Unprecedented Jobs Crisis

Government policies that facilitate job creation and prosperity are well known and understood.  Yet the President and the political movement he leads obstinately pursue opposite policies.

The March jobs report is out and it’s more of the same, a net increase of 192,000 jobs, about average for the past few months.  The unemployment rate was unchanged at 6.7%.   There was little reaction from the political-media establishment.  After years of the same dreary, disappointing reports what can they say?

But America is suffering through what is probably its worst employment crisis ever, and certainly the worst since government began publishing monthly job counts in 1939.  This chart puts the jobs crisis in context:graphfailure-april-14

The recession ended almost five years ago, yet we’re still a half million jobs short of the pre-recession job count.

Nothing like this has happened before.  The American economy has always produced enough new jobs each year to keep up with population growth except for relatively brief recessionary setbacks.  Post recession job markets have always recovered quickly, again catching up with population growth.

The next chart shows what a successful recovery from recession looks like.  graph-success-april-14Like President Obama, President Reagan inherited a severe recession. The 1981-82 recession was caused by a monetary crisis and was in some ways worse than the 2008-09 recession.  The initial unemployment rate was higher.  Interest rates soared into double digits and home prices crashed.  Yet the job market recovered more, not less rapidly than population growth. 

Reagan’s governing strategy was based on history’s proven prosperity formula:

reagan-formula

Reagan’s economic program, based on his commitment to liberty, was the opposite of Obama’s:

  • Implement sweeping tax cuts that were phased in over three years, beginning 1982.  Each of the 16 income tax bracket rates was reduced by at least 25%.  Tax cuts left capital in the hands of those who had created it and were best equipped to reinvest in job creating enterprises;
  • Release the creative and productive energies of The People by eliminating the restraints of excessive government regulation.

Unfortunately, 2014 is unfolding as year six of America’s worst ever jobs crisis with no end in sight because President Obama and the Democrats simply ignore history, adhering to the seductive, “progressive” promise of prosperity through expanded central government power and intervention.  Obama’s program includes:

  • Record high deficits;
  • A government take-over of health insurance;
  • tax increases, especially on small businesses the primary job creators;
  • An aggressive regulatory agenda.

The Obama strategies have delivered entirely predictable consequences: a crisis level jobs shortage and widespread economic misery.

A Principled Candidate For Congress

Igor-photoI recently had the privilege of  interviewing Mr. Igor Birman, candidate for Congress from the Seventh District of California.  Mr. Birman believes as we do, that more liberty rather than more government is the proven strategy to achieve prosperity and promote the general welfare. He is exactly what America needs to sweep the failed government excesses of the Obama era into the dustbin of history.

Igor is an enthusiastic, positive and gracious man who is profoundly grateful to be an American.  While we were in his campaign office he interrupted his activities to humbly thank a group of volunteers who were working the phones on his behalf.  He tells everyone that his life story is “something that could only happen in America.”

Igor was born in the Soviet Union and experienced life without freedom, under constant fear of the ruthless, Russian secret police.  When he was 13 Igor, his parents, his grand parents and his brother immigrated to the United States as refugees.  For this blessing he thanks President Ronald Reagan and “the programs that he sponsored to bring Soviet Jews to America.” 

Igor says the proudest moment of his life was when, at the age of 19, he and his 88 year old grandmother stood together, and took the oath of US Citizenship.  He has earned a BA in Political Science, a law degree, is a member of the California Bar and an instrument rated pilot.  Since 2009 he has served his adopted country as Chief of Staff to Congressman Tom McClintock who represents the adjacent, 4th Congressional District.House-oath-of-office

To become a naturalized citizen Igor swore an oath to support and defend the Constitution.  His campaign platform is inspired by a similar oath of allegiance Congressmen take, not to the President or even to constituents back home, but to the Constitution. 

Even though Congress has enacted countless laws and appropriations that are not authorized by the Constitution, Birman promises to take his oath seriously.  When any bill comes before the House of Representatives that includes functions or spending not authorized by the Constitution he will offer an amendment to strip out the Unconstitutional portions, generating a debate within the House of Representatives and hopefully across the nation as well.  Igor believes it is his responsibility as a Congressman to be able to articulate and teach the people the reasons why it is in their best interest for the government to obey rather than disregard the Constitution.  And he does just that with inspiring enthusiasm.

