Budget And Tax Reform

Anyone familiar with my record in the Iowa Legislature over 14 years knows that I’ve strongly opposed wasteful government spending.

I led the charge against the abuse of tax increment financing (TIF), which has become a huge corporate subsidy.
I uncovered $350,000 in mismanaged funds within CIETC.
I voted against all budget bills that spent more taxpayer money than needed.
I led the charge against corporate giveaways in the Iowa Values Fund.

While Republicans often wrongly portray Democrats as ‘tax and spend liberals,’ my commitment to fiscal integrity has won me support from Republicans and independents alike.

The Problem

If you and I managed our personal checkbooks like Congress manages the federal budget, we’d be doing time. Federal debt has grown to a level that may soon compromise the solvency of future generations. A wide range of budgetary reforms is needed, beginning with earmarks.

Earmarks

Earmarks allow members of Congress to direct spending to their pet projects, often as payback to big donors. Proponents defend earmarks as a way to fund worthwhile projects, and some do. But many go to boondoggles such as $223 million for Alaska’s infamous ‘bridge to nowhere,’ and $44.5 million for a tropical rainforest here in Iowa.

The earmark process is an abuse of power, position, and taxpayers’ trust. Earmarks sidestep the usual provisions for merit-based evaluation and competitive bidding. Twelve years ago the total number of earmarks was 958. This year there are 12,881 earmarks totaling more than $18 billion hidden in various spending bills. That’s almost 21 per member - an increase of over 1000% since 1996. In his state of the union address this year, President Bush talked tough about vetoing bills that don’t cut back on earmarks. But as Bill Moyers reported recently, "Just a few days later it was learned that Mr. Bush has packed the proposed new budget with thousands of his own earmarks - including over $6 million dollars for research in Vice President Cheney’s home state of Wyoming on ‘the fundamental properties of asphalt’" [Bill Moyers’ Journal, 02/22/08].

After Democrats took control of Congress two years ago, they passed legislation making the earmark process more transparent. But that has done nothing to stem the tide. Only 13 out of the 535 members of Congress refuse to request earmarks. My opponent in this race, Leonard Boswell, secured $32.3 million in earmarks last year alone. This included $510,000 for a beltway through NE Polk County, which is opposed by most area residents.

In a recent interview, Seattle Times reporter David Heath summed it up well. Heath reports that lobbyists "spent in 2006 alone, one year, $160 million lobbying Congress. Big money, but money got $12 billion in earmarks." [Bill Moyers’ Journal, 02/22/08].

Honest Budgeting

We also need to reform the budget to reflect actual spending. While the size of the budget seems staggering ($3.1 trillion), the truth is we are spending a lot more. The Bush Administration has been deceptive in keeping most of the costs of the wars in Iraq and Afghanistan out of the budget. Currently, the Administration is proposing a defense budget of over $500 billion, but that doesn’t include funding for the two wars we are fighting. Since 2001, Congress has authorized $700 billion for the wars in Iraq and Afghanistan.

If President Bush gets what he is asking for in fiscal years 2008 and 2009, the total price tag will be about $876 billion - most of which has never shown up in the defense budget. This year, President Bush has requested an additional $70 billion for these wars, but this represents only enough money to prosecute the wars through February 2009. This means that when a new president is inaugurated in late January, he or she will immediately face a budget crisis, one that won’t even be reflected in the FY 2009 budget.

Waste, Fraud, and Abuse: The Iraq War

Another problem is taxpayer money being lost to waste, fraud, and abuse. Here are some recent examples of waste, fraud, and abuse from the Iraq war.

The U.S. government appointed an Iraqi judge to investigate corruption in the Maliki government. The judge found not only that corrupt Iraqi officials stole $18 billion of U.S. funds, but that Prime Minister Maliki issued secret orders to block corruption investigations into members of his administration, including his own cousin.
The U.S. government gave a no-bid contract to First Kuwaiti to build a new American embassy in Baghdad for $600 million. Construction is behind schedule and the project is $144 million over budget. The company is under investigation for bribery, kickbacks, and using slave labor. One of the few Americans working on the project, Rory Mayberry, testified before Congress that the company told workers they were being flown to Dubai to work at hotels, but instead were forced against their will to Baghdad where they are packed into trailers housing 25-30 men and forced to work without safety equipment.
No-bid contracts and outsourcing to corporations such as Halliburton (Dick Cheney’s former company) have led to serious fraud. Former CIA counsel Jeffrey Smith, who now represents private contractors, said, "what has happened in Iraq is just disgraceful," adding that "Iraq has attracted patriots and crooks - and there were probably some crooked patriots. We’re going to be cleaning that up for years to come, I fear" [Business Week, July 31, 2006].
The U.S. government gave no-bid contracts to Blackwater, a private security firm. Its private soldiers receive several times the amount of compensation as U.S. military personnel, and thus far have escaped accountability for civilian deaths at the hands of its employees. Despite numerous allegations against Blackwater, the State Department’s Inspector General, Howard Krongard, never opened an investigation. He later resigned his position when it was disclosed that his brother was serving on Blackwater’s advisory board.

