Federal Budget & Tax

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Friday, May 16, 2008

Overseas Contractor Insurance Companies Bilking Taxpayers

Citing inflated profit margins, a recent report by the House Oversight and Government Reform Committee criticized providers of federally mandated insurance to the Pentagon of sticking taxpayers with exorbitant bills.

The Defense Base Act (DBA) requires that all contractors working for the federal government overseas purchase workers compensation insurance for its employees. The cost of the insurance is then passed on to the government. But unlike other federal agencies, the Pentagon has the authority to negotiate its own contracts.

At a hearing yesterday, before the House panel, GAO's John K. Needham testified that not only does the Pentagon pay higher insurance rates, but that it doesn't keep good enough records to figure out to obtain lower rates:

GAO previously reported that eight DOD prime contractors paid from $10 to $21 per $100 of salary cost, a rate that was significantly higher than the rates paid by State and USAID contractors—$2 to $5 per $100 of salary cost—through the agencies' respective single-insurer programs.
...
DOD continues to lack reliable aggregate data on the total cost of DBA insurance. Based on GAO's 2005 report, Congress directed DOD to identify methods to collect data on DBA insurance costs. While State, USAID, and Army Corps can obtain aggregate DBA cost data for their respective single insurer programs, DOD reported that it has not collected this data departmentwide. As GAO has previously reported, agencies can analyze financial data to leverage their buying power, reduce costs, and better manage suppliers of goods and services.

And usual-suspect Iraq contractor KBR is also featured in the report.

The largest private contractor in Iraq, KBR, paid its workers' compensation insurer, AIG, $284 million in premiums through 2005 under its contract to provide logistical support to the troops. In addition to receiving reimbursement for these expenses, KBR will receive an additional payment of $2.8 million to $8.4 million in profits for incurring these expenses. The insurer, AIG, will payout $73 million in claims and incur around $114 million in expenses, earning almost $100 million in profits.

Posted by Craig Jennings, 04:59:47 PM

Unions Boost Wages of Lowest-Income Workers the Most

Shawn Fremstad posted yesterday on a new paper released this month by John Schmitt over at the Center for Economic and Policy Research. The paper studies the impact unions have on income and has some interesting findings:

Using national data for 2003 through 2007, we estimate that unionization raises the wages of the typical low-wage worker (one in the 10th percentile) by 20.6 percent, compared to 13.7 percent for the typical worker (one in the 50th percentile), and 6.1 percent for the typical high-wage worker (one in the 90th percentile). The traditional statistical approach applied to the same data produces an estimate of the average union wage premium of 11.9 percent, which is substantially lower than the union effect on low-wage workers (20.6 percent) and somewhat below the effect for the median- wage worker (13.7 percent).

Read the full report.

Posted by Adam Hughes, 03:32:21 PM

GI Bill Surtax Would Affect 0.3% of All Taxpayers

When the House approved the domestic spending amendment to the war supplemental spending bill, it approved not only a $52 billion expansion of the GI Bill, but a 0.5% surtax on income for millionaire couples (individuals earning more than $500,000).

According a recent Citizens for Tax Justice report, the tax would affect about 0.3% of all taxpayers.

"The surtax would simply scale back the Bush tax cuts for the richest 0.3 percent of taxpayers, by an average of just 7 percent, to help the men and women returning from the wars and their families," said Robert S. McIntyre, director of Citizens for Tax Justice. "Lawmakers who oppose this proposal will prove that they really do value tax cuts for the wealthy over all else."

Annual effects of a proposed 0.47% surtax on adjusted gross income in excess of $1 million for married couples and $500,000 for others (at 2007 levels)
	Number affected by surtax	% of all taxpayers affected	Total tax change ($-billion)	Average tax change
Married couples	291,300	0.5%	$+3.0	$+10,240
Others	152,500	0.2%	+0.9	+5,960
ALL	443,800	0.3%	+3.9	+8,770
Source: Citizens for Tax Justice, "Surtax on Millionaires to Help Veterans Would Be A Tiny Sacrifice for the Richest 0.3 Percent of Taxpayers"

(click here to see full report chart)

Posted by Craig Jennings, 10:37:13 AM

TPC Testimony Before Senate Finance Committee

The Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution, has published two tesitmonies from a recent Senate Finance Committee hearing on overhaul of the U.S. tax code:

A Blueprint for Tax Reform and Health Reform
Leonard Burman

In this testimony Burman outlines a plan for tax reform that would maintain progressivity, raise enough revenues to finance the government, and dovetail with plans to provide universal access to health insurance. The plan would combine a value-added tax (VAT) dedicated to pay for a new universal health insurance voucher with a vastly simplified and much flatter income tax.