Igor’s  positions on the issues are on his website but two issues we discussed at length would be of particular interest to Liberty Works readers:

Health Care

No other law threatens such a large sector of the economy as Obamacare with it’s new taxes, new spending and maniacally complex regulation of medical service providers and health insurance.  Igor would repeal Obamacare and implement steps to make medical care more available and affordable including:

  • Allow Americans to purchase health insurance across state lines.  It isn’t allowed now because regulations, and therefore costs, vary from state to state.  A state can’t impose expensive regulations on its citizens if they have the freedom to choose a policy with less onerous regulation from another state.  Igor points out that allowing interstate sale of health insurance would force state regulatory regimes to compete with each other for customer acceptance, forcing the political class to serve rather than command the people.
  • Expand health savings accounts (HSAs).  ObamaCare restricts the amounts that consumers may deposit into HSAs and forbids using HSA funds to buy non-prescription drugs.  Igor would allow unlimited deposits into HSAs and remove the drug restriction.
  • Give individuals the same tax advantages as employers and employees.  Employers pay no income tax or payroll tax on health insurance expenditures.  Employees receive health insurance free of income tax and payroll tax.  Individuals who buy their own insurance should, but do not get the same treatment.
  • Allow people to form groups outside of employment to buy group health insurance.  Religious groups, trade associations and other entities should be able to purchase the same group insurance that current law restricts to employers.  Because these policies would cover large groups they could accept people with preexisting conditions who have been unable to purchase individual health plans.
  • Reduce the costs of unnecessary litigation born by health care providers through tort reform.

Taxes

The only legitimate purpose of taxation is to raise money to fund the Constitutionally authorized functions of government.  Yet the US individual and corporate tax codes are both riddled with thousands of special provisions that are designed to manage the behavior of taxpayers, often for the benefit of politically connected special interests.

One of Igor’s arguments for tax reform is that the current tax code distorts price signals. Natural, or undistorted price signals influence the behavior of both consumers and producers.  Prices that are too high soften consumer demand and motivate additional producers and additional production.  Thus, prices eventually decline.  When prices are too low the least efficient producers, making the smallest profit or suffering losses redeploy their capital to different markets, where price signals call for more production.  The result is continuous, market driven adjustments in production.

But government interferes with and distorts natural price signals with tax penalties and tax subsidies designed to alter behavior or benefit those with political connections, making the overall economy less efficient and reducing economic opportunity.

Igor would dismantle the current tax code and replace it with either a consumption tax or a flat income tax with no deductions.

Liberty Works strongly urges readers to support the Igor Birman for Congress campaign

 

Using the IRS to Bully and Intimidate

Update: The House Oversight and Government Reform Committee has voted to hold former IRS official Lois Lerner in Contempt of Congress for refusing to answer questions at committee hearings.  The full House will vote next week.

The undisputed facts overwhelm denials and diversions from the Democrats and the media.URS-timeline-top

In an effort to identify the person or persons responsible for IRS harassment of conservative organizations the House Committee on Oversight and Government Reform has investigated and held hearings since May of last year.  Last week the committee held another hearing and recalled former IRS official Lois Lerner to answer questions.  But, invoking her 5th Amendment right against self-incrimination, she refused to testify for a second time.

After Ms. Lerner refused to answer several of his questions Chairman Darrell Issa abruptly adjourned the hearing over the shouted objections of Ranking Member (most senior Democrat) Elijah Cummings, who wanted to voice complaints about the committee’s investigation.  Cummings continued bellowing as Issa tried without success to turn off the microphones and then walked out of the room.IRS-timeline-bottom

Predictably, the “news” was mostly about Issa Vs Cummings.  The shameful spectacle of Ms Lerner, a senior government official, refusing to answer questions from The People’s representatives was treated by most of the media as an insignificant detail. 

In defending itself the Obama Administation has used the same diversion as many of its predecessors, claiming to be unfairly persecuted by a thuggish investigator.  Thus, Chairman Issa has suffered character assassination and baseless, presposterous allegations. 

Issa’s questions and requests for documents have been brushed off by the Administration for nearly a year now and he can be forgiven for being fed up.  But his actions fed the persecution narrative, enabling the media herd to target him with 48 hours of sanctimonious indignation.

But the Administration and the media can not overcome the undisputed facts, starting with the timeline to the right.

The scandal is rooted in IRS’s Exempt Organizations (EO) unit.  Non-profit organizations apply to EO for “determinations” that they qualify for tax exempt status.

