Category Archives: Politics

How to fund highways? Not this way.

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

How long could your family pay for today’s needs with tomorrow’s dollars before it would start to catch up to you? Congress is doing something like that, again.

The Highway and Transportation Funding Act of 2014 would provide extra highway funding for 10 months by pulling money from future revenues through a tactic known as “pension smoothing.” This allows employers to delay contributing to their employees’ pension plans, thus raising the employers’ taxable incomes now. Under a formula, they’ll make up the difference later, reducing their taxable incomes then, and at that point a future Congress will have to budget for that lost revenue. But that’s a problem for the future Congress.

The House of Representatives passed the $10.8 billion bill this past week, with all four Arkansas House members voting yes – which I guess they had to do, because the alternative was a train wreck. The Senate is expected to vote on the matter as early as this coming week.

This is happening because we’ve reached yet another unnecessary fiscal crisis. The Highway Trust Fund, which reimburses states for highway costs, will be dry within a couple of weeks – the result of too few dollars funding too many projects. The Arkansas Highway and Transportation Department (AHTD) has already delayed some contracts in case that happens.

Money flows into the fund as a result of federal highway laws passed periodically by Congress. In the past, these have been five- or six-year deals so states could make long-term planning decisions. It takes, after all, a long time to build a highway. The most recent, MAP-21, lasted only two years, and now it’s expiring. The Highway and Transportation Funding Act would extend MAP-21 only to May.

Highways are funded mostly through fuel taxes. These are easy to collect, they don’t require that much bureaucracy, and they are considered to be fair because they are user fees. The person using the government service, the highway, is the one who pays for it.

But the federal fuel tax has not been increased since 1993, which means inflation has eaten away at it. Meanwhile, cars have become more fuel efficient, so we’re buying fewer gallons to drive the same distance, thereby paying even less in fuel taxes. At the same time, construction costs have risen.

There’s waste in the highway system, of course, but even if all of that were eliminated, the country still would be investing far too little in its aging and decaying infrastructure. According to the American Society of Civil Engineers, the average bridge in America is 42 years old.

For now, the easiest, quickest, most efficient way of increasing highway funding is raising the gas tax, but politically that’s a tough sell. Even the Connecting Arkansas Program passed by voters in 2012 exempted fuel as part of its half-cent sales tax. Meanwhile, the fuel tax faces an uncertain future. As Scott Bennett, AHTD director, points out, reducing fuel consumption is a national priority, so how can consumption continue to be the primary way we fund highways? The Obama administration is suggesting letting states put toll booths on interstates – an inefficient way of collecting money that is inconvenient for drivers. Oregon is testing a vehicle miles traveled tax, where drivers’ mileage would be tracked, and they would be taxed accordingly.

It may be that the only solution now is for states to bear greater responsibility for maintaining and constructing the nation’s roadways. According to Bennett, 70 percent of Arkansas highway construction funding comes from the federal government, but other states pay more of their own way.

Arkansas voters have shown a willingness to pay for highways. In addition to the Connecting Arkansas Program, they also voted in 2011 for the Interstate Rehabilitation Program, which funds interstate improvements through a bond issue. Those two programs are funding $3 billion worth of work. On the other hand, they only apply to 4 percent of the state’s highway miles.

What do you think? Raise fuel taxes? Build toll booths? Track how far (and maybe where) we drive? Let the states take care of it?

Something has to happen. There are only so many times future dollars can pay for current work.

One-sided approaches won’t stabilize the debt

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

Is it possible to bring the government’s debt under control by focusing only on one area – raising taxes, for example, or cutting defense spending? Let’s return to the Debt Stabilizer to find out.

I wrote last week about the Debt Stabilizer, an online tool created by the Committee for a Responsible Federal Budget that lets average citizens make tax and spending choices – hopefully better ones than Congress has made – in order to reduce the public debt.

Currently $12.6 trillion, the public debt is the portion of the $17.6 trillion national debt that doesn’t include what the government has borrowed from itself, such as from Social Security. It’s currently 78 percent of the size of the economy and headed to nearly 150 percent by 2050. Historically, it’s been 40 percent.

The goal of the Debt Stabilizer exercise is to reduce the public debt to 60 percent of the economy by 2024. Doing so requires improving the government’s balance sheet by $4.84 trillion over 10 years – equal to $1.54 million for every American.

I managed to reduce the public debt to 59 percent of the economy, mostly by cutting spending while raising the gas tax and closing tax deductions, and then wrote about it in my last column. After I emailed the link to the CRFB, communications director Jack Deutsch replied with an observation: Try playing various roles – the defense cutter, the tax raiser, etc. You’ll see how one-sided approaches don’t work well.

Let’s see if he’s right.

I started by trying sort of a House Republican approach: Oppose most defense cuts, support most spending cuts, and support most tax cuts. That approach left me at 69 percent of gross domestic product by 2024 and at 60 percent by 2028. However, some of those spending cuts, including the steeper ones for Social Security and Medicare, are unlikely to materialize.

