The Inmates Running the House of Representatives Asylum
The party of ‘fiscal responsibility’ is at the center of this week’s news and commentary. There’s nothing responsible about what Republicans in the House of Representatives are planning, except that the American public would likely hold them responsible for the fiscal chaos that would emerge.
Two items are front and center in these proposals that most sane people know have no chance of coming to pass. I’m writing about them today to help readers understand the (lack of) thinking involved here and to give a preview of the non-Biden ‘scandal’ headlines we can expect to see in the next two years.
First up, a side trip in the Biden Scandal generator Republicans call the House Oversight Committee. As part of selling his soul to the Congressional nut caucus, Speaker McCarthy promised to put Reps. Marjorie Taylor Greene, Lauren Boebert, Scott Perry and Paul Gosar on the House Oversight Committee.
The early reviews are in, and Facts First activist David Brock should get a prize for this observation:
“This collective group has the credibility of a sentient My Pillow commercial,” Brock said.
Now on to follow the money, GOP style.
The US has, according to Treasury Secretary Janel Yelkin, reached its debt limit, an imaginary line in the sand originally drawn to keep President Woodrow Wilson from hocking the family jewels to support European allies in World War 1.
There are considerable differences in opinion about when the government will stop paying its bills (the debt limit refers to money already authorized by congress). The Treasury Department can play “presto change-o” for a while with various pots of set aside money, and cash flow from things like people paying taxes will likely tide us over until summer.
While it’s true the debt ceiling is an arbitrary limit, it’s also true that the financial engines of capitalism worldwide depend on the good credit rating of the US government. There is a lot of conjecture saying markets worldwide will collapse; even China –our biggest economic competitor– doesn’t want to test this theory.
The financial geniuses in the GOP are hoping they can get bipartisan agreement on a temporary measure, allowing interest on monies borrowed by the government to continue to be paid, and maybe a few other things.
There is no world in which this can happen. Arguing about who gets paid and when unleashes a horde of special interest influencers, the same people funding the political action committees members of both parties depend on to get elected.
I’m not saying default can’t happen; the House GOP effectively has no leader since Kevin McCarthy has negotiated away all his power in order to claim a title. Somebody has to be gathering up votes to do something, anything and since any one member of Congress can pull the rug out from under the Speaker, it’s political suicide for him to whip votes.
As I’ve said in the past, the pain reactionaries promise or cause is the point. They have no interest in governing, as their whack-a-doodle tax plan making its way to the floor proves.
Meet the “Fair Tax,” a proposal to wipe the slate clean of all federal taxes (income, payroll, gift, corporate, and inheritance taxes), shutter the IRS and replace it with a 30% national sales tax. State governments would collect the taxes and remit them to the federal government.
Part of the sales pitch for this proposed legislation involves a promise built upon the lie about the IRS hiring 87,000 agents. Another part is the promises of a direct deposit “prebate” for lower income citizens.
Via Mother Jones:
Prebates would necessitate something the right loves to hate. Here’s one aspect of the “fair tax” that should really give pause to small-government conservatives: The Bush panel concluded in its 2005 report that cash payments “designed to reduce the burden of a retail sales tax on lower-income and middle-income taxpayers…would represent a new entitlement program—by far the largest in American history.” The panel estimated these payments would cost (in November 2022 dollars) between $900 billion and $1.2 trillion annually, and would “make most American families dependent on monthly checks from the federal government for a substantial portion of their incomes.”
Speaker McCarthy agreed to fast track this idea as part of his wooing of the freedom cuckoo caucus members. It’s the latest version of the libertarian wet dream involving screwing the less wealthy by promising simplicity and funneling even more cash into the pockets of the ultra-wealthy.
Once you get into the mechanics of taxation, the flaws compound on each other. The Brookings Institutes estimates that the current rate of tax evasion (mostly by the uber-wealthy) is somewhere between 15 and 20%; given the historical inefficiencies of state sales tax collection systems (no two are the same) the rate of avoidance would be 35% in the Fait Tax plan.
Since business to business purchases wouldn’t be taxed, for instance, entrepreneurs can simply have the purchasing department order products for personal consumption. You might remember that the Trump companies have been convicted of a similar trick, while their owners remain untouched and bellow about conspiracies.
It’s possible to create a consumption tax with a progressive structure, but that’s not what’s on the table here. As Matt Yglesias notes, the inegalitarian implications of their proposal are a feature, not a bug.
The income tax system we currently use is built upon the foundations of the income tax process (later declared unconstitutional) passed by Republicans during the Civil War (later corrected by the 16th amendment).
Of course, the “States Rights” crowd loves the current GOP proposal, since without a tax enforcement agency it would be much easier for states to simply withhold payments as a protest against policies. It would take an opportunist like Florida’s Gov. DeSantis a New York minute to cut the flow, based on a demand for less “wokeness” in government.
Wait! It gets worse. The 30% plan also includes the provision that, unless the 16th amendment is repealed in seven years, the national sales tax would sunset, raising the possibility of actually defunding the federal government.
It’s a lose-lose proposition, as Jim Swift notes in Bulwark article:
The Fair Tax has never been popular in the Senate, having never garnered more than eight senators as cosponsors. (The Fair Tax Act of 1985, which had 11 cosponsors, was a different proposal entirely.) Assuming the Fair Tax has the votes in the House—a big, unwieldy assumption that could come crashing down at any moment—it will be dead on arrival in the Senate.
In light of all this, why promise a vote on such a loser? Going straight to the floor poses risks, given the slim GOP majority. It’s a lose-lose situation: Vote yes, and the House Republican Conference looks frivolous, to say nothing of the messaging gift they would give Democratic speechwriters in 2024 (“Republicans want to instate a 30-plus percent federal sales tax!”). Vote no, and invite primaries by far-right candidates who will accuse you of siding with Democrats when given a chance to abolish the IRS. There’s a reason Republicans have never brought any of the previous versions of the Fair Tax to a vote before.
This measure will not pass in this Congress, but it will be very interesting to see how various Republicans end up voting. Will they dare defy “the base?” Or will they pass the bill, hoping the Senate will let it die. As a matter of fact, this latter scenario is likely to end up being the fate of most of the far right’s fevered dreams.
Locally, we need to remember Rep. Darrel Issa’s votes, and quiz any Republican running for office that crosses our path about their stance on this half-assed proposal.
Email me at WritetoDougPorter@Gmail.com