So far the investigations and committee hearings have confirmed, beyond any doubt, that after the IRS was scolded by high ranking Democrats for not silencing tea party activists, scores of Conservative or Tea Party non-profits suffered…

Two Unconstitutional Abuses of Power

  1. After they sent in their applications, 25-40 page questionnaires that can take weeks of an organization’s leadership and staff time to complete, EO officials sent back lists of additional questions that were outrageously invasive and inappropriate, and required hundreds of pages to answer.   Since the answers to the questions were not relevant to the EO’s determination function the only plausible reason for demanding them was to harass and intimidate Conservative applicants.
  2. Their applications were held in limbo for periods of 18 to 36 months or more without action.  They received neither approvals nor denials.  Had their applications been denied the organizations had the right to appeal.  Or, they could have made changes to their operations to bring them into compliance with IRS regulations and reapplied. But no action at all from the IRS became a de facto denial without any recourse.

Some in the media say this was not an attempt to silence conservatives because liberal groups were also “scrutinized.”  But, there are four reasons we know that Conservative or Tea Party groups suffered the two abuses of power above and that liberal groups did not:

  1. The targeting of Tea Party groups was first announced by Lois Lerner (the same Lois Lerner who now refuses to answer questions) who was at the time in charge of EO.  She disclosed the existence of be-on-the-lookout or BOLO lists of key words such as “tea party” and “patriot” that staff used as a guide to flag applications for the two abuses of power.  From her May 10 announcement came the initial headlines that conservative groups had been mistreated.
  2. A few days after Ms. Lerner’s announcement the Treasury Department Inspector General for Tax Administration (TIGTA) published the report of his audit, confirming that Conservative organizations had suffered abuses 1 & 2 above.  TIGTA conducted scores of interviews and reviewed thousands of documents and found no indication that any left-leaning or “progressive” groups had suffered the same two abuses of power.
  3. Some of the Tea Party groups came forward and testified at one or more of the Congressional hearings.  Their attorneys, who have filed lawsuits against the IRS, publicly released examples of the inappropriate questions.  Some of those questions are here.  Even though they were invited to testify no leftist or “progressive” groups reported having had their applications delayed or having to respond to long lists of invasive questions.
  4. The interim head of the IRS, appointed by the President in May, acknowledged that the abuses took place and submitted to Congress his plan to “clear the backlog” of Conservative/tea party groups who were still waiting for determinations, some for three years or more.

Since the Obama 2012 reelection campaign was the obvious beneficiary of sidelining Tea Party activists, suspicions have been roused and it has become imperative for Democrats to develop and plant in the media misleading scenarios like these:

  • IRS was only doing its job.  It gave “extra scrutiny” to groups with political agendas.  But the abused groups aren’t complaining about “extra scrutiny” which would normally add a few weeks to the application review process.  Their primary complaints are the two abuses of power: They had to answer invasive, inappropriate and irrelevant questions and no decision was made on their applications.  They waited up to three years, with their activities on hold, without receiving either approvals or denials.
  • There have been vague reports of additional BOLO lists that included  the key word “progressive.”  It’s possible that some progressive applications were given “extra scrutiny” which could mean anything from a second pair of eyes going over the forms to a couple of clarifying questions being sent out.  But so far however, there are no examples of any left-leaning groups who suffered two abuses of power.  The Inspector General did not find any, and none have come forward to complain, even though the Congressional committees put out an open invitation.
  • From the beginning Democrats had tried to insulate the Administration from the scandal by pinning all the blame on a few low-level IRS employees in the Cincinnati office, where much of EO operation was located.  Even White House Spokesman Jay Carney weighed in, telling reporters on May 20, 2013 that “there were line employees at the IRS who improperly targeted conservative groups.”

But Cincinnati-outpost deception was shattered by direct testimony in Congressional hearings. The under-reported headlines:  One of the “line employees” in Cincinnati, Elizabeth Hofacre testified that she was not permitted to process what were internally called “tea party cases” in the normal manner.  She was ordered to wait for instructions from Carter Hull, an IRS attorney in Washington D.C.  Eventually she requested a transfer to a different job out of frustration with Mr. Hull and the restrictive process.

Carter Hull testified that he also was told not to process the applications – to not to issue approvals or denials.  He was instructed to wait for further instructions from Lois Lerner, and the IRS Chief Counsel, William Wilkins who is a Presidential appointee.

Thus, through their sworn testimony these two IRS employees have placed accountability for the two abuses of power at the very top of the IRS chain of command in Washington.
The IRS scandal highlights fundamental problems with our massive, federal government run largely by unaccountable bureaucrats:

  • the IRS EO unit is empowered to apply an opaque screening process that facilitates inconsistent, and even capricious treatment of applicant organizations.   Bureaucrats can, at will, harm some groups while giving a boost to others.
  • Lack of accountability.  Chairman Issa’s committee has tried since May to learn who is responsible for the two abuses of power.  But the IRS, like many federal bureaucracies protects itself by making it nearly impossible for Congress to perform it’s Constitutionally mandated duties of oversight.  Many people have many ambiguous roles in overseeing the application review process making it difficult to identify a decision maker.

