the House Oversight Committee go off course early in the proceedings, and they continued to cloud and obfuscate the intended purpose of the hearing almost to the very end.

The behavior and demeanor of Rep. Jim Jordan (R, OH) and Rep. Mark Meadows (R, NC) on 2/27/19 (as displayed on national television) was unprofessional; inappropriate; and absolutely unacceptable coming from elected Members of Congress.

I am a citizen and registered voter in the United States.

As such, I am entitled to all of the protections afforded by the Constitution of the United States, including the expectation that elected Members of the House will (1) behave at all times in a manner that shall reflect creditably on the House; (2) adhere to the spirit and the letter of the Rules of the House and to the rules of duly constituted committees thereof; and (3) not receive or accept compensation, favors or other benefits from any source which would occur by virtue of influence improperly exerted from their elected position in Congress.

It is my belief that both Rep. Jordan and Rep. Meadows repeatedly violated their basic duties of comportment and professionalism during their activities today as members of the House Oversight Committee.

I do hope the House Ethics Committee will hold each of these individuals fully accountable for their unprofessional, inappropriate, and unacceptable public behavior, and I encourage others to demand accountability from Congress.

Border Security

February 15, 2019

I’ve been looking into the border situation.  My goal is to reach an understanding of what’s really going on, because the political rhetoric has my head spinning.  Here is what I found:

Depending on which source(s) you are comfortable with, you may agree that the 1,900+-mile border between the United States and Mexico is the most heavily crossed – both legally and illegally – international boundary in the world.

Today – mid-February 2019 — barriers which block people and vehicles along 650 miles of the U.S.-Mexico border are in place and operational.  These barriers include stretches of steel and barbed wire, fortified with infrared cameras, imposing watchtowers, and blinding floodlights, and it is patrolled by thousands of guards. These 650 miles represent a four-fold increase over 2005, when there were 120 miles.

About 1,300 miles of the U.S.-Mexico border lacks fencing because the Rio Grande forms a natural border along most of those miles. Remaining sections are in rugged, inhospitable terrain, where building a barrier would not only be impractical, but fail the most rudimentary cost-benefit analysis.

The legislation President Donald Trump needs to build his promised wall along the U.S. southern border with Mexico was passed in 2006 and remains on the books.

The Secure Fence Act was introduced in Sept. 2006 by Rep Peter King (R-NY) and was quickly passed by Congress on a bi-partisan basis.  The House passed the Fence Act 283 to 138 on September 14, 2006; the Senate passed the Fence Act 80 to 19 on September 29, 2006; and the Act was signed into law by Pres. George W. Bush on October 26, 2006.

The goals of The Secure Fence Act of 2006 envisioned helping to secure America’s border with Mexico to decrease illegal entry, drug trafficking, and security threats by building about 700 miles of physical barriers along the Mexico-United States border. Additionally, the law authorized more vehicle barriers, checkpoints, and lighting as well as authorizing the Department of Homeland Security to increase the use of advanced technology such as cameras, satellites, and unmanned aerial vehicles to reinforce infrastructure at the border.

The initial concept imagined in the King-sponsored law anticipated a continuous barrier of double-layered fencing with a sufficient gap that a vehicle could be driven between the layers.

Once it became clear that the geographic and topographic diversity along the border could not accommodate a simple double-layered fence, Senator Kay Bailey Hutchison (R, TX) worked with the Department of Homeland Security to propose an amendment to give DHS discretion to decide what type of fence was appropriate in different areas.

The law was subsequently amended to read,

“Nothing in this paragraph shall require the Secretary of Homeland Security to install fencing, physical barriers, roads, lighting, cameras, and sensors in a particular location along an international border of the United States, if the Secretary determines that the use or placement of such resources is not the most appropriate means to achieve and maintain operational control over the international border at such location.”

By mid-2011, the Department of Homeland Security reported that fencing for 649 miles of border had been completed.  As described in the 2007 Hutchinson amendment, much of the total fence reported by DHS consists of vehicle barriers and single-layer pedestrian fence, deemed most appropriate at those locations by DHS.

Purists looked back to the original King-sponsored bill and decried the type of fencing DHS was counting as “completed”.  They said that vehicle barriers and single-layer pedestrian fences can’t meet the amended letter of the law.

Yet, according to Customs and Border Patrol reports at that time,  the border barriers they included in their report include: ‘Post on Rail’ steel set in concrete;  Steel Picket-style fence set in concrete;  Vehicle Bollards similar to those found around federal buildings; ‘Normandy-style’ steel beam vehicle barriers; and concrete ‘Jersey Walls’ reinforced with steel mesh.

I don’t know much about barriers, but these sound pretty substantial and imposing to me.

Many people will take exception to something President Obama said in 2011 when addressing the issue of border security.  I include this here because it is emblematic of the political discourse we seem to have devolved toward in the past decade or two:

“We have gone above and beyond what was requested by the Republicans who said they supported broader reform as long as we got serious about enforcement.  All the stuff they asked for, we’ve done. But even though we’ve answered these concerns, I’ve got to say I suspect there are still going to be some who are trying to move the goal posts on us one more time.”

