Monday, May 20, 2013 - Scandals

Scandals: All of you have heard about them. There are 3 at this point. In the case of Benghazi, at the very least, warnings were ignored and a potential rescue team was ordered to "stand down" for unexplained reasons. Afterwards, a story was fabricated, apparently with no factual justification, to explain away the terrible tragedy. In the "AP" scandal, the Justice Department seized and read a broad swath of private communication amongst journalists without court orders. And in the latest IRS scandal, just last Friday we found out about another illegal action against private citizens which, at the very least, amounts to an abuse of government power.

I will not, in this missive, attempt to summarize all that has gone on and is still going on in all of these investigations. New information is coming to light every day and you have many sources for that information. Nor am I going to try to guess as to who knew what and when and who was ultimately responsible and so forth. I think we are still not only just in the first "inning" of these investigations, but may still be on the first batter. There are 3 long strings that need to be followed through in detail in order to know the answers to all those questions. I expect this process will take months. 

But, I will give you a couple of conclusions I have reached on the basis of the unassailable facts that are available to us now:

Much of the press is focused on conclusions from conservatives that these scandals are proof of the failings of "big government". Liberals (many of whom I know number themselves amongst my readers) are vociferously defending that this has nothing to do with "big government", but is in fact about a few bad people and mistakes. I hate "big government". I have spent the last 13 years in elected office fighting it. But, I really don't think the size of the government, in these cases, is at the heart of what we have learned here.

In my humble opinion, this is really not about government being too big. It is about government being too powerful and largely unaccountable.

The most egregious thing I heard last week was that the IRS told pro-life groups in writing that they would have to suspend all protests at or near abortion clinics or they would not be allowed to be tax-exempt. So, they effectively suspended First Amendment rights in exchange for granting non-profit status to organizations that clearly are not designed to earn a profit. The second most egregious thing is that the IRS released private tax return information to the public (through The Huffington Post) containing the names and private information of donors to these non-profits. If any of my liberal friends reading are not outraged by this, let me change a few details. Imagine that a Republican president (pick your least favorite and least trusted Republican in elected office - who I hope is not me!) told Planned Parenthood that they could no longer offer abortion clinics or advocate in favor of abortions without losing their non-profit status. Now, imagine that the same administration released all of your personal and confidential tax information and that of the Sierra Club to Fox News and Rush Limbaugh. You would be outraged! And you absolutely should be.

This is not partisan. As sure as abuses can happen with Democrats in charge, they can happen with Republicans in charge. You see, a number of people in positions of authority in government are there not because they love public service, but because they love the power. I have seen it more times than I choose to remember. The more power they get, the more they will wield it in pursuit of their own purposes. The remedy is to make sure their power is severely limited and that there are checks and balances on that power. The writers of our Constitution did a remarkable job limiting and checking that power. But, over the last 100 years, the many architects of the federal bureaucracy have done a lousy job in that regard. The president and most of his senior advisors say they didn't authorize or know anything about any of these scandals. If they are not telling the truth, that obviously is very bad because it shows that the corruption extends well into this administration. But, for the moment, let's assume they are telling the truth. I'm not sure that is any more comforting because it means that low level people in various agencies of the federal government were and are able to wield abusive and illegal power without anyone knowing it or catching them. Remember that the IRS’ bad behavior started at least as early as 2010, if not before. Who knew what and when is something we need to figure out. But, it really doesn't change the fact that the enormous unchecked power of the government at all levels needs to be reined in. And now, we want to put people like these IRS officials in charge of who gets health care treatments and who doesn't?

There is one other thing to note here about how extreme government power is applied by real people. Some people reach a point at which they believe so strongly that they are right and that the country must have their leadership that they will violate the very principles for which they stand in order to secure or expand their political position or power. In other words, they decide that the end justifies the means and the "end" is defined by their side wining and the other side of the argument being obliterated. In this case, the bad actors are not corrupt in their own minds and rationalize their abusive and immoral actions under the misguided idea that they know better what is good for us and they must ensure that any contrary voices are silenced for the benefit of the country.

