First Quarter GDP Downgraded

The Commerce Department just downgraded America’s GDP growth during the first quarter of this year from the anemic 2.5% initially reported back in April to an alarmingly low 1.8%.  For context consider that average quarterly GDP growth during all non-recession periods from 1947 when quarterly GDP reporting began, through  2007 was 4.4%. 

The chart below tracks every post-recession economy the same way the Obama administration tracks the current era, from the first positive quarter after the end of the recession.  As the chart shows, we’re living through the weakest post-recession economy ever recorded since quarterly GDP reports began 66 years ago.Obama era GDP growth

With the constellation of Washington scandals and the Zimmerman trial dominating headlines this GDP revision was virtually ignored by the national media.  But the numbers are the best macro indicator we have of the overall level of misery Americans still endure, in the fifth year of the Obama Administration and four years after the end of the recession in 2009. 

Polls show most Americans believe big government polices like ObamaCare and hyper regulation of the energy sector depress economic opportunity and prevent job creation.  These statistics demonstrate that most Americans are right.

Let’s Clear Away the Fog Over IRS Scandal

Most of the media have misrepresented the IRS harassment of Tea Party and Conservative organizations as either innocent mistakes or deserved scrutiny of shadowy groups with suspicious motives.  But a review of  the documented experience of these groups leads to the inescapable conclusion that it was deliberate, politically motivated intimidation.

Non-profit organization are tax exempt.  That is, they are not set up to generate profits for the benefit of owners or shareholders and thus are not subject to income tax.  Executive and staff employees of non-profit, tax exempt organizations do pay personal income tax on their salaries and wages.

Non-profits fill out and submit exhaustive, 25-40 page application forms to the IRS, seeking it’s “determination” that they qualify for tax exempt status.  The tax code sets forth several types of tax exempt organizations, two of which are 501(C)(3) and 501(c)(4).  All the Conservative groups who experienced the harassment and delays that Congress is now investigating applied for one of those two designations.  Liberal or progressive groups who applied for the same designations did not.

The IRS’s legitimate function is to review applications for tax exempt status to:

  • ensure that a fraudster doesn’t use a non-profit organization as a front to generate untaxed income for himself;
  • ensure that 501C organizations comply with political spending regulations.

Regarding the current controversy IRS officials and most of the media have echoed acting (and outgoing) IRS Commissioner Steven Miller’s testimony before the House Committee:

Generally, 501(c) applications are centralized for review if there are indications in the application that the organization may engage in political campaign intervention, lobbying or advocacy. This was done to sure that the legal requirements related to these applications are applied in a fair and consistent manner.

That word “centralized” is internal IRS jargon that apparently means applying consistent procedures to similar applicant organizations.  Mr. Miller acknowledged what he could not deny after the Inspector General’s report, that for Conservative-leaning groups his “centralization”  became harassment and years of delay.  Even though the IRS demanded that these groups provide hundreds of pages of extra, irrelevant information that presumably IRS staff would have to read and evaluate, Mr. Miller’s preposterous testimony before Congress was:

I think that what happened here is that foolish mistakes were made by people trying to be more efficient in their workload selection.

To help us understand the 501C designations we turned to Attorney Clita Mitchell, who is perhaps the nation’s foremost expert on the intersection of tax law and campaign finance laws.  She is now representing several of the victim, Tea Party groups in a lawsuit against the IRS.  She provided clarification that so far have been missing from media commentary. 

Regarding Mr. Miller’s claim that organizations plans to engage in political campaign intervention, lobbying or advocacy prompted extraordinary IRS scrutiny:

  • The Internal Revenue Code defines lobbying as an expenditure to influence legislation.  It also says both C3 and C4 are permitted to spend on lobbying.  In fact, if they wish C4s can spend 100% of their funds on lobbying.  C3s can spend part of their funds on lobbying.
  • Advocacy is not defined or prohibited by the Internal Revenue Code. All non-profit, tax exempt groups engage in advocacy, from exhorting us to aid needy people or medical research or helpless animals, to espousing religious, cultural, environmental, or political ideas and beliefs.

So neither potential lobbying nor potential advocacy were legitimate reasons for the IRS to subject applications to extraordinary scrutiny and delay.  The IRS has no legitimate reason to treat advocacy or lobbying as suspicious or sinister activities.

  • Political Campaign Intervention is narrowly defined in the tax code as spending funds on “partisan campaign intervention” which means a campaign for or against a candidate.  C4s are allowed to spend on candidate campaigns as long as that spending adds up to less than half of their total annual expenditures and they pay taxes on those amounts.  C3s are prohibited from spending on such campaigns.  Both C3s and C4s are allowed to spend money to advocate for their causes without restriction.

So what is the job of IRS ?  To review C3 and C4 applications and determine if the groups intend to comply with these political campaign spending rules.  The standard application forms provide more than enough information to make that determination.