“They’ll want a higher fence,” Obama said. “Maybe they’ll need a moat. Maybe they want alligators in the moat. They’ll never be satisfied. And I understand that. That’s politics.”

Political rhetoric is to be expected, and most of us prefer it to be witty, sharp and to the point.

There really is no place in a civilized society for the sort of caustic and unforgiving political hate speech and outright lies we all too frequently seem to encounter in 2019.

National Emergency

February 13, 2019

Yes, we are facing a national emergency, and it’s not along our southern border.

Our real national emergency is our National Debt.

Let’s first agree that when the U.S. federal government runs a deficit, or spends more than it receives in tax revenue, the U.S. Treasury Department borrows money to make up the difference.

Next, let’s agree that our national debt is the amount of money the federal government has borrowed through various means, including: (1) by issuing bills, notes and bonds which are bought by investors (domestic and foreign), including the public, the Federal Reserve and foreign governments; (2) through intra-governmental debt, essentially money borrowed from trust funds used to pay for programs like Social Security and Medicare.

The great majority of economists and economic and fiscal analysts tend to agree that the significance of national debt is best measured by comparing the debt with the federal government’s ability to pay it off using the debt-to-GDP ratio, simply by dividing a nation’s debt by its gross domestic product.

Various sources have estimated that a healthy debt-to-GDP ratio is in the 40% to 60% range.  A longitudinal study conducted by World Bank economists published in 2010 estimated that in highly developed countries, 77% was a ‘tipping point’ where productivity and potential economic growth was constrained by adding additional debt without addition of incremental revenue.  (In emerging economies, they estimate that 64% is the tipping point.)  In either case, potential for default begins to increase once the tipping point has been breached, thus putting upward pressure on borrowing costs.

The first instance when U.S. debt-to-GDP ratio exceeded 77% was toward the end of World War II.  In the post-war years, our national debt shrank in comparison to the booming post-war economy, and the debt-to-GDP ratio fell as low as 24 percent in 1974.

Recession and rising interest rates during the Carter administration put upward pressure on the debt-to-GDP ratio, and once the tax cuts enacted during Reagan’s first term combined with increased spending on both defense and social programs, the debt-to-GDP ratio reached 50 % in July 1989.

Economic growth in the ‘90s, combined with tax increases under both Presidents George H.W. Bush and Bill Clinton helped keep the debt load in line, and by the end of December 2000, our national debt was about 55% of GDP.

Following the terrorist attacks on 9/11/2001, U.S. military spending spiked, yet tax cuts enacted in 2001 and 2003 during the George W. Bush administration combined with a mild recession in 2001 and the Great Recession beginning in 2007 caused significant decreases in tax revenues. By the time Barack Obama took office in January 2009, the debt-to- GDP-ratio reached 75%.

Deficit spending is one of the key tools available to stimulate economic recovery, and by the time of Obama’s 2nd inauguration in January 2013, the U.S. debt had grown to $16 Trillion – a debt-to-GDP ratio of 101%. By that time, it was clear that the economic stimulus of deficit spending had worked, evidenced by an expanding U.S. economy; signs of ending the wars in Afghanistan and Iraq; resurgence of the U.S. stock market; continued job growth; and other positive economic indicators.

All of these positive signs at the beginning of 2013 pointed to the need to rein in government spending and to strategically increase revenues (i.e. raise taxes).

Yet, the Congress has stubbornly refused to deal with the reality that our U.S. debt-to-GDP ratio has remained above 100 percent since 2013.

In early 2018, an analysis by the nonpartisan Committee for a Responsible Federal Budget concluded that the Tax Cuts and Jobs Act signed into law in late 2017 will push the U.S. national debt to $33 Trillion — 113 % of GDP — by 2028, a ratio not seen since immediately after World War II.

The Tax Cuts and Jobs Act is a sham (and a scam) which created a situation exactly opposite of what responsible elected officials should have supported.  The sooner it is  amended, repaired or repealed, the sooner the American people will be transitioned into a less dangerous and more stable and sustainable economic environment.

Fentanyl is a powerful synthetic opioid created in 1960, originally introduced as an anesthetic. Because it is synthetic, it can be easily and inexpensively made in a lab. It was approved by the FDA in the early 1990’s for use as a painkiller and anesthetic. It works by binding to opioid receptors in the brain, but it does so faster — and in much smaller doses — than morphine or heroin. Like other opioids, it boosts levels of the chemical dopamine, which controls feelings of reward, pleasure, euphoria, and relaxation.

Today, Fentanyl is typically prescribed to treat patients who need long-term, around-the-clock relief from severe pain. When used for medical purposes, it is often given in a shot, a patch on the skin, or in lozenges.

China has become a global source of Fentanyl because (a) it can be easily and inexpensively made in a lab; and (b) the vast chemical and pharmaceutical industries in China are lightly regulated.

Some Fentanyl comes straight to the United States from China, while other shipments come in from China to Mexico (and to a lesser extent) Canada before making its way into the U.S.