The bottom line here is that human beings will abuse power if they have too much of it and if they believe they can get away with it. We have seen it throughout time and throughout the world.

On another note about the IRS scandal, the IRS employees repeated over and over that the targeting they did was not political. Seriously? That's like saying yes I robbed a bank, but I didn't do it for the money. Of course it was politically motivated. If I told you that I was targeting groups with the words "occupy", "progressive", "labor" and "environment" in them, would you believe me if I said, “Noooo, the choice of these words was not politically motivated!”?

The point here is that any one of us, conservative or socialist, Catholic or Atheist, pro-life or pro-choice, should be scared to death by what we have heard in the last week. A government that is too powerful and unaccountable can trample on the rights of anyone with whom that government disagrees. The president in a speech at Ohio State University last month asked people to "reject" calls to be watchful against "tyranny". I could not disagree with him more. We must always be watchful for the rise of tyranny, even in this country. And, it can rise from the right or from the left.

The reach of the federal government today is too deep, too broad and too hard to control. That unchecked and often abused power should be devolved, as the Constitution says, to "the states, respectively, or to the people". The investigations of these scandals have a long way to go before we all really know the full extent of all that happened. But, the federal government has too much concentrated power today and the checks on this power are too weak. That is a conclusion upon which there should be little disagreement amongst those who could be victims of the abuse of that power - which is all of us.

Monday, April 29, 2013: Profiling as Policy?

Profiling as Policy?: Today, The Wall Street Journal published an op-ed that I wrote on the latest guidance issued by the Consumer Financial Protection Bureau. You won't believe what they are telling automobile lenders to do to you.

  This Federal Proposal on Car Loans is a Lemon
A consumer protection agency recommends that lenders guess the race and sex of applicants.

By JOHN CAMPBELL

There were many contributors to the 2008 financial crisis—including unsound housing loans and mortgage-backed securities, Fannie Mae FNMA +0.73% and Freddie Mac, FMCC +0.98% excess leverage by major financial institutions, and regulatory failures. Car and truck loans were not among the problems, and their lenders in any event pose no "systemic" risk to the financial system.

And yet, amazingly, the Consumer Financial Protection Bureau—a creature of the Dodd-Frank Act, which was passed to correct and prevent the causes of, and problems that led to, the 2008 crisis—wants to change the way car loans are made. The CFPB's proposal is a noxious attempt to solve a problem that doesn't exist and is likely to make a mess of one part of the consumer-loan industry that works.

Currently, if you apply for a car loan through a bank, credit union or one of the car manufacturers like Ford Motor Credit or Toyota Financial, you are judged on matters such as your credit score, income and debt. The financial institution won't know your race or ethnicity or even necessarily your gender. It will approve or disapprove the application and offer you an interest rate based on the data. That's just as it should be.

But it is not good enough for the CFPB. In a quest to make sure that all individuals falling within the "protected classes" under the Equal Credit Opportunity Act get the same interest rate as those who are not covered by it, the agency wants financial institutions to guess your race, ethnicity and gender based on your name and the address on your application. Put bluntly, they want lenders to profile you.

It sounds bizarre. But during a conference call on March 21 to congressional offices explaining how auto lenders were supposed to comply with the Equal Credit Opportunity Act (as outlined in CFPB's Bulletin 2013-02), agency staff advised us that they would recommend that financial institutions use "proxies to give probabilities of the race, ethnicity and gender of borrowers" to guess if an applicant falls into a protected class, or not, for the purpose of setting interest rates. In other words, they would like lenders to use stereotypes associated with your name and location in order to monitor compliance with equal-opportunity requirements.

Does that mean a person named Jefferson who lives in the Bronx is to be presumed an African-American, but not a Jefferson in Wichita? Is Taylor Rosenstein living in Miami a woman or a man? He or she must certainly be Jewish, right?

What I just wrote is absurd and looks offensive. But it is exactly what the CFPB's advice would effectively require.