Following are some examples of additional questions that were asked of Clita Mitchell’s clients.  As you read each of these questions try to put yourself in the place of the leader of the organization.  Will the answers help the IRS to determine if you intend to obey campaign spending rules? OR, is the purpose of the question to harass and intimidate you?  Keep in mind that you are required to sign and enclose a statement under penalty of perjury that your answers are complete and correct:

Provide details of all your activity on Facebook and Twitter. 

The question is absurdly vague, yet under penalty of perjury your answer must be precise.  What does “details of your activity” mean?  Who does this include? Just you, the organization’s leader? Does it it include your employees? Your volunteers?  IRS doesn’t say.  Does it include personal as well as organization-related communication on Twitter and Facebook?  It doesn’t say. 

Provide a list of all issues that are important to your organization. Indicate your position regarding each issue.   

You could be on any side of any issue and either comply with or violate the campaign spending rules.  Thus, your answers to these questions are utterly irrelevant to IRS’s task.  IRS has no reason to ask about your beliefs except to intimidate you.

Provide a print-out of each of your website’s pages or proposed website’s pages… 

If you already have a website, why can’t IRS personnel simply look at it?  If your website is only in the “proposed” stage, how can you print out it’s pages?

How many employees do you have, full time, part time and seasonal. If they work part time when do they work? If hey are seasonal, during what season do they work?

How many volunteers do you have? How many volunteers were devoted to each activity of the organization throughout the year?  How many and what sort of resources are devoted to volunteer activities? 

If you had fifteen or twenty volunteers coming and going on their own schedules how would you be able to answer this? Did you make the volunteers fill out time cards?  Again, these questions are irrelevant to the task of determining if you intend to comply with campaign finance spending rules.

Provide a listing of all of your past activities. Indicate the percentage of your time spent conducting the activity and the percentage of your funds spent conducting the activity

Provide a listing of all of your planned activities. Indicate the percentage of your time you will spend conducting the activity (total of all activities should equal 100%) and the percentage of your funds you will spend conducting the activity (total of an activities should equal 100%) 

You could spend days answering these two items and still risk inaccuracy.  Will the IRS investigate your activities of the past to see if it can find information that contradicts your response an then charge you with perjury?  Again, your responses provide absolutely no information that is relevant to the IRS’s task.

Has any person or organization provided educational services to you? If yes, provide The name of the person or organization, a full description of the services provided and the political affiliation of the person or organization.  

Provide details regarding each training you have provided or will provide. Indicate who has received or will receive the training and submit copies of the tracking material

Again, these are intrusive, intimidating questions and the answers are irrelevant to the IRS determination process. 

Several of the victim groups have come forward with scores of questions like these that are difficult and time consuming to answer and provide no relevant information to the IRS.

IRS’s job is, literally, to follow the money, to determine what portion, if any, of the organization’s funds will be spent on political campaigns for candidates.  The answers to these questions do not help the IRS follow the money.  It appears that their only purpose is to harass and intimidate.

The media’s latest distraction is an attempt to cast the whole matter as a partisan personality conflict between Daryll Issa the Republican Chairman of the House Government Oversight and Reform Committee and Democrat Committee Member Elijah Cummings.  But the only reasonable conclusion one can reach is that the purpose of these questions and the years of unexplained delay was to prevent Conservative groups from receiving tax exempt determinations, without raising the red flag of an unjustifiable denial. 

Was the motivation political? Of course!  No other motivation is plausible.  The only question that remains is who harnessed the bureaucracy to punish the President’s political adversaries?

 

Hidden Context Around Headline Job Numbers

The Labor Department announced that employers created 175,000 jobs in May.  Alan Kruger, Chairman of the President’s Council of economic Advisers, gave us the White House’s upbeat spin:

Today’s report from the Bureau of Labor Statistics indicates that private sector businesses added 178,000 jobs last month. Total non-farm payroll employment rose by 175,000 jobs in May.  The economy has now added private sector jobs every month for 39 straight months, and a total of 6.9 million jobs has been added over that period. So far this year, 972,000 private sector jobs have been added.

Mr. Kruger has to emphasize private sector jobs because the president’s  various “stimulus” programs, while spending more than a trillion borrowed dollars, failed to live up to his promise that government jobs would not be lost due to the recession.

Kruger starts counting jobs 39 months ago, in March, 2010, because that was the the Obama Administration’s first month of positive, job growth after two years of recessionary job losses.  He presents his numbers without any context hoping we’ll think they’re impressive.  This chart provides some of the context the White House withholds.Job growth during the last 8 post recession economiesAs the chart shows the current post-recession job market turned out to be the weakest out of the past eight.  In fact, it ranks dead last when compared to every post-recession job market since the Labor Department began compiling monthly data in 1939!