Congressional Democrats are not interested in solving these fundamental problems.  Unaccountable bureaucracies with unchecked power are the intended result of the laws they have enacted for decades, especially their two most recent triumphs: ObamaCare and the Dodd-Frank Financial regulation law that placed virtually limitless power in the hands of bureaucrats.

Some Republicans seem to believe they must tie this scandal directly to President Obama in order to maintain even minimal media attention.  But this strategy has backfired because it set a bar too high. The media have reacted as if there is no story until Republicans can produce video of the President whispering to Lois Lerner or handing off a bag of cash.

Obviously, it is a scandal if the President is involved.  But even if he is not involved this scandal should be treated as an alarm bell, another indicator that the raw power of unaccountable bureaucracies must be curtailed. 

Government bullying and intimidation of The People is dangerous and unacceptable whether or not the President is involved. Even if the President knew nothing the IRS still acted in favor of one side and against the other in a political contest between competing ideologies.  This is dangerous and unacceptable.  The Republican’s main goal should be a reformed IRS without the power to infringe on the First Amendment rights of The People, even if they can never prove the President was personally involved.

Five Years of Stimulus Debunks Keynesian Theory

The American Recovery and Reinvestment Act is now five years old.  Known affectionately as his “stimulus” it was President Obama’s first legislative triumph, attracting high praise and hosannas from the media.

But today, stimulus advocates are on defense, trying to justify an additional trillion dollars in federal debt.  During a campaign style media event to announce a new round of infrastructure grants the President said:

These are competitive grants that we created as part of the Recovery Act, also known as the stimulus, which actually worked despite what everybody claims.

One has to wonder, what’s Obama’s definition of “worked”? For five years we’ve endured the results of this audacious experiment, testing the Keynesian Economic theory that:

  1. The government can generate prosperity by spending mountains of borrowed money on the priorities of the governing elite, and,
  2. the resulting debt doesn’t matter.

At the beginning of 2009 America was in the depths of a severe recession, and the new Obama Presidency invoked theEmanuel-Doctrine Emanuel Doctrine.  The new President and his supporters in Congress launched a frenzied P.R. campaign promoting an urgent, “stimulus,” a trillion in extra spending on top of the already bloated federal budget to create millions of jobs.  The obsequious Washington Press Corps hailed the new President’s “bold action.”  A parade of “experts” regaled us with claims of “shovel ready pr0jects” that would ramp up and start hiring within days if the stimulus became law.

The Stimulus was rammed through Congress on a straight party line vote on the 20th day of the new Administration, before it’s final version was written.  Obviously, no Congressman or Senator read its thousand pages before voting.

To help sell the stimulus the President’s economic team published a report, “The Job Impact of the American Recovery and Reinvestment Plan,” with optimistic predictions for employment and GDP growth if the stimulus was enacted.  This chart compares their core jobs prediction with what actually happened.job-predictionsIn January 2009, the month the Job Impact report was published, there were 134 million jobs in America.  The report predicted that without a stimulus there would be 133.9 million jobs at the end of 2010, or, with the stimulus 137.5 million jobs at the end of 2010. 

As the chart shows the stimulus utterly failed to deliver the surge of jobs they predicted.  As the chart shows there were seven million fewer jobs at the end of 2010 than the report predicted.  There were 3 million fewer jobs than the no-stimulus prediction!

The Job Impact report included several job creation projections by sector including:

“…30% [1 million] of the jobs created will be in construction and manufacturing, even though these industries employ only 15% of all workers”

 The next chart compares their prediction with what actually happened to the construction and manufacturing sectors.Construction-manufacturingInstead of growing by a million new jobs as the Obama team promised, Construction and manufacturing had lost two million jobs by the end of 2010.  As of January 2014 there are still 1.1 million fewer construction and manufacturing jobs than there were when the stimulus was enacted at the beginning of 2009.

The Bottom Line

The Keynesian fallacy is based in part on the assumption that economic activity that is visible and readily quantifiable, especially government spending, is the only activity that matters.  What are not visible and quantifiable are the losses to the economy when government uses its power to divert resources from investments that would have been chosen by entrepreneurs, small businesses and corporations to government projects chosen by politicians and the politically connected.