Under this scheme, banks and finance companies would employ highly questionable methods to presume the race and gender of each applicant and assess whether the interest rates they offer are discriminatory.

This guidance is not just stupid, it is incredibly offensive and contrary to standards of fairness and equality upon which our society is based. One can only imagine the legal and other costs it would entail if lenders tried to put it into practice.

The auto industry is one of the economy's bright spots right now. There is no need to knock it off track by diverting resources toward fixing a problem that doesn't exist, resources that might otherwise be used to make credit more available for consumers who want to buy a car. The percentage of consumer complaints on car loans was and continues to be very low, especially when compared with home loans.

The CFPB should withdraw this outrageous and abusive guidance immediately and focus on helping consumers in those areas in which the need for reform truly exists.

Mr. Campbell, a Republican congressman from California, is chairman of the House Financial Services Subcommittee on Monetary Policy and Trade.

This piece, exclusive to The Wall Street Journal, may be accessed online by clicking here.

Thursday, March 7, 2013 - Making the Worst of It

Making the Worst of It: How often in life has something not gone quite the way you hoped and you or someone responded with the common phrase, "We'll make the best of it"? This is reflective of the natural optimism that is an endemic part of American culture.

The “Sequester” went into effect just over a week ago. It is inartful. No one loves it. But, it is better than not reducing the deficit at all and borrowing another $85 billion per year. Even though it was his idea, we now know that the president hates it. But, rather than take something he isn't happy with and "make the best of it", the president has decided to "make the worst of it". He has affirmatively decided to intentionally and unnecessarily inflict discomfort on as many Americans as possible in a distasteful attempt to justify his excessive rhetoric of the last few weeks.

Amongst the many egregious actions taken is his unilaterally canceling of all White House tours, effective Saturday, under the guise of forced cost reductions because of the Sequester. The problem with that logic is that White House tours don't cost anything. There are no tour guides except for a few unpaid docents. If you have been on one, you know that it is a self-guided tour. There are Secret Service agents in each room, but the Secret Service is largely exempt from the Sequester. Of course, there is a security check when you enter, but those checks are always there for people entering the White House on business. So, to save no money at all, President Obama told 92 children who flew 2500 miles from a school in Orange County, CA that they cannot see the people's house this weekend. Upsetting children is worthy of the "all great and powerful Oz", but not a president.

But, there is something emblematic here, as well. The White House is the only executive mansion of any government in the world that is open to the public. You cannot tour Number 10 Downing Street. You cannot see where the French president lives. But, you can see where John Adams wrote letters to Abigail and have always been able to do that because it is not the president's house. It is the people's house. By prohibiting public viewing of the $376 million remodel of the house those taxpayers paid for in 2010; by spending millions to fly Air Force One for a golf game with Tiger Woods, but saying it’s too expensive to let someone pay their own way to Washington and walk through their house without a guide; by continuing to spend $2.2 billion a year giving away free cell phones with more generous usage plans than almost of all you reading this e-mail have, while the people paying those taxes can't see where Abraham Lincoln spent his last hours; the president is saying that it is his house and not your house. That is, frankly, disgusting.

Speaker John Boehner, on the other hand, announced that all tours of the US Capitol are open and will continue without abatement. Good for him.

But, it doesn't stop there. By way of another example, the Department of Agriculture has chosen to furlough meat inspectors. You cannot slaughter the animals for food without these inspections, so this could actually result in some food shortages. In the government shutdown of 1995, meat inspectors were never furloughed despite the fact that government spending cut was 100% rather than the Sequester's 2%. Also, these meat inspectors are paid for by fees levied on the industry for this purpose. These fees were not cut. The Department of Agriculture has more economists than any other organization on earth, but it appears that not one of them will be furloughed. If they had, you certainly wouldn't feel that. There are also several trips scheduled to be taken by Department employees, including one to California's wine country, where "spectacular wines" will be served. Not one of these trips will be cut.

"Make sure you are not contradicting what the impact would be." Those are the words from an internal Administration memo rejecting a suggestion on how cuts within the Department of Agriculture could be made to be, "less painful to the public.”