The “employment population ratio” is the percentage of working age Americans with jobs. In May of 2007, just before the recession started the ratio stood at 63%.  Since then the working age population has increased by 14 million men and women.  In a “break-even” job market employers would have added enough jobs to retain the ratio at 63%, or about 8.8 million jobs.

But instead there were 2 million fewer jobs in May 2013 than May 20007.   Today only 58.6% of working age adults are fortunate enough to have a job, and tens of millions of them are working part time and/or at lower wages than they earned before the recession.

Why is our economy suffering this tragic loss of human capital?  President Obama roared into office in 2008 announcing his intention to “fundamentally transform” America.  A major consequence of his transformation has been a host of new barriers to job creation including:

  • ObamaCare with its punitive cost increases and penalties on small to medium sized businesses, the very employers who have always created most of the net new jobs.
  • A massive regulatory offensive that adds needless complexity and risk to every business decision and every business start-up or expansion;
  • Tax increases on employers and on investors who have always provided the seed capital that funds start-ups and business expansion.  Indeed two-thirds of the taxpayers who are subject to the infamous “fiscal cliff” tax hike of last January are small to medium sized business employers.

As we demonstrated here, there is no historical experience to validate the administration’s core economic principles, that increasing government’s power and control over the private sector, coupled with spending massive amounts of borrowed money, will cause the private sector to create more jobs than it does in the absence of government supervision and “stimulus.”

A few of the President’s supporters in the media try to sell the notion that the statistics above reflect a retiring baby boom generation rather than an increase in joblessness among those who want to work.  We researched and compiled the relevant data, and it turns out that baby boomers are the only age group bucking the trend with increasing rates of employment.

IRS “Low Level Employees” Push Back

The IRS scandal was launched on May 10 by Lois Lerner, Director of the IRS Exempt Organizations Division, as she spoke to a meeting of the American Bar Association.  In her answer to an audience question that she had planted, she said that “our line people in Cincinnati,” had demanded answers to invasive, offensive questions and had caused delays of several years in the processing of applications for tax exempt status from targeted, Conservative groups

It turned out that Ms. Lerner was trying to “get ahead of” a Inspector General audit of the targeting matter that was about to be published.  We summarized his findings here.

So far, the official White House position has not differed from Ms. Lerner’s, that “line people in Cincinnati” spontaneously began targeting Conservative groups for harassment without permission or direction from anyone higher up the IRS or Administration chain of command.

Last week the House Oversight and Government Reform Committee published excerpts of interviews committee staff had conducted of some of those line people in Cincinnati.  It appears they are not willing to accept the role of designated scape goat for the persecution of innocent citizens or for a mushrooming Washington scandal.

In the following excerpts from a transcribed interview One Cincinnati IRS employee rejects the White House assertion and points to Washington as being responsible for the targeting project:

Q: In early 2010, was there a time when you became aware of applications that referenced Tea Party or other conservative groups?
A: In March of 2010, I was made aware.

******
Q: Okay.  Now, was there a point around this time period when [your supervisor] asked you to do a search for similar applications? 
A: Yes.
Q: To the best of your recollection, when was this request made?
A: Sometime in early March of 2010.

******
Q: Did [your supervisor] give you any indication of the need for the search, any more context? 
A: He told me that Washington, D.C., wanted some cases.

******

Q: So as of April 2010, these 40 cases were held at that moment in your group; is that right?
A: Some were.
Q:  How many were held there?
A: Less than 40.  Some went to Washington, D.C.
Q: Okay.  How many went to Washington, D.C.?
A: I sent seven.

******

Q: So you prepared seven hard copy versions of the applications to go to Washington, D.C.?
A:  Correct.

******

Q: Did he give you any sort of indication as to why he requested you to do that?

[…]
A: He said Washington, D.C. wanted seven.  Because at one point I believe I heard they were thinking 10, but it came down to seven.  I said okay, seven.
Q: How did you decide which seven were sent? 
A: Just the first seven.
Q: The first seven to come into the system?
A: Yes.

*****

Q: Did anyone else ever make a request that you send any cases to Washington?
A:  [Different IRS employee] wanted to have two cases that she couldn’t ?? Washington, D.C. wanted them, but she couldn’t find the paper.  So she requested me, through an email, to find these cases for her and to send them to Washington, D.C.
Q: When was this, what time frame?
A: I don’t recall the time frame, maybe May of 2010.

******

Q: But just to be clear, she told you the specific names of these applicants. 
A: Yes.
Q: And she told you that Washington, D.C. had requested these two specific applications be sent to D.C. 
A: Yes, or parts of them. 

******

Q: Okay.  So she asked you to send particular parts of these applications. 
A: Mm-hmm.
Q: And that was unusual.  Did you say that? 
A: Yes.
Q: And she indicated that Washington had requested these specific parts of these specific applications; is that right?
A: Correct. 