There currently is no tariff on Fentanyl imported into the U.S. from any point of origin, which indicates that the Trump administration has missed a major revenue opportunity.

Build The Wall?

January 23, 2019

Ever ready to incite a riot and to encourage acts of violence, President Trump recently tweeted, “Four people in Nevada viciously robbed and killed by an illegal immigrant who should not have been in our Country… We need a powerful Wall!”

[Background:  Wilbur Martinez-Guzman, 19, has been jailed in Carson City, Nevada since January 19 on an immigration violation. Federal immigration authorities said that Guzman entered the U.S. illegally from El Salvador. Guzman is a prime suspect in 3 home invasion burglaries in Nevada over a 6 day period during which four people were shot and killed.]

No, Mr. President.  We probably don’t need a Wall.  Certainly not because of this particular case.

What we need is elected officials who consistently adhere to the highest standards of mature, honest and responsible leadership.

And, we need our elected officials to separate day-to-day federal government operations from capital projects.

We need immediate restoration of funding for the day-to-day operations in all sectors of our federal government, at the same time putting debate and deliberations over capital projects into the traditional federal budget process.

Monday, January 21, 2019The International Monetary Fund pared back its world economic growth forecasts for 2019 and 2020 due to sustained economic weakness in Europe and some emerging markets. They also said looming trade tensions and the longer-term ramifications of the U.S. government shutdown could further destabilize a slowing global economy.

“After two years of solid expansion, the world economy is growing more slowly than expected and risks are rising,” IMF Managing Director Christine Lagarde said.

In addition to other forces, IMF economists pointed to: (a) challenges to German auto manufacturers due to new fuel emission standards; (b) uncertainty in Italy where a newly elected coalition government has clashed with EU leadership over a budget proposal which would dangerously increase the Italian sovereign deficit, combined with limp domestic demand; and (c) the uncertainty of fallout from a less-than-smooth exit from the European Union by the U.K. a.k.a. ‘a no-deal Brexit’.

Fears of a global slowdown began to jinx financial markets in early November 2018 as investors began to worry about increasingly weak signs in China.

The ripple effect of Sino-U.S. trade frictions over the past year apparently has exacerbated the slowing of China’s official growth rate to its weakest level since 1990, attributed to a combination of diminishing domestic demand and damaging U.S. tariffs.

Each of these issues is important, and they generally share a common theme:  bad policy decisions made by incompetent and/or uninformed people, some of whom are voters; some private-sector executives; and some unconstrained elected officials.

On Day 30 of the 2018-19 U.S Shutdown:  It is becoming increasingly evident that this partial federal government shutdown is taking an increasingly negative short-term toll on consumer and business confidence, and by extension, the overall US economy.  The White House’s Council of Economic Advisors recently updated their estimate that the shutdown will reduce current economic growth by 0.13% for every week that it lasts.  Doesn’t sound like much, you say?

We can look back to the “Ted Cruz Green Eggs & Ham” shutdown of 2013 – a mere 16 days – to see estimates of negative economic impact:

  • $24 billion in lost domestic economic output;
  • $2.1 billion in non-productive government costs (primarily the cost of paying furloughed workers for hours they didn’t actually work);
  • $2.4 billion in lost travel spending (based on a combination of estimated reductions in business travel for federal contractors and federal employees, plus cancellations of discretionary travel by tourists);
  • $7.2 Million in lost revenue at National Parks (based on an average collection of $450,000 per day);
  • Most alarming? While we can estimate current economic effects, there really is no valid means to estimate long-term economic – and societal – effects of an extended shutdown.

The message?  Political decisions made by unqualified and/or inexperienced individuals can and do have long term negative consequences. A comprehensive system of checks and balances is a critical ingredient in the long-term viability of any institution. In the public sector, a key ingredient seems to be the involved and active participation by a well-educated and well-informed body of citizens who are able and willing to vote.

What is there about the simple concept of separating day-to-day operations from long-term planning that our elected federal officials seem unwilling or unable to comprehend?

Our current federal budgetary process was set into law by the 1974 Budget Control Act, based on a federal fiscal year which runs from October 1st to September 30th.  Thus our current Federal Fiscal Year — known as FY 2019 — runs from October 1, 2018 until September 30, 2019.

In February 2018, President Trump – through the Office of Management and Budget – submitted a proposed budget to Congress for FY 2019. The operating budget for FY 2019 was discussed, deliberated and adopted, and it needs to be funded.

There just isn’t any room in the process for the President – or any other elected official — to demand modifications to the current FY budget prior to approving ongoing funding for current government operations.

While it is unfortunately true that Congress doesn’t always follow the schedule as proscribed in the 1974 Budget Control Act, the proper time for the President to present new spending initiatives to Congress is during the annual federal budget deliberations process which typically begins in January when the OMB presents a proposed FY budget to the President.

President Trump’s current demands are only legitimately appropriate as a component of a proposed FY 2020 federal budget proposal.

PLEASE:  Let’s get the federal government back into its day-to-day operation by providing necessary current funding, and bring the debate over additional border funding where it belongs – in the discussions and deliberation toward a FY 2020 federal budget.