Read the complete testimony

Individual Taxpayers and Federal Tax Reform
William Gale

In the next few years, several factors including the expiration of the bush Administration's tax cuts will push tax issues to the forefront of policy discussions. Gale's testimony focuses on some overarching principles that should guide tax reform efforts.

Read the complete testimony

Posted by Adam Hughes, 10:20:10 AM

DAILY FISCAL POLICY REPORT -- May 16, 2008

Tax Policy -- W&M Approves Extenders; Rejects AMT Patch: By a mostly party-line vote of 25-12, the House Ways and Means Committee approved at $57 billion tax package of an assortment of tax breaks yesterday. The committee also voted down a Republican-offered unpaid-for one-year AMT patch. The bill is expected to be on the House floor next week.

War Supplemental -- House Rejects War Funding Portion of War Sup: Anti-war Democrats voted "no" and 132 protesting Republicans voted "present" to defeat an amendment that would fund war operations in Iraq and Afghanistan to a war funding bill. A domestic spending package was approved along with provisions aimed at changing war policy. The Senate is expected to add war funds when it votes on the bill, probably after the Memorial Day break.

Farm Bill -- House and Senate Pass By Wide Margins: The Senate passed the farm bill reauthorization yesterday by a wide margin: 81-15, well above the 67 needed to override a promised presidential veto of the bill. The House has also passed the bill by much more than needed to override a veto in that chamber. The bill has almost $300 billion in spending over the next five years, with 73 percent of that spending going to people in poverty.

Posted by Craig Jennings, 09:01:01 AM

Thursday, May 15, 2008

War Supplemental Update: War Funding Bill Lacks War Funding Provision

For reasons not entirely clear -- other than simply throwing a temper tantrum -- House Republicans voted present on the amendment that would add $162.5 billion in war funding to HR 2642, the shell bill that was to be ultimately be the war supplemental spending bill. The vote to add war funding failed 141-149, as anti-war Democrats voted "no" and 132 Republicans voted "present." A second amendment, a provision that would set a Dec. 31, 2009 withdrawal date for troops in Iraq, passed 227-196. And a third amendment containing a bevy of domestic spending measures, including GI Bill expansion and an unemployment insurance benefit extension, passed 256-166.

The temper tantrum theory would appear viable considering that ranking House Appropriations Committee member Jerry Lewis (R-CA) had been incensed ($) that Democrats bypassed the committee process to speed passage of the bill.

"Regular order is designed to ensure that the people's voices and interests are heard as serious public policy questions move through the legislative process," Lewis said. "To have the Democrat leadership cut off the people's right to be heard by such crass parliamentary maneuvers results in great harm to the Appropriations Committee and seriously undermines the credibility of the world's most admired legislative body."

Last week, 177 Republicans voted to reconsider a previous (unanimous) vote on a resolution "Celebrating the role of mothers in the United States and supporting the goals and ideals of Mother's Day," (H. Res. 1113) in a bid to stymie congressional action.

Posted by Craig Jennings, 04:43:01 PM

Best Spin Ever: Doan Fought for Accountability!

When I posted at the end of April that the book had closed on Lurita Doan, former head of the General Services Administration, (GSA) apparently I was wrong. She has resurfaced in interviews in GovExec magazine, on Federal News Radio and most recently in this border-line ludicrous column in Federal Computer Week by Neal Fox, the former assistant commissioner of acquisition at the GSA.

Now I've come across some interesting spin in Washington in my time here, but I think this one has to take the cake. There are too many strange, misleading, and frustratingly vague statements (e.g. "Some people who had backed IGs began to have doubts.") in Fox's article to jump into all of them (Beverley Lumpkin over at POGO has a good rundown refuting many of them that is worth reading). But the overall tone of the piece implies that IG offices are a danger to good government and need to be reigned in. This perspective needs to be soundly dismissed.

Fox's main point seems to be that a thirsting for power and arrogance at the IGs office was the main issue at GSA, not any particular issue or problem they were investigating (and there were plenty). Fox's point is mind-numbingly ironic considering many of the actions the IGs office was investigating can not be seen as anything else than a power grab by a pretty arrogant Ms. Doan herself (see strong-arming contracting officers and side-stepping contracting protocols to help friends). Worst of all, Doan's unprecedented actions to attempt to cut the IG office's budget and outsource its contracting oversight responsibilities to, of all places, private contractors, was a deliberate attempt to keep prying eyes away from her attempts to operate on her own outside of federal laws and regulations.

I'm still hopeful, as I think POGO was at first glance, that vague assertions and unsubstantiated ramblings like those contained in Fox's article won't influence anyone (that would be a shame). In these times of poor oversight and significant corruption and incompetence in the federal government, we need strong IG offices more than ever to help develop a more effective and accountable government.