The economy is hobbled by additional invisible, non-quantifiable barriers. In anticipation of yet to be clarified ObamaCare costs and regulations, small businesses (fewer than fifty employees) are reluctant to expand even if they have the capital.  No government agency tracks and counts private decisions to not invest or expand.  But that doesn’t mean those decisions aren’t being made.  In fact the charts above proves they’ve been made for five years.

Astoundingly, many on the left, including progressive hero Paul Krugman, hold that the economy is weak because Obama’s record-shattering escalation in borrowing and spending wasn’t enough!  They simply ignore the record of previous recessions when, without government intervention, there was robust private sector recovery and job creation.

ObamaCare’s Miserly Small Business Tax Credit

Since the Administration’s earliest efforts to persuade America that ObamaCare will do more good than harm, one of the most hyped selling points has been “small business tax credits.”

In a September 2009 speech to a joint session of Congress the President promised:

For those small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need.

More recently, during one of the President’s endless campaign tours, he regaled the audience with this:

Small business owners who provide health care to their workers can sit down at the end of the week, look at their expenses, and begin calculating how much money they’re going to save!

small-business-tax-credit tableWow!  Weekly savings for the small business employer to count. Sounds exciting, huh?

But, as with all ObamaCare promises the tax credit’s implementation particulars fall far short of the hype.  It turns out that the small business tax credit is so limited and restrictive it’s worthless or nearly worthless to most small businesses.

  • The maximum tax credit of 35% applies only to business with ten or fewer employees and only if those employees are paid less than $25,000 per year, or about $12.00 per hour.
  • If the employer hires more than ten or begins to pay more than $25,000 per year the law imposes a ruthless sliding scale, slashing the value of the tax credit in response to each additional employee and dollar of increased wages

Thus, ObamaCare is a barrier, a financial disincentive facing the small business owner who might consider an investment in job creating expansion, or rewarding employees with higher wages.

It gets worse

  • If the employer provides a health plan that costs more than the government later determines is “average” in the employer’s state, the tax credit will be retroactively reduced, and the IRS will send a bill.
  • Because ObamaCare compliant health plans come with a raft of new mandates, including a package of “free” (no co-pay) benefits, they will be substantially more expensive than the health plans most small businesses have carried in the past.  Thus, for most small employers the increase cost will more than offset the tax credit.

A Tsunami of Government Debt

Debt-held-by-public

ObamaCare’s Negative Effect on the Economy

The White House just announced a second one year delay in the ObamaCare employer mandate.

The chart below displays economic data that likely influenced last year’s decision to delay the employer mandate from 2014 to 2015, and the latest decision to further delay it until 2016 for a critical segment of the economy, medium sized businesses.

GDP-through-2013-2

The chart above compares the performance of the current post-recession recovery that began in July, 2009 with every previous post-recession recovery since the government began issuing quarterly GDP reports in 1947.  The current recovery, struggling under ObamaCare’s cloud of increased regulation, soaring insurance costs and uncertainty is the weakest of all.

Back in September President Obama made a speech to assure an anxious nation that his massive government intrusion into the health care sector was not a threat to the overall economy.  His remarks included:

There’s no serious evidence that the law [Affordable Care Act or ObamaCare], which has kept down the rise of health-care costs to their lowest level in 50 years, is holding back economic growth.

But the President ignores the evidence in the chart above.  Even though the latest quarterly GDP report was published the day before his State of the Union he said nothing about it in his speech.

Two lines in the chart, 1954-59 and 1970-75, show recoveries that stumbled, dipping down temporarily before before resuming.  But even those two were stronger than our current, anemic, post-recession economy.

When asked about the dismal economy the President’s supporters invariably fall back on the excuse that he responded to an inherited crisis with his record shattering spending increase aggressive new regulations.  The the result was, in the words of Juan Williams: “he lifted us out of recession.”  There are two problems with this argument:

  • Every recession ends, with or without government intervention.  Economic Historians have identified 34 recessions since 1854.  The first 33 ended, most without any government intervention at all.  Yet Obama’s supporters hope we’ll believe the recession of 2008-09 would be the first to go on forever, without end unless Washington intervened with a tsunami of news spending and regulation.
  • There is no historical evidence to validate the theory that a spike in government spending during the first two years of a recession will bring on a stronger post-recession recovery. 

The chart below compares the 2008-09, Bush-Obama spending surge with spending increases or decreases in the first two years of each previous recession since World War II.  It turns out the biggest increase bought the weakest recovery.spending-vs-growth

The second largest spending increase, 1947-49 was for the Korean War.  It was not the kind of domestic spending Obama undertook to “fight the recession.” 