******

Q: So what do you think about this, that allegation has been made, I think as you have seen in lots of press reports, that there were two rogue agents in Cincinnati that are sort of responsible for all of the issues that we have been talking about today.  What do you think about those allegations?
[…]
A:  It’s impossible.  As an agent we are controlled by many, many people.  We have to submit many, many reports.  So the chance of two agents being rogue and doing things like that could never happen.

******

Q: And you’ve heard, I’m sure, news reports about individuals here in Washington saying this is a problem that was originated in and contained in the Cincinnati office, and that it was the Cincinnati office that was at fault.  What is your reaction to those types of stories?
[…]
A: Well, it’s hard to answer the question because in my mind I still hear people saying we were low-level employees, so we were lower than dirt, according to people in D.C.  So, take it for what it is.  They were basically throwing us underneath the bus.

******

Q: So is it your perspective that ultimately the responsible parties for the decisions that were reported by the IG are not in the Cincinnati office?
A: I don’t know how to answer that question.  I mean, from an agent standpoint, we didn’t do anything wrong.  We followed directions based on other people telling us what to do.
Q: And you ultimately followed directions from Washington; is that correct?
A: If direction had come down from Washington, yes.
Q: But with respect to the particular scrutiny that was given to Tea Party applications, those directions emanated from Washington; is that right?
A: I believe so.

The following excerpts are from an interview of another more senior IRS Cincinnati employee who complained about micromanagement from D.C. and who applied for a transfer to a different job so he would not become a designated scape goat.

Q: But you specifically recall that the BOLO terms included “Tea Party?” 
A: Yes, I do. 
Q: And it was your understanding — was it your understanding that the purpose of the BOLO was to identify Tea Party groups? 
A: That is correct. 
Q: Was it your understanding that the purpose of the BOLO was to identify conservative groups? 
A: Yes, it was. 
Q: Was it your understanding that the purpose of the BOLO was to identify Republican groups? 
A: Yes, it was. 

******

Q: Earlier I believe you informed us that the primary reason for [you] applying for another job in July [2010] was because of the micromanagement from [Washington, DC, IRS Attorney], is that correct? 
A: Right.  It was the whole Tea Party.  It was the whole picture.  I mean, it was the micromanagement.  The fact that the subject area was extremely sensitive and it was something that I didn’t want to be associated with. 
Q: Why didn’t you want to be associated with it? 
A: For what happened now.  I mean, rogue agent?  Even though I was taking all my direction from EO Technical [Washington, D.C], I didn’t want my name in the paper for being this rogue agent for a project I had no control over. 
Q: Did you think there was something inappropriate about what was happening in 2010? 
A: Yes.  The inappropriateness was not processing these applications fairly and timely. 

******

Q: You have stated you had concerns with the fairness and the timeliness of the application process.  Did you have concerns with just the fact that these cases were grouped together and you were the only one handling them? 
A: I was the only one handling the Tea Party’s, that is correct. 
Q: Did that specifically cause you concern? 
A: Yes, it did.  And I was the only person handling them. 
Q:  Were you concerned that you didn’t have the capacity to process all of the applications in a timely manner? 
A: That is correct.  And it is just — I mean, like you brought up, the micromanagement, the fact that the topic was just weirdly handled was a huge concern to me.

Two More Disturbing IRS Revelations

The decision by a high ranking IRS official to in invoke the Fifth Amendment and refuse to testify to a Congressional hearing grabbed most of the headlines.  But that wasn’t the only shocker.

On May 10 Ms. Lois Lerner, Director of the IRS Exempt Organizations Division, gave an address to a meeting of the American Bar Association Tax Section’s Exempt Organizations Committee.  This looks like the a yawner meeting of accountants, but it turned out to be the fuse that ignited the IRS scandal.

In answering an audience question that we later learned she had planted, Ms Learner announced that the IRS had “centralized” a bunch tax exempt status applications for “efficiency and consistency.”  She explained that applicant groups were flagged based on their political and ideological positions.   She then disclosed that “in some cases the applications sat around for a while” without any action and that letters had been sent to these organizations asking questions that were “far too broad” and “weren’t really necessary.”  She blamed “our line people in Cincinnati,” a way of denying that she or anyone in senior management was responsible.

It turned out that Ms. Lerner knew the Treasury Department’s Inspector General had completed an audit of the matter and was about to publish the his findings which, as we reported here, are a lot more detailed and controversial than her remarks indicated.

Last week Ms. Lerner was the topic of most of the headlines following a Congressional hearing on the matter because she invoked her Fifth Amendment right to refuse to testify.