I next was more of a congressional Democrat – cut defense, increase social spending, tax the rich, etc. That option reduced the debt to 73 percent of the economy but did not put the country on a path to 60 percent. “Uh oh! You failed to reduce the debt to a sustainable level,” the Debt Stabilizer said.

Other imbalanced approaches were unsuccessful. I tried one that would be popular with many Americans – cut taxes and spending without touching Social Security and Medicare. That got me to 73 percent, same as the congressional Democrats. The same percentage was reached when I cut defense spending and pulled us out of Afghanistan but left everything else alone. Doing almost nothing but cutting foreign aid left the debt at 78 percent of the economy. Foreign aid is 1 percent of the budget.

There were several imbalanced approaches that reached 60 percent. Raising every tax on the list and ending every deduction reduced the debt to 57 percent of gross domestic product. Cutting spending wherever I could and leaving taxes alone reduced the debt to 56 percent. Cutting all the taxes and all the spending reduced the debt to 60 percent.

However, those spending cuts included politically unpopular reductions for Medicare, Social Security – even $30 billion less for school breakfasts. Realistically, they wouldn’t happen. My tax increases included similarly unlikely scenarios such as ending deductions for the powerful oil industry and reducing the amount that average Americans can deduct for charitable gifts.

When I started this exercise, I hoped to play the parts of Rep. Tom Cotton and Sen. Mark Pryor, but I soon decided I couldn’t do their positions justice – particularly Pryor, who can be hard to pin down. Safe to say that Cotton takes pretty much the congressional Republican approach, which requires a number of unlikely spending cuts. Pryor – at least based on how he’s campaigning – is somewhere in the neighborhood of congressional Democrats, who, as the Debt Stabilizer makes clear, “fail to reduce the debt to a sustainable level.”

If a family’s debt needed stabilizing or a small business were in trouble, everyone would gather around the table to consider what to cut and where extra income could be found. Probably no one would get everything they wanted, and if one tried to dictate, the rest would not buy in.

At some point, Americans and their elected officials hopefully will realize that the government is no different – that choices and compromises must be made. If that happens, the debt will be reduced to a sustainable level.

And if that never happens? Uh oh.

Ross, Hutchinson explain their number one priority in education

If you could accomplish only one thing in public education during your time as governor, what would that be?

Democrat Mike Ross and Republican Asa Hutchinson were asked that question at the Arkansas School Boards Association’s Summer leadership Conference in Hot Springs Friday.

Ross touted his plan to expand pre-K classes for four-year-olds. Currently, free pre-K classes are available through the Arkansas Better Chance program for families making 200 percent above the poverty level. Ross would expand that to families at 300 percent. As the program is phased in, families making 400 percent of the poverty level would be eligible for the ABC program by paying a reduced rate of 50 percent.

Total cost of the plan would be $35 million a year. He said it would be funded through “revenue growth”

“If you’re a parent and you’ve got a four-year-old and you want them in a public pre-K classroom, there should be a desk for them regardless of your income and regardless where you live in Arkansas,” he said.

Hutchinson wants computer science to be offered in every public Arkansas high school in four years. He said fewer than one in 10 high schools currently offer it. Under Hutchinson’s plan, a high-level computer science class could serve as a math or science credit and potentially a concurrent college credit as well.

Total initial cost would be half a million dollars to train teachers, Hutchinson said.

Hutchinson said that if 20 percent of Arkansas students took computer science, 6,000 would leave school with that skill every year, which “could change the dynamics of this state for decades and decades to come.”

Could you spend money better than Congress?

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

It’s been 13 years since Congress and the White House balanced the federal budget. Could you do better in 20 minutes?

The Committee for a Responsible Federal Budget (CRFB), a Washington-based group dedicated to finding solutions to the country’s long-term debt problems, offers a budget-balancing tool for citizens, the Debt Stabilizer, at its website, crfb.org. According to the site, the Debt Stabilizer has been visited more than 600,000 times since it was created.

Users are given a series of choices to reduce the public debt from its current 78 percent of gross domestic product to a more manageable 60 percent by 2024. Historically, the debt has been 40 percent of GDP. At its current pace, it will reach 100 percent by 2035 and nearly 150 percent by 2050, according to the CRFB.

The public debt, currently $12.6 trillion, is the portion of the $17.6 trillion national debt that doesn’t include what the government has borrowed from itself, such as from the Social Security Trust Fund.

To reach 60 percent, you must come up with $4.84 trillion over 10 years using a combination of savings and increased tax revenues. That’s $1.54 million for every American man, woman and child, or about $6 million for a family of four. That’s how deep in debt we are.

The exercise shows the range of actual, difficult choices that would address the problem, as opposed to the much easier solutions many Americans mistakenly believe exist. Polls show Americans are aware the national debt is a serious issue. However, in a survey last year by the Pew Research Center listing 19 options for reducing spending, not a single one was favored by a majority.

Want to give it a shot?

The Debt Stabilizer starts with a page featuring unavoidable policy decisions, such as what to do about Afghanistan. Brief explanations are provided about the options. Eliminating war funding entirely after 2021 would save $820 billion. Choosing that gets you one-sixth of the way to $4.84 trillion.