The third largest, 2000 – 02 was also a mostly-military increase after the terrorist attacks of 9-11-01.  The fourth largest, 1989-91 was mostly for the Gulf War of 1990-91. 

The Bush-Obama spending increase of 2008-09 was sold as a job creator.   The economic theory behind it was presented by the media as a proven, reliable strategy to “jumpstart the economy.”  But actual experience invalidates that theory. 

Not only was the spending increase ineffective, the data in the chart at the top leads inexorably to the conclusion that ObamaCare interventions in the private economy are at least partly to blame for an economic recovery that has been so weak, with so much continuing misery, that most Americans think we’re still in recession.

The Administration’s second delay of a key regulation in the law that directly impact’s jobs would seem to indicate that the President agrees with Liberty Works, that ObamaCare restrains economic growth and job creation.

Obama’s Federal Nursery School

In his State of the Union speech President Obama ran through his laundry list of proposed new government run programs and government spending that he called “investments,” including this:

Research shows that one of the best investments we can make in a child’s life is high-quality early education.  Last year, I asked this Congress to help states make high-quality pre-K available to every four year-old.  As a parent as well as a President, I repeat that request tonight.

This is a familiar, progressive formulation. 

  • Start with appeal to authority, in this case “research shows.” Other variations include “study after study shows” and “independent experts confirm.” But never name the studies or experts.
  • Then, make an assertion – in this case the obvious – that it’s good for children to begin learning early. 
  • Finally, leap to the  conclusion that Washington politicians and bureaucrats, with their volumes of regulations and piles of money should jump in and take control to “help states.” 

Federal “help” always involves rigid regulations and payoffs to special interest cronies.  And, dictating that “every four year-old” shall be enrolled strongly appeals to Obama’s base, an ideal opportunity to begin indoctrinating a future generation of voters in progressive dogma.

But the federal government already operates a nation-wide preschool system called Head Start. Yet Obama chose not to mention it.  Why?

Perhaps the answer lies in a meticulous study of Head Start results completed just three years ago by the staff of Obama’s own Department of Health and Human Services.  For several years they tracked the progress of 5,000 children who were eligible for Head Start, a program offered only to low income families.  Half of the 5,000 kids were enrolled Head Start programs, while the other half became a control group that did not attend Head Start or any pre-school. 

An extensive battery of tests was run on both groups of children just before Kindergarten, at the end of Kindergarten and at the end of first grade.  It turned out that the Head Start group did not perform any better in Kindergarten and first grade than the control group.  Here’s a summary, directly from the HHS study:

[I]t appears that access to Head Start has an impact on 4-year-olds’ language and literacy skills while they are in Head Start, but these early gains are not sustained as the children develop and move into the early school years. Furthermore, there is no evidence of impacts on children’s math ability, pre-writing skills, or teacher assessments at the end of Head Start, at the end of kindergarten, or at the end of 1st grade. In other words, the children in the Head Start group ended their Head Start year with moderately higher skills than their counterparts in the control group, but this advantage did not lead to longer term gains when they were in school. At the end of 1st grade, they end up at the same point as the children who were not given access to the program.  Although both groups of children are making progress over time, in most instances, the Head Start group scores are not statistically different from the control group scores in kindergarten and 1st grade.

For decades politicians have routinely called on Congress to expand Head Start.  But with this study documenting failure in mind, Obama asks Congress to pay for “high quality” preschool.  In his 2013 State of the Union he asked for funding for private preschools.

Obama’s most recent budget proudly proclaimed an annual cost of $8.1 billion for Head Start “to serve approximately 962,000 children.”   That works out to about $8,400 per year, per child, not as much as the elite preschools the children of Washington officials attend, but well above the average charged by private preschools across the country.  Yet, Head Start graduates are no better prepared for school than children who didn’t attend any preschool.

Apparently, the President’s response to the failure of government’s existing national preschool is demand that Congress launch a second, national preschool.

The Constitution’s Tenth Amendment commands the President and Congress to restrict government’s power and reach only to those functions authorized by the Constitution.  Everything else is to be left to the States or to The People.  Operating preschools is definitely not authorized by the Constitution.  So, the failing Head Start program shouldn’t even exist. And there certainly is no Constitutional authorization for a second national preschool system!

There have always been successful sources of early childhood learning, from parents and grand parents, to siblings, to low cost and even free preschools, some organized by churches.  But the progressive movement Obama leads does not trust The People to figure out their own, varied, approaches and as always demands nation-wide uniformity.