But there were two more bombshell disclosures at the House Oversight  and Government Reform Committee hearing that deserve just as much attention.  Committee staff had interviewed another IRS manager, Ms. Holly Paz, who reports directly to Ms. Lerner.  Committee Chair Issa read some of her remarks into the hearing record, producing the two stunning revelations:

  1. Ms. Paz told the interviewers that the IRS had conducted its own investigation more than a year before the IG report was published and reached the same conclusions as the IG, that the division she and Ms Lerner managed had targeted conservative groups, delaying their applications for years, and that these groups were harassed with intrusive and unnecessary and even illegal extra questions that were not asked of other applicants.  Yet apparently nothing changed after the internal investigation.
  2. Ms. Paz further said that she had been in the same room, listening to every interview of every IRS employee who was questioned during the course of the Inspector General’s audit.  Whatever employees said to the supposedly independent Inspector General was said in front of Ms. Paz, who reported directly to the top person in the division, Ms. Lerner.

Responding to committee members who expressed frustration at the continuing lack of information, J. Russell George, the Inspector General had testified that IRS employees – the folks Ms. Lerner called “our line people in Cincinnati – had been reticent, not very forthcoming with information, and unwilling to say who had set up the procedures that targeted those with conservative or small government leanings for delay and harassment.  Obviously, the intimidating presence of  Ms. Paz, representing the boss who ran the Division they worked for, was a contributor if not the main cause of the employees’ reticence. 

Unearthing the whole story will require far more aggressive investigative procedures.

IRS Scandal: Excuses Denials and Justifications

We live in the era stultifying, bureaucratic complexity, imposed by government.  The serpentine federal tax code is beyond human comprehension and is almost universally hated. 

Then there’s federal election law.  The First Amendment to the US Constitution says, “Congress shall make no law…abridging the freedom of speech, or of the press.”  It’s simple and easily understood.  Yet, somehow  Congress has manifestly abridged both freedoms with a bewildering system of laws and regulations that control who may pay for campaigns, how much may be spent and who is permitted to advocate for or against candidates.

The Obama Administration’s IRS scandal is a collision at the intersection of impenetrable tax law and byzantine election law.

While businesses are taxed on their profits, not-for-profit activities and organizations are tax exempt. But in most cases one can’t simply engage in a tax exempt, not-for-profit activity unless one’s “tax-exempt status” has first been applied for and approved by the IRS bureaucracy.

The current scandal is over applications from conservative groups to the IRS seeking officially recognized tax exempt status as 501(c)(3) or 501(c)(4) organizations.  The numbers are chapter and verse of the tax code.

An understanding of the scandal requires a brief lesson in bureaucratic vocabulary:

Campaign Intervention is IRS speak for activities that support or oppose candidates for public office.  Tax exempt organizations may support causes but support of or opposition to candidates is either forbidden or limited, depending on the 501 category.   The rules are completely arbitrary and thus make no sense, but that much is is not the fault of the IRS, nor within it’s power to change.  Congress enacted and Presidents signed the nonsensical laws.  The job of the IRS is to interpret and enforce them, evenly, without prejudice, treating everyone the same.

The Determinations Unit of the IRS Exempt Organizations Office is charged with reviewing tax-exempt applications to ensure compliance with restrictions on “campaign intervention.”

The 25 to 40 pages of IRS application forms include scores of questions, demanding lots of meticulously detailed information on the organization’s leaders, employees, mission, operating plans and finances.  Many organizations find they must hire attorneys and/or accountants with specialized expertise just to complete the forms.

After several years of Complaints from Conservative groups and their representatives in Congress The Treasury Department Inspector General for Tax Administration launched an “audit” of the IRS Exempt Organizations Office to investigate allegations that the Determinations Unit, in the passionless prose of the Inspector General:

1) targeted specific groups applying for tax-exempt status, 2) delayed the processing of targeted groups’ applications for tax-exempt status, and 3) requested unnecessary information from targeted organizations.

The criteria the Determinations Unit applied to identify “specific groups” who were targeted was overtly biased against the administration’s ideological adversaries.  Applications that evidenced any of the following were flagged:

  • Buzzwords such as “Tea Party,” or “Patriots” or “9-12 project:
  • Opposition to government spending, deficits or tax increases
  • Education of the public by advocacy/lobbying to “make America a better place to live”
  • Criticism of how the country is being run
  • References to the Constitution
  • References to the Bill of Rights

Inside the Exempt Organizations Office the flagged applications were all called “tea party cases” until mid-2011 when someone apparently decided it might look less biased if they were called “advocacy cases.” 

The Inspector General notes that criteria for selecting applications for further investigation “should focus on the activities of the organizations and whether they fulfill the requirements of the law.  Using the names or policy positions of the organizations is not a appropriate basis for identifying applications for review…”  Yet, Every application with “Tea Party” or “Patriots” or “9/12″ in the organization’s name was flagged.

Rather than approve or disapprove the tea party applications The Determinations Unit would forward them to “a team of specialists” who would investigate the possibility that the group might, in the future, engage in forbidden acts of “campaign intervention.”  The team of specialists turned out to be a black hole.  the Inspector General found that many applicants had not received either approval or denial for more than two years.   In fact, the specialists simply stopped working on what they called “political cases” from October 2010 through November 2011!

