Jan 08 2014

Washington is not serious about controlling spending


Reform Party of California Commentary

The current debate about extending federal jobless benefits for another three months exemplifies the failure mode situation about as well as it can be exemplified. The extension is projected to cost about $6 billion. Democrats want to finance it with debt. Most republicans demand spending cuts elsewhere in the budget. Its the same old story.

Assuming there is nothing inherently wrong with the extension, the question is simple, what are the options?Just more debt and/or spending cuts, right? Wrong. There is another option that neither side will even acknowledge exists.

The extension could easily be financed by hiring more IRS tax enforcers to collect enough from America’s huge annual tax gap to make up the needed revenue. The tax gap is the amount of money that is owed to the IRS but is never collected. The tax gap, roughly $430 billion/year, adds to federal debt by that much each year. By hiring enough IRS enforcers, or farming the work out to private sector tax collectors, it is reasonable to project that at least about 80% of that amount, $344 billion, could be recovered at a cost to taxpayers that is far lower than the amount recovered from the tax cheats. Obviously, if you want to recover only $6 billion to pay for the extension, you need to hire far fewer enforcers to do the job.

Tapping this revenue source would have the beneficial effect of reducing federal debt, so it ought to strike most normal people as an appealing option to finance the benefits extension. Why doesn’t anyone in Washington even consider this option to finance the extension? The answer is simple. Neither party nor their politicians in Washington are serious about dealing honestly or intelligently with the federal debt. The two parties and their politicians are not normal people. They are, among other things, posturing over this issue in anticipation of the 2014 midterm elections and protecting their revenue streams by allowing hundreds of billions in taxes to go uncollected each year.

In other words, congress simply does not want the uncollected taxes to be paid. That is the quid pro quo payback that congress gives to tax cheats in return for campaign contributions. Congress intentionally restricts the IRS budget for collection of taxes that are owed and that allows the hundreds of billions to simply vanish into thin air each year. One can easily argue the proposition that, under the circumstances,  congress condones tax evasion.

It is just business as usual in Washington. If you do not like the situation, walk away from the two-party system. If your are OK with this or don’t care, do nothing different and you will continue to be rewarded with the excellent service that the two-party system delivers, not to you, but to their campaign contributors. Its your choice.