The Victims of Fundamental Transformation

President Obama roared into office vowing a “fundamental transformation” of America.  His transformation has not been kind to middle class workers.

The Labor Department just published it’s monthly, new normal – miserable – jobs report.  The headline, that in December the unemployment rate ticked down from 7.0%, to 6.7% was an illusion that masked the real news.  In fact, the bad news, as shown in this chart is now so stark, even the establishment media are beginning to be skeptical of the validity of the declining unemployment rate.  Arc-of-participation-Jan14

The labor force participation rate is the percentage of the working age population counted as “in the labor force” either because they have a job or because they qualify by government criteria to be counted as “unemployed.”  The unemployment rate is the percentage of the labor force who are counted as unemployed.

People who have been jobless for a long time become discouraged and don’t actively look for work often enough to meet arbitrary, government criteria for inclusion in the ranks of unemployed.  These “discouraged workers” are no longer counted as unemployed.  In December while employers created a meager 74,000 jobs, 347,000 jobless people were reclassified from “unemployed” to “not in the labor force,” and thus not counted as unemployed.

As the chart above shows the labor force participation rate has declined dramatically since 2008 to it’s lowest level since the Carter Administration, 37 years ago.

If the labor force participation rate were the same as it was at was in June 2009 when the recession officially ended the December unemployment rate would have been 10.4%

The next chart tracks the unemployment rate and the labor force participation rate over the 50 months since unemployment peaked at 10% in October 2009.  As it shows the drop in the unemployment rate runs parallel to and is almost entirely due to the shrinking the labor force participation rate.Obama-participation

This parallel decline in both rates is unprecedented.  In every previous post-recession job market, the labor force participation rate was flat or increased as the unemployment rate declined. 

Barack Obama’s “transformation” agenda of higher taxes on small business employers, aggressive increase in regulations, and new costs and mandates on employers are obvious barriers to business expansion and job creation.  His bureaucrats are busy with ObamaCare implementation, making job creation even more risky and expensive.

The next chart tracks the first 50 months of job market recovery after the deep recession of the 1980s.Reagan-participation
In the 1980s President Reagan worked with Congress to reduce tax rates on entrepreneurship, investment and capital gains.  He enhanced economic opportunity and decreased the cost and risk of hiring employees by scaling back regulations.

The route to prosperity is the same as it has always been, more liberty.  What can government do to help employers create more jobs?  Stop being a barrier!  Cut taxes, repeal ObamaCare, and reduce regulation.

IRS Abuse of Conservatives: The Indisputable Facts

After several months without any investigative progress the IRS scandal is back in the headlines.   The  House Committee on Oversight and Government Reform has been  leading the investigation since May of last year.  Committee Chairman Darrell Issa sent a letter to Attorney General Eric Holder protesting the appointment an Obama campaign donor to lead the FBI/Justice Department’s investigation, such as  it is, into the IRS matter.

Since Administration supporters have resumed their disinformation campaign, it’s time for a review of the facts, including four reasons we know conservative or tea party groups were targeted for Unconstitutional abuse while liberal groups were not.

The scandal is rooted in IRS’s Exempt Organizations (EO) unit.  Non-profit organizations apply to EO for “determinations” that they qualify for tax exempt status.

So far the investigations and committee hearings have confirmed, beyond any doubt, that Scores of Conservative or Tea Party non-profits suffered Two Unconstitutional Abuses of Bureaucratic Power

  1. After they sent in their applications, 25-40 page questionnaires that can take weeks of an organization’s leadership and staff time to complete, EO officials made up lists of additional questions that were outrageously invasive and inappropriate, and required hundreds of pages to answer.   Since the answers to the questions were not relevant to the EO’s determination function the only plausible reason for demanding them was to harass and intimidate Conservative applicants.
  2. Their applications were held in limbo for periods of 18 to 36 months without action.  They received neither approvals nor denials.  Had their applications been denied the organizations had the right to appeal.  But no action at all became a de facto denial without the right of appeal.