Posted by Adam Hughes, 12:37:26 PM

An Equal Opportunity Crisis

House Financial Services Committee chair Rep. Barney Frank -- profiled in the New York Times this week -- is the only person in Washington remotely both as bright and as indecipherable as Alan Greenspan. His accent is the aural equivalent of illegible handwriting. A stenographer should follow him around so you don't have to wait 'til the next day for the transcript.

Mr. Frank, who has deftly led the surprisingly challenging effort to pass comprehensive housing legislation equal to the crisis, made an off-handed remark, according to the Times profile, after the House approved his bill on Thursday, though without enough votes to override a veto:

Mr. Frank quickly went on the offensive, seeking to undercut the administration's argument that homeowners in trouble should have known better. "No dumb people got America into this problem," he snapped. "You had to be really smart to understand collateralized debt obligation derivatives."

Needless to say, the profile adds, "Mr. Frank, who holds degrees from Harvard and Harvard Law School, understands collateralized debt obligations." Of course, you don't have to have multiple Ivies to become ensnared in the current housing crisis.

In fact, as the Washington Post reports today, the crisis knows no class boundaries. "Nationwide, from 2006 to 2007, the number of foreclosed properties listed at $1 million or more rose 50 percent, to 7,642, up from 5,091, according to RealtyTrac. And the number of foreclosed homes priced from $500,000 to $999,999 jumped 88 percent, from 52,836 to 99,457."

Some of that's deep in GOP territory.

Maybe George Bush will re-consider his veto threat. He's got enough Ivy League degrees to understand the problem.

Posted by Dana Chasin, 11:34:12 AM

GovExec Maps Out the Six Degrees of OSG Bloch

GovExec has a neat app that lays out OSG Scott Bloch's recent legal troubles called Six Degrees of Scott Bloch: A Scandal Scorecard

Posted by Craig Jennings, 11:18:46 AM

DAILY FISCAL POLICY REPORT -- May 15, 2008

War Supplemental -- House and Senate Action Today: The House is scheduled to vote on a $183.7 billion war supplemental spending package today. The Senate Appropriations Committee will begin work on marking up companion legislation also today. but it's unlikely a bill will reach President Bush by the Memorial Day break. House Amendments to Bill.

Unemployment Insurance -- House, Senate Approps Votes Slated: The full House and the Senate Appropriations Committee are scheduled to vote on an amendment to the war supplemental to extend UI benefits. The House bill provides a 13-week extension in most states, 20 weeks in with the highest unemployment rates -- it's 33 weeks in the Senate version. The percentage of workers who exhaust unemployment benefits currently is 36 percent, higher than at the beginning of any of the past five recessions.

Tax Policy -- Ways and Means to Mark Up Extenders: The extenders package covers dozens of tax credits and breaks, costing $57 billion. On top of that, , GOP members of the panel are expected to propose a one-year AMT unpatch, unpaid for, during the mark up. H.R. 6049 Energy and Tax Extenders Bill Summary. JCT Scoring.

Posted by Dana Chasin, 09:55:39 AM

Wednesday, May 14, 2008

Ranks of Contracting Officers Grow, But Not Enough

Stephen Barr, who writes the Federal Diary column for the Washington Post, wrote on an interesting topic last week - the growth in federal contracting officers (COs) under President Bush.

Barr reported that the number of COs has increased 6.8 percent since President Bush took office, according to federal statistics. Barr also was correct in pointing out that there are concerns among many in Washington (both inside Congress and out) that despite these increases, there are still far too few COs and they receive sub par training and support in doing their jobs.

One of the most shocking things was that federal officials don't even know how many COs would be appropriate to have:

But how many contracting officers the government actually needs has not been determined, despite efforts by federal agencies, the Office of Personnel Management and the OMB over the past two years to develop plans for hiring and training contracting officers and specialists.

"We are still working real hard with OPM and the departments to try to figure out what the right number is," said Paul A. Denett, an Office of Management and Budget official in charge of government procurement policy. For his part, Denett added, "I believe we need to increase the hiring even more."

Let me give Mr. Denett a hint. You definitely need to hire more. While the COs workforce has increased 6.8 percent since Bush took office, federal contracting dollars have increased close to 100 percent - from $219.8 billion in FY 2001 to $430.1 billion in FY 2007. Those facts alone should be pushing the government to hire and better train more employees to oversee an immense area of discretionary spending by the federal government. That, plus the wide-ranging and seemingly continuous reports of waste, fraud, and abuse in federal contracting makes it almost shameful something hasn't been done already.