The next page features a series of options regarding defense and foreign policy spending. Those include ending the military’s new Joint Strike Fighter plane, which is very late and far overbudget. You can either cut veterans’ benefits $50 billion, or you can increase them by $50 billion.

There’s an option to cut foreign aid by 25 percent – certainly a popular choice among Americans. A Kaiser Family Foundation poll last year found the average American believes foreign aid is 28 percent of the budget. It’s actually 1 percent. Cutting it 25 percent would save $150 billion.

The next page gives you a chance to cut various kinds of domestic discretionary spending – basically what the government doesn’t spend on defense, Social Security and health care programs. Want to create a moon colony? That would add $250 billion to the public debt. You can cut highway spending or increase it. Reducing food stamps to 2008 levels saves $140 billion.

The next pages cover Social Security, Medicare and the government’s health programs. Social Security and Medicare politically are very difficult to touch, as Rep. Tom Cotton is discovering in this year’s Arkansas Senate race, but together they are 38 percent of the federal budget. Leaving them completely off the table requires very deep cuts elsewhere and/or higher taxes.

By enacting all my spending cuts, I saved $3.5 trillion, which is apparently far more than the average American would choose. And yet as tough as I was, I still needed to find $1.1 trillion to stabilize the debt.

That means I had to increase revenues, which I did by increasing a few taxes, such as the gas tax to fix our roads and bridges, and by eliminating some big tax deductions. I saved $510 billion by gradually phasing out the mortgage interest deduction we all use, including me. That would be political suicide if I were running for office.

I more than met the goal. I lowered the 2024 public debt by $5.03 trillion, which would be 59 percent of the projected gross domestic product that year.

See if you can do better at crfb.org. Email me at brawnersteve@mac.com and let me know how it goes.

Hobby Lobby: Is a corporation owned by people still people?

By Steve Brawner
© 2014 by Steve Brawner Communications, Inc.

You probably think this column is being written by a columnist. It’s not. Legally, it’s being written by a corporation, Steve Brawner Communications, Inc.

Steve Brawner Communications, Inc. – in the eyes of the IRS, an “S Corporation” – copyrighted the material, bills your news provider, and writes a paycheck to its only full-time employee, Steve Brawner.

Last week, the Supreme Court declared 5-4 that the federal government under Obamacare could not require another S Corporation, Hobby Lobby, to pay for insurance that covers four types of birth control for its employees – two interuterine devices and two types of the so-called “morning after pill” – because the family that owns the corporation considers those to cause abortions. The Court drew a distinction between public corporations with many stockholders and a closely held corporation owned by only a few people – in this case, founder and CEO David Green and his family.

Among the arguments opposing the decision, voiced by politicians and pundits, is that the Supreme Court has decreed that employers can force their religious beliefs on their employees.

That’s not even remotely what has happened. All the Supreme Court has said is that a closely held corporation should not be required to pay to insure forms of birth control that its owners consider to cause abortions. Hobby Lobby employees are free to purchase those services on their own or to go to work for a company whose insurance does cover them. Or they can take advantage of one of the 16 types of birth control that Hobby Lobby is willing to cover.

The federal government under Obamacare gave the Greens three choices: cover those services; don’t provide health insurance and pay an annual penalty of $26 million; or face annual fines up to $475 million, which would have put Hobby Lobby out of business. Hobby Lobby has 23,000 employees.

The Court specifically said the decision applies to “only the contraceptive mandate,” but in her dissent, Justice Ruth Bader Ginsburg wrote that the Court has waded into a legal minefield. Who could decide if one religious objection is legitimate while another can be ignored?

Ginsburg has a point. But that’s the thing about these hard cases – they’re hard. That’s why we have courts and legislatures, so we can tackle these issues one at a time, attempting to formulate general legal principles while also being flexible based on the facts of an individual case. Very few of us would argue that an employer could have a religious reason to practice racial discrimination, for example, but on abortion Americans are deeply divided. True, it was difficult for the government to accommodate the Greens’ religious beliefs, but does that mean it shouldn’t have even tried?

The mixed public reaction to this case is about more than Hobby Lobby, birth control, or even abortion. At its heart, it’s also about what people think about corporations, the people who own them, and the people who work for them. During the past few decades, Americans have watched corporations off-shore jobs and manipulate the political system to their advantage. It’s no wonder that many Americans identify more with the employee than the employer.

The Court does not see it that way. In its decision, it used some of the same “corporations are people” logic that it used in the Citizens United decision that removed limits on corporate political spending.

“A corporation is simply a form of organization used by human beings to achieve desired ends. … When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of these people,” Justice Samuel Alito wrote in the Hobby Lobby decision.

So if you start a company and then incorporate it, is it still an extension of you? Five Supreme Court justices say yes, and four say no.

I’m watching how this unfolds. Whatever the federal government can enforce regarding an S Corporation with 23,000 employees, it probably can do to an S Corporation with one.