After delays of a year or more the team of specialists would send letters to applicants demanding that additional information be provided within three weeks.  The IG report lists these examples:

  • Identity of donors.  The tax code states that applications are confidential until tax exempt status is approved by the IRS.  After approval the applications are public information.  The tax code does not require public disclosure of the names of donors to approved 501(C)(3) and (C)(4) organizations.  But because the identities of donors would become part of the organization’s application they would eventually become public information.
  • A list of all issues that are important to the applicant organization, and it’s position on those issues.
  • List of any organization’s leaders who had ever or would ever in the future run for public office.
  • Party affiliation of the organizations leaders, speakers, and candidates they supported.
  • Information on the organization’s leaders employment and hours worked;
  • Information on the activities of another organization not affiliated with the applicant.
  • Roles of the organization’s leaders, members and non-members in activities;
  • Types of conversations and discussions that took place among members and non-member participants in the organization’s activities.

Congressmen and Senators report that constituents were asked for even more offensive information than is in the above list, including paper copies of all Facebook articles and tweets they had ever posted.  One of Senator Grassley’s Iowa constituents complained that his pro-life organization was told it’s application would be approved only if leaders signed a letter under oath that they would never demonstrate in front of a Planned Parenthood abortion clinic.

When asked by a reporter President Obama reacted with a show of sanctimonious indignation and claimed, preposterously, that he knew nothing about IRS persecution of Conservative groups until media reports appeared on May 10.  In a just completed Senate Finance Committee hearing the last two IRS Commissioners testified that they knew almost nothing and could not say who had developed the criteria that flagged Conservative organizations for further investigation and delay, or who developed the invasive, intimidating questions.

Predictably, the White House and the President’s supporters in the media say “there is no evidence” that anyone in the Obama Administration directed, suggested or encouraged the IRS Exempt Organizations Office to undertake said targeting.  That would be true if one excludes from “evidence” the facts that:

  • Obama’s agenda and reelection campaign benefited because opposition was muted;
  • Obama’s political adversaries suffered delays, and unnecessary expense, while some were intimidated into withdrawing their applications;
  • IRS staff, like all Americans, heard the speeches and media appearances wherein the President and his top appointees aggressively demonized tea party and patriot groups, portraying them as sinister agents of dark special interests;
  • The IG report notes that after the buzzwords and other criteria listed above had been operational for about a year they were discovered by the Director of the Exempt Organizations office who ordered them to be changed to criteria that legitimately focused on activities rather than applicants’ beliefs or positions.  But after only six months someone yet to be identified changed them again, back to targeting beliefs and policy positions.

Some on the Left say the targeting was justified as legitimate extra scrutiny of nefarious “far right” groups.  President Obama may eventually wish he had chosen this defense rather than pleading ignorance, but since he has so vehemently denounced the targeting activities it’s now too late for him to “pivot.”

Some of the President’s supporters have adopted the incompetence defense: misdeeds were done by low level, apparently stupid, IRS employees with no direction from above.  Indeed Steven Miller, the acting IRS Commissioner said in both House and Senate hearings:

I think that what happened here is that foolish mistakes were made by people trying to be more efficient in their workload selection.  The [criteria] described in the report while intolerable was a mistake and not an act of partisanship.

The incompetence defense may seem to protect the President from being convicted in the public mind of what he appears to be, a ruthless, Chicago-way politician who would use the government’s most feared agency to punish and intimidate political adversaries. 

But dismissing the targeting as incompetence doesn’t serve Obama’s agenda of rapidly expanding government and concentrating power in Washington D.C.  One of the legitimate fears of Big Government is the effects on hapless individuals, businesses and organizations that get caught in the gears of indifferent, unresponsive bureaucracy charged with enforcing a regulatory behemoth so complicated and vast that it’s unmanageable, even by those who work within it every day.

ObamaCare, implementation has already produced some ten thousand pages of new regulations that no doctor or patient will ever be able to read and comprehend.  ObamaCare will be managed in part, by the IRS.  Pollsters tell us the Public is already skeptical and a majority supports repeal of of the health care leviathan.  Washington elites who dismiss outrageous offenses against freedoms of speech and the press as insignificant because they were acts of incompetence don’t help the effort to sell ObamaCare.

We don’t yet have all the answers but the Inspector General continues to investigate and more Congressional hearings are scheduled. 

Memorial Day: Remember Why They Fought

By Cheri Douglas

eagle_in_front_of_the_american_flagI Am the American Dream.

I was born as a vision out of the hearts and minds of the founders and their families who came to the shores of this continent determined to find a better life.  As they fled government oppression and tyranny, they yearned for a new homeland where they could breathe free.