Four reasons we know that Conservative or Tea Party groups suffered these two abuses of power and that liberal groups did not:

  1. The targeting of Tea Party groups was first announced by a high ranking IRS official, Lois Lerner, who was at the time in charge of EO.  She disclosed the existence of be-on-the-lookout or BOLO lists of key words such as “tea party” and “patriot” that staff used as a guide to flag applications for the two abuses of power above.  From her May 10 announcement came the initial headlines that conservative groups had been mistreated.
  2. A few days later the Treasury Department Inspector General for Tax Administration (TIGTA) published the report of his audit, confirming that Conservative organizations had suffered abuses 1 & 2 above.  TIGTA conducted scores of interviews and reviewed thousands of documents and found no indication that any left-leaning or “progressive” groups had suffered the same two abuses.
  3. Some of the Tea Party groups came forward and testified at one of the Congressional hearings.  Their attorneys, who have filed lawsuits against the IRS, publicly released examples of the inappropriate questions.  Some of those questions are here.  Even though they were invited to testify no leftist or “progressive” groups reported having had their applications delayed or having to respond to long lists of invasive questions.
  4. The interim head of the IRS, appointed by the President in May, acknowledged that the abuses took place and submitted to Congress his plan to “clear the backlog” of Conservative/tea party groups who were still waiting for determinations, some for three years or more.

Republicans and Conservative commentators, noting that the Democrats’ 2010 Congressional campaigns and President Obama’s 2012 reelection campaign were obvious beneficiaries of sidelining Tea Party activists, accused the Administration of complicity.

It thus became imperative for Democrats to try to develop and plant in the media several misleading scenarios like these:

  • IRS was only doing its job.  It gave “extra scrutiny” to groups with political agendas.  But the abused groups aren’t complaining about “extra scrutiny” which would normally add a few weeks to the application review process.  They’re primary complaint is that their applications were set aside, that no action was taken.  They waited up to three years, with their activities on hold, without receiving either approvals or denials.
  • There have been vague reports of additional BOLO lists that included  the key word “progressive.”  It’s possible that some progressive applications were given “extra scrutiny” which could mean anything from a second pair of eyes going over the forms to a couple of clarifying questions being sent out.  But so far however, there are no examples of any left-leaning groups who suffered The Two Major Abuses above.  IRS officials do not claim there were any, and none have come forward to complain, even though the Congressional committees put out an open invitation.   However lack of any evidence hasn’t stopped Obama supporters in the media from declaring that all political groups got “extra attention” and therefore the matter is not important.  Move along.  Nothing to see here.
  • From the beginning Democrats had tried to insulate the Administration from the scandal by pinning all the blame on a few low-level IRS employees in the Cincinnati office, where much of EO operation was located.  Even White House Spokesman Jay Carney weighed in, telling reporters on May 20, 2013 that “there were line employees at the IRS who improperly targeted conservative groups.”

But Cincinnati-outpost deception was shattered by direct testimony in Congressional hearings. The under-reported headlines:  One of the “line employees” in Cincinnati, Elizabeth Hofacre testified that she was not permitted to process what were internally called “tea party cases” in the normal manner.  She was ordered to wait for instructions from Carter Hull, an IRS attorney in Washington D.C.  Eventually she requested and received a transfer to a different job out of frustration with Mr. Hull and the restrictive process. 

Carter Hull testified that he also was told not to process the applications – not to issue approvals or denials.  He was instructed to wait for further instructions from Lois Lerner, and the IRS Chief Counsel, William Wilkins who is a Presidential appointee. 

Thus, through their sworn testimony these two IRS employees placed accountability at the very top of the IRS chain of command in Washington, and opened a potential connection to the White House.

The IRS scandal highlights fundamental problems with our massive, federal government run largely by unaccountable bureaucrats:

  • EO is empowered to apply an opaque screening process that facilitates inconsistent, and even capricious treatment of applicant organizations.   Bureaucrats can, at will, harm some groups while giving a boost to others.
  • Lack of accountability.  The House of Representatives had been trying since May to learn who is responsible for the two Unconstitutional buses above.  But the IRS, like all federal bureaucracies protects itself by making it nearly impossible for Congress to perform it’s Constitutionally mandated duties of oversight.  Many people have many ambiguous roles in overseeing the application review process making it difficult to identify a decision maker. 

But Congressional Democrats are not interested in solving these fundamental problems.  Unaccountable bureaucracies with unchecked power are the intended result of the laws they have enacted for decades, especially their two most recent triumphs: ObamaCare and the Dodd-Frank Financial regulation law that places virtually limitless power in the hands of bureaucrats.

For their part, Republicans seem to believe they must tie this scandal directly to the Obama Administration in order to maintain even minimal media attention.  Obviously, it’s a scandal if the President or high ranking Administration officials were involved.  But even if they were not involved this incident should be treated as an alarm bell, another indicator that the raw power of unaccountable bureaucracies must be curtailed.

So far Republicans haven’t yet put much emphasis on these fundamental problems But we can hope.

 

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