You have been told that lines at airports may be longer and flying less safe because of furloughs of TSA agents and air traffic controllers. Yet, the TSA is going forward with its plans to spend $50 million on new snazzier uniforms.

Past presidents of both parties have always tried to reassure the country during times of stress that they will help navigate through difficult waters and that everything will be OK. That is leadership. This president seems to be telling you that it’s going to be awful and that he is powerless to do anything but make it more awful. But, be reassured in the knowledge that it's not his fault. Nothing bad is ever his fault. That is abdication.

In the face of all of this, the president asked to come to Capitol Hill next week to meet with House Republicans. This request came the day after all of his Sequester orders, designed to cause public pain and discomfort, came out. This is akin to sending the peace treaty negotiators in while increasing the artillery barrage and launching an attack.  I must confess that this president has done nothing to inspire trust from me and I suspect that is true of many of my colleagues. His permanent campaign and press conferences, filled with untruths and distortions, do not inspire confidence. We will meet with him because he is President of the United States. Press reports say he wants to talk about a "grand bargain" on the deficit. There is nothing I want more. Saving this country from fiscal ruin is the overriding mission I feel I have as a member of Congress. But, given the president's actions of late, I am assuming that this is another false overture mainly intended to gain political and campaign advantage rather than to actually solve the problem. He has a huge trust and goodwill deficit to make up before we can really do something constructive.

But, this member of Congress will "make the best of it" wherever the meeting and its aftermath may go. That is what we do in this country. We will get through this and we will save this country from fiscal ruin. It would be easier to do with the president's help. But, we will do it with or without him.

I will report back to you after the meeting.

Monday, March 4, 2013 - 9 Reasons to Keep the Sequester

Monday, March 4, 2013

The Sequester: I would wager that just a few months ago very few of you knew what the word "sequester" meant. Maybe you didn't know how to pronounce it either (see-kwes-ter). I can tell you that I had never heard the word before I was elected to Congress. And, it took me a couple of terms on the budget committee to become familiar with it.

But, now we all know. It is a budgeting mechanism by which across-the-board spending reductions are enforced. And, it went into effect on March 1st.

Listening to the president, you would think that the Mayan calendar was off by a couple of months and that the end of the world was really coming as a result of the Sequester. From the dramatic rhetoric in his perpetual campaign swing, it sounds like life as we know it will cease because of a 2% reduction in the growth of planned government spending. What you are not hearing is that even with the Sequester cuts in effect, total federal spending this year will be higher than last year. So, why all the drama? Because it is clear that the president wants to increase spending and increase taxes and he wants you to think that the future of the republic rests upon every dollar of the $3.6 trillion that is spent annually by the federal government.

The president is completely wrong and his rhetoric is irresponsible. Here are 9 reasons why the Sequester should be left in place:

1. This was the compromise!: Remember how the Sequester came into being? It was the spending reduction that President Obama offered House Republicans in August of 2011 in exchange for increasing the debt limit past his reelection. We do not need to now compromise on the Sequester because it WAS the compromise. To give this up without replacing the Sequester’s reductions with other dollar for dollar reductions would be akin to having raised the debt limit with no deficit reduction whatsoever.

2. “It’s about the debt and deficit, stupid”: Remember the national debt? It stands close to $16.7 trillion and rising. Remember the deficit? It’s still close to $1 trillion a year with no hope for balancing in sight. The Sequester does not stand in a vacuum. If we don't keep the cuts, we will borrow another $85 billion this year. This will bring us closer to the day when we follow the now well-worn path of Greece, Spain and Japan to a debt crisis or economic malaise that will cause a forced fiscal contraction 10-15 times this size. We must reduce the deficit slowly to avoid this fate. The Sequester is the first step.
 