They hoped against hope that they might find a place where everyone could live securely within a fair rule-of-law, without fear of big government bullies overpowering their lives. I became their dream!

I am the American Dream. As my founders dared to dream of me, they saw a life for themselves, free to be exactly who they were and to worship the God who made them that way.  As they worshiped, I began to take on life in their mind’s eye. They envisioned me as a land where their freedom would be treasured equally for everyone as a God-given right, never being handed out by a government as a favor to a select few, or dictated to them against their will.

I am the American Dream. As I continued to take shape, Americans got even more excited about me. They began to realize little by little, that this freedom they sought in me, would allow them to use their talents and creativity to make a living and a life for themselves. The seed of creative craziness was planted in our soil.  Americans began to assume that they could follow the passions that God, himself, had woven into the fiber of their being in their mother’s womb.  They saw that every person who wanted to make a difference in this new country, was challenged to greatness by freedom, itself, even if they had to work from sun-up until sundown to achieve it

I am the American Dream. The best thing about me is, that I am not owned by any one person or clique.  I belong to every American.  When a team of patriots created the Declaration of Independence, the love of me, and sense of ownership was spread to all. The people participated and shared in the investment and commitment to make me real.  “We the People” became the cry of freedom for all who took me as their own.  And, “We the People” set an example of brilliance and excellence that shined like a ray of sunlight around the world.

I am the American Dream.  The fibers of my tapestry were woven most elegantly with threads of pure gold when I was made complete by the writing and ratification to the Constitution of the United States of America. After that I didn’t just hold out hopes for individual freedom and the rule of law any longer, I became it.  I became the reflection of a country thriving on the shared vision of freedom for all. Personal responsibility, commitment, and investment made Americans true owners in their homeland, and in me. An economy based on homes, business ownership, hard work and a minimal government evolved to become strongest in the world.

I am the American Dream. I have provided many rewards to individual, teams., and countries.  I have become one of the strongest forces for good in the world. I gladly share my fortunes and resources to bless the poor across the globe…always have and always will! I captured the imaginations of people everywhere around the globe and they began to come from every corner of the world to become Americans. I am spread around the world, not to enlarge America, but to enlarge freedom, as a God-given right to all.

I am the American Dream.  I am so loved that millions have fought and died for me over the time of my relatively short life. I treasure the blood of every American hero and save every drop as diamonds and rubies among my pure gold threads. These precious gems are proof that I will never die, as long as there are those who will sacrifice their lives to preserve me.  And Americans have truly been living gems where I am concerned.  The more I am challenged, the more Americans will sacrifice to make sure I bounce back alive and well. Patriots, like gem stones, keep going to the grinder in struggles for me.  I shine more brilliantly with every struggle…, aglow with the blood of my fallen heroes and victims who have died at the hands of my enemies. They have brightened America and the world for others, with an unmistakable American beacon that shines even in the darkest times.  Because of them, great leaders have called me the light of the world and the shining city on the hill.

I am the American Dream.  Some people don’t like me. I don’t know why.  Maybe they are jealous of all the crazy fun and joy that emanates from me.  Maybe they fear the loss of control over me if “We the People” really are my owners. Maybe they just feel guilty because they know they didn’t earn me and don’t deserve me? But for whatever reason, I constantly have my detractors and even attackers.  It’s a sad thing too, because my Heavenly father, who inspired me, knows that no one us deserves me. I am a gift of God.  As a gift of God, I am offered freely to all.  God is the only one who can truly control anything. And, the joy that comes from me will flood the soul of anyone who goes to my Father in Heaven to pray with His son Jesus Christ. After all, He made all this possible by grace. No one can earn it.  Not even Patriots.! It’s a pure gift from God.  That’s why I am the American Dream.

©2009 LibertyWorks.com  All Rights Reserved

The Jobs Crisis and Baby Boomer Retirements

The gradual decline in the unemployment rate over the past 4 years does not reflect rising prosperity.  It is a statistical deception, due entirely to a shrinking labor force.

The Labor Department’s Jobs report for the month of April once again called attention to the alarming drop in what statisticians call the “labor force participation rate.” Arc-of-participation-May13

Labor force participation is the percentage of the working age population that is “in the labor force.” They are either employed or qualify to be counted as “unemployed.”  Not everyone who is out of work and wants a job is officially classified as unemployed. When people have been out of work for a long time they tend to become discouraged and don’t engage in job seeking activities often enough to meet government criteria and are thus no longer included in the labor force or counted as unemployed.

The recent, steep decline in the Labor Force Participation Rate has meant that fewer jobless people are being counted in computing the official unemployment rate which was 7.5% in April.  If the Labor force participation rate had been the same in April as it was at the end of 2008, the April unemployment rate would have been 11%.