Waste, Fraud, and Abuse: Other Examples

Waste, fraud, and abuse aren’t unique to Iraq war spending. The General Services Administration (GSA) brokers most of the federal government’s goods and services, and is responsible for close to $500 billion of the budget. In 2006, President Bush appointed to head the GSA a big contributor to Republican campaigns, Lurita Doan, herself a former government contractor. It didn’t take long before her own staff began leaking news of her mismanagement, such as trying to give a no-bid contract to a personal friend, and directing a contract to a particular company when her own staff was saying it was a bad deal for the government. The GSA’s own inspector general has criticized her mismanagement and she has been called to testify before Congress.

One Congressional perk that is easily abused is the franking privilege, which allows members of Congress to write their constituents - at taxpayer expense - about legislation of interest to voters in the district. Congress has a rule that prohibits a member from sending out franked mail within 90 days of an election in which that member is a candidate. The cutoff for franked mail in our district’s Democratic primary is March 5th. Yet in February, a month before the cutoff, Congressman Boswell sent out two mass mailings to voters in the district that look more like campaign ads than constituent communications. One talks about some positions he has taken on health care issues, and the other portrays him as a leader on the environment - all printed and mailed at taxpayer expense.

Taxes

Finally, our tax system needs an overhaul. One of the signs of trouble in our economy is the growing gap between the rich and poor, which is now as big as it was in 1929 at the beginning of the Great Depression. The Bush Administration’s tax policies have been aimed mostly at helping the richest Americans, people whom the President once referred to as "my base."

Another example of unfairness has to do with how hedge fund managers are taxed. Some of them make over half a billion dollars a year, yet they pay a tax rate of only 15% because their income is taxed as capital gains earnings, not as regular income. Yet the income tax rate for someone making $32,000 is 25%. For someone making $78,000 the rate is 28% - almost twice what it is for a hedge fund manager.

Another example is the estate tax. Congressman Boswell has voted twice with the Republicans and against his fellow House Democrats to eliminate the estate tax. This is a classic example of the influence of big money in politics. Republicans call it the "death tax," saying it hurts family farmers and small businesses. But that is a misnomer. More than 98% of Americans never pay any estate tax, even those who inherit significant wealth. A couple receives an exemption on the first $4 million, which will go up to $7 million in 2009.

The simple truth is that the lobbying campaign to eliminate the estate tax was financed by 18 of the richest families in America (worth a total fortune of $185 billion) who, as a result, would have saved $71 billion in taxes. Eliminating the estate tax would shift almost a trillion dollars to other taxpayers in its first decade alone.

Boswell sent out two mass mailings
to voters that look more like campaign ads
than constituent communications...
all printed and mailed at taxpayer expense.

The Solution

The first step is to get rid of earmarks. Before Republicans took control of Congress in 1981, earmarks were practically non-existent. Congress has shown that America can get by quite nicely without them.

A second step is to make the budgetary process honest. We need to put the cost of waging war in Iraq and Afghanistan into the budget so that it’s clear how much is being spent. This will give us a more accurate picture of the extent of the federal deficit.

The third step is to make our tax structure more progressive. The idea that the wealthy should pay a greater share of their taxes is as old as the father of capitalism, Adam Smith, who recommended it in his The Wealth of Nations. This includes keeping the estate tax. When Congress levied estate taxes in 1797, 1862, 1898, and 1916, it did so to support the military. In 1916, they added a second reason for the tax - to prevent inherited wealth from being concentrated in the hands of the few. With the huge cost of the George Bush’s wars, this is no time to get rid of the estate tax. And remember, a couple receives a $4 million exemption ($7 million beginning next year).

A fourth step is to put an end to corporate handouts. Just one example is Congressman Boswell’s vote for $14.5 billion in tax breaks and incentives for oil and gas companies (H.R.6, 07/28/05), which House Democrats opposed 124-75. The big winners were companies such as Exxon Mobil, which only the day before had announced second-quarter profits of $7.64 billion, making its most recent three quarters that year the most profitable in the company’s history. This year, Exxon Mobil posted new record earnings - the most profitable quarter ever for an American company ($11.7 billion) and the most profitable year ever for an American company ($40.6 billion).

If you elect me as your Congressman, I will be your strong and consistent advocate for responsible spending, honest budgeting, and fair taxes.