3. The "cuts" aren't all cuts and they aren’t that big: After the Sequester, non-defense government spending will still be 12% higher than it was when Obama took office. That means that these "draconian cuts" actually allow most government agencies to spend more, after inflation adjustment, than they did 4 years ago. How is an increase faster than inflation a draconian cut? Now, it is different in defense. Defense will be left, after the Sequester, with a 3% increase in spending since Obama took office (not including war costs). So, after inflation, defense will in fact have to spend less, but not "dramatically" less.

4. Don't fall for the Washington Monument strategy: In any fiscal standoff, it's an age-old strategy in Washington to threaten that the most visible, recognizable and noticeable things to the average person will be compromised. In past debates, this has manifested itself in claims that the Washington Monument would be shut down. This time, it's allowing planes to crash because air traffic controllers will be furloughed. Does anyone really believe that there is nothing in the approximately $70 billion annual Department of Transportation budget that can't be reduced a tiny bit other than air traffic controllers? The Department of Agriculture has more economists than any entity on earth. How about furloughing some of them?  As another example, the president said last week that the Capitol will become filthy because janitors will be laid off. Almost immediately afterwards, the Architect of the Capitol, who is in charge of maintaining the Capitol, said he will absolutely not do that. Don't fall for the monument strategy.

5. If we can't do this, what can we do?: The Sequester is a 2% reduction in this year's growth in federal spending, which still leaves total spending higher than last year. Tax revenues will be the highest ever. But, even after the Sequester, we still are projecting a deficit. Spending is still over 20% higher than the revenue raised by the just increased taxes. If we can't do 2%, how will we ever close the gap on the other 20%? I suspect that the president's strategy, as supported by his compliant Democratic allies in Congress, is to make even the smallest reduction in growth so "painful" politically that it will forestall any further attempts to shrink the deficit by means of cutting spending.

6. Calls the president's bluff: It is well established that the Sequester was the president's idea as a compromise on the August 2011 debt limit debate. He put defense reductions in there thinking that they would be such anathema to Republicans that we would refuse to allow the Sequester to happen. He was wrong. To their credit, even the most hawkish defense Republicans understand the national security risk posed by the debt. So, we did not cave. It also turns out that the president can't stand even reducing the growth in places like EPA administrators or the number of IRS agents needed to enforce Obamacare, etc. Truly, what he is really worried about is losing some ability to enforce the myriad of unlawful or unnecessary regulations he promulgates every day to dampen economic growth. Cutting these areas would render a double benefit: less deficit and less regulatory burden.

7. The military can handle it: On the defense side, there is no question that it results in less spending power for that department. But, we can do it and still defend the country. Defense spending is still higher today, in constant dollars, than it was at the height of the Vietnam War or any time since. We have nearly 150,000 more non-uniformed, civilian employees at the Department of Defense than we did when Obama took office. Even here, we can spend less money more intelligently without impacting the "point of the spear".

8. It will not hurt the economy: The Sequester will have far less effect on the economy than the 32 cent increase in gas prices that has occurred in the last 30 days. Energy prices take money out of everyone's pocket. Do you hear the president running around the country saying we need to develop our available oil and gas resources to help on that front? Of course not. That would actually be true and have a meaningful effect.

9. This is the start: Remember entitlements? They still represent over 60% of federal spending. If the Sequester stays in place, it controls the growth of non-entitlement spending for the next 8 years. It will then be time to turn our attention to reforming and slowing the growth in entitlement spending in order to save those programs from bankruptcy. Let's get the relatively small Sequester cuts over with and move on to the next and much bigger frontier for saving America.

Amazingly, we all woke up on March 2nd, just as we did on the Mayan end-of-the-world day, December 22nd, and the country seems to still be going along much as it was. Sorry, Mayan King Pacal Votan and President Obama.

This week, Republicans in the House will pass a measure (CR) to fund the government to the end of the fiscal year (September 30) at the sequester level. This measure will have a bipartisan, bicameral agreement in it to protect the "point of the spear" in defense by directed defense reductions elsewhere in DoD’s budget. Then it’s the Senate's turn. If the government shuts down, it will be because the Senate shuts it down in order to increase spending. Hopefully that will not happen.