Posted by Adam Hughes, 02:58:17 PM

Down on the Farm Bill

A compromise reached on the farm bill, the House and Senate are expected to vote on final passage as early as today. The bill provides about $289 billion over five years in agriculture spending including nutrition programs and food stamps as well as reauthorization of crop subsidies, conservation programs and a special $3.8 billion trust fund for farmers who lose crops to flood, fire or drought, bumping up the baseline in the aggregate by about $10.3 billion.

The big question is whether the two houses will pass the bill with sufficient margins to overrule a presidential veto, which has been promised repeatedly.

Bush is down on the farm bill. In a statement yesterday, he said:

I am deeply disappointed in the conference report filed today as it falls far short of the proposal my Administration put forward. If this bill makes it to my desk, I will veto it...
Farm income is expected to exceed the 10-year average by fifty percent this year, yet Congress' bill asks American taxpayers to subsidize the incomes of married farmers who earn $1.5 million per year. I believe doing so at a time of record farm income is irresponsible and jeopardizes America's support for necessary farm programs.

Congress claims that this bill increases spending by $10 billion, but the real cost is nearly $20 billion when you include actual government spending that will occur if this bill becomes law. Instead of fully offsetting the increased spending, the bill resorts to a variety of gimmicks, such as pushing commodity payments outside the budget window.

Anti-Analysis: Who Wants to Be a Millionaire?

Posted by Dana Chasin, 10:31:03 AM

DAILY FISCAL POLICY REPORT -- May 14, 2008

PAYGO -- Congress Pays Heed to PAYGO: On three fronts, Congress paid heed to the principles of PAYGO this week, planning to pay for tax cuts and spending increases in the farm bill, the tax extenders package, and (most surprsingly; see below) the supplemental. The farm bill's new tax credits would be paid for, in part, by limiting the net operating loss carryback to $200,000 on businesses' non-agriculture income if they receive commodity payments. The extenders would raise revenue by limiting the deferral of offshore corporate income. That's the plan for now. Here's how PAYGO works.

War Supplemental -- Compromised Reached with Blue Dogs?: Politco's The Crypt is saying that House Democratic leadership will offset a $52 billion expansion of the GI Bill with a half percentage-point increase on income for couples earning more than $1 million. (CongressDaily reports that the increase applies to individuals earning more than $500,000 as well).

Taxes -- Senate Finance Hears Ideas on Tax Reform: The Senate Finance Committee heard ideas from left, center, and right on individual income tax reform yesterday at Cracking the Code, the first of three hearings chair Sen. Max Baucus (D-MT) plans in the coming months. From AMT to the estate tax, the individual income tax code will probably see significant reform in the next couple of years. The Brookings Perspective.

Posted by Dana Chasin, 09:58:57 AM

Tuesday, May 13, 2008

Entitlement Panel Legislation Unlikely This Year

CQ reports ($) that Senate Budget Committee Chair Sen. Kent Conrad (D-ND) has cast serious doubt on the probability that legislation to create a commission to look at Social Security and Medicare reform will make any progress this year. Conrad had hoped to have a committee markup for the Bipartisan Task Force for Responsible Fiscal Action Act of 2007 (S. S 2063), but has been convinced there is scant appetite in Congress for any such measures.

Posted by Craig Jennings, 10:19:25 AM

DAILY FISCAL POLICY REPORT -- May 13, 2008

Taxes -- Rangel Eyeing Extender Offsets: House Ways and Means chair Rep. Charles B. Rangel (D-NY) is sifting through potential revenue-raisers to pay for a set of tax credit and deduction extensions expected to hit the House floor by or immediately after Memorial Day. A prime contender: offshore nonqualified deferred compensation, which would defray $23 billion. Less likely: "The carried interest is dead on arrival. Schumer killed the whole thing. I expect that he would do the same in the Senate — in a quiet way, behind the scenes — on Rangel's 'payfor,'" a lobbyist said.

War Supplemental -- House Looking for GI Bill Offsets: To get the House Blue Dog coalition to back a war supplemental spending bill, Democratic leadership is mulling its options to offset a $52 billion GI Bill expansion. CongressDaily reports ($) that one plan would involve closing the carried interest loophole.

Budget -- Resolution at Last; Deal Sealed: Senate Budget Committee chair Kent Conrad (D-ND) announced yesterday that budget resolution negotiators had reached a deal last Friday, but its terms were still under seal under conferees can be named and meet. The domestic discretionary topline is close to $1.012 trillion.

Tax Expenditures -- JCT Releases "Reconsideration": Yesterday, the Joint Committee on Taxation released an examination of federal tax expenditures -- $1 trillion in annual spending that goes relatively unnoticed, because it is comprised of tax credits, deductions, exemptions, exclusions, deferrals, and rate reductions not considered in the appropriations process. JCT's "Reconsideration".

Posted by Dana Chasin, 09:59:16 AM

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