For years President Obama’s supporters and most of the media simply ignored the falling participation rate and hailed each incremental drop in the unemployment rate as “proof” that his policies of maximum government borrowing, spending and regulation “worked.”  But in recent months they’ve been forced to acknowledge the elephant in the labor statistics room, and have responded with a contrived explanation.  Now they tell us it reflects not discouraged workers but retiring baby boomers.  Thus, they say, it is not the bad news it appears to be, it’s a predictable demographic trend.

But an examination of the available data debunks this explanation. 

  • The emerging “millennial generation” is larger than the boomer generation.  So for every boomer who reaches retirement age there is one – actually a fraction more than one – young person reaching working age who should be seeking work and thus, should be counted as “in the labor force.”
  • The monthly jobs statistics contradict the baby boomer retirement story.age-group-participateAs the chart above shows the only age group whose labor force participation has increased since the end of the recession in 2009 is the oldest group, those over 55, which includes the oldest half of the baby boom generation.  Labor force participation by younger groups is the same or less than it was when the recession ended.
  • Statistical comparison of those over 65 with the prime working age population between 20 and 64 is even more dramatic:over-under-65

The data in this chart show that reality is the opposite of what the President’s supporters tell us.  The overall labor force participation rate has fallen not because of senior baby boomer retirements, but because younger people in the prime working ages between 20 and 64 have quit looking for work and have been reclassified as out of the labor force. 

Meanwhile more and more people who have reached the traditional retirement age continue to work.  Since the recession, labor force participation among those over 65 has increased from 21.7% to 24%.  And an unprecedented 52% of those who reached the age of 65 since the end of 2011 are still working.

These data contradict assertions that retiring baby boomers are the reason for falling labor force participation.  It turns out that the oldest groups are the only ones bucking the trend with increasing participation rates.

Theory Behind ObanaNomics is a Proven Hoax

Rarely has there been a better opportunity to judge the validity of economic ideas than the last four, miserable years.  We have experienced in real time an audacious experiment, testing the theory of economist and progressive hero John Maynard Keynes that the government can buy prosperity by spending enormous amounts of borrowed money and the resulting debt won’t matter.

The Commerce Department published its quarterly GDP report, confirming again that history’s largest and most aggressive experiment has proven Keynesian economic theory to be a hoax.

GDP grew at an anemic 2.5% during the first quarter, an improvement over less than 1% in the previous quarter and a bit above average for the four years since the technical end of the recession in 2009.  The White House provided positive spin to be echoed by the President’s media fans:

Today’s report indicates that the economy posted its fifteenth straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.5 percent annual rate in the first quarter of this year…

Their hope is you will think fifteen quarters of growth is impressive.  The chart provides perspective, showing that compared to every previous post-recession recovery on record the past four years have been emphatically unimpressive.GDP-percentages-April-13

President Obama’s early political successes were several legislative initiatives that would add up to a staggering increase in government spending and debt.  His economic team of academics confidently predicted that his nearly trillion dollar “stimulus” program would cut the recession short, and pump up GDP.  The enthusiastic media hailed brilliant economics that would “put America back to work.”  The President himself promised that his stimulus would, in his words, “immediately jumpstart job creation and long term growth.”

So far, the “jumpstart” has been limited to an unsustainable rate of increase in government debt, about $4.2 billion every day.

The supposed justification for spending like drunken sailors is the old Keynesian theory of “counter-cyclical” government intervention to “increase aggregate demand” during recessionary periods.  Keynesian economic theory is especially attractive to politicians of the liberal/progressive persuasion because it provides the illusion of scholarly research and scientific validation for what they always want to do anyway, spend more and expand government.

But it turns out that a massive spending increase is not a proven economic strategy that has been used successfully in the past.  The last time it was tried in the US was in the early 1930s and it utterly failed to shorten the Great Depression. 

Obama’s counter cyclical spending surge is the largest ever attempted.  But the promised economic growth, prosperity and jobs have not materialized.  Instead, as the chart above shows this halting, faltering recovery from recession has significantly underperformed every previous post-recession economy since the Commerce Department began publishing quarterly GDP reports in 1947.

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 taxing and borrowing power to divert resources from investments that would have been chosen by entrepreneurs, small businesses and corporations to government projects chosen by the political elite.  There is no way to identify or quantify the business start-ups and expansions that would have occurred if the trillions Obama borrowed for extra government spending had instead been invested by the private sector.

The current recovery is hobbled by more invisible, non-quantifiable barriers than diversion of  resources  from the private to the public sector.  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 chart above proves they have been made for four years.

Keynesians continue to preach their gospel of borrowing and spending.  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 experience of previous recessions when, without massive government intervention, the private sector economy recovered, creating jobs and spreading prosperity.

President Obama’s “Smart Cuts”

The President has submitted his 2014 budget to Congress.  At a White House media event he spoke of  “deficit reduction” and claimed to have proposed  “smart cuts” in spending.  20-year-spending-chart

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