Four Years Since Takeover of Financial Services

Monday, July 21st, 2014 by and is filed under Blog, Economy

In many respects, Dodd-Frank is the forgotten leviathan of the Obama administration – one that is dragging down the economy just as much as Obamacare, even though it hasn’t received the same scrutiny or provoked as much outrage.

The 2300-page bill, which turns four years old today, contains hundreds of new mandates and rules that distort the credit, financial, and housing markets, impose onerous and time-consuming burdens on small businesses, and limit consumer choice.  The regulations are so complex that many of them have not been formally drafted, causing thousands of businesses to halt their expansions and new hiring until the government provides them with some clarity.  It is nothing short of a wholesale takeover of the financial services and banking industries, much like Obamacare is to the healthcare industry.  As House Financial Services Committee Chairman Jeb Hensarling (R-TX) recently said, Dodd-Frank is “more appropriate for a Soviet-style command-and-control economy than a system of free enterprise.”

There are a number of serious problems with this bill.  Here are some of the worst aspects:

  • Too Big to Fail: - Title I of the bill created a new permanent bailout regime, the Financial Stability Oversight Council.  This institution would vitiate the bankruptcy process and allow the government to take over any entity that it deems vital to the rest of the economy.  In other words, it consummates “too big to fail” as a permanent policy, the very policy this bill was supposed to fix.
  • Volcker Rule – The Volcker rule ostensibly prohibits regular banks from investing their own money by engaging in bond trading.  It also prohibits banks from holding more than a 3% stake in private equity funds.  Just this part of the bill is 300 pages long!  It will take hundreds of new Keynesian jobs just to enforce, interpret, and comply with the rule.
  • CFPB – The bill created the Consumer Financial Protection Bureau (CFBP), which will limit the choices of consumers in financial markets, making it harder and more expensive to obtain credit.  This unaccountable agency will operate autonomously within the Federal Reserve and will not be subjected to congressional appropriations or oversight.  It is essentially the “death panel” of the financial sector, with control over bank accounts, mortgages, and student loans.
  • Derivatives Trades – Some key restrictions on derivatives trades only apply to banks with assets above $10 billion.  This has created a perverse incentive for banks to limit their expansion, and by extension, creation of jobs, for the purpose of staying below the limit.
  • Debit Card Fees – The new limitations on bank charges for processing debit card submissions from retailers has caused an increase in user fees for customers, most notably, for opening checking accounts.  It has also prompted banks to eliminate debit card rewards programs.
  • Freddie/Fannie – Dodd-Frank did nothing to privatize or even reform these two behemoths that are responsible for the housing crisis and the recession.

It’s no wonder such an odious law was conceived by two of the most corrupt members of Congress – Barney Frank and Chris Dodd – who were largely responsible for the housing crisis and ensuing freezing of the credit market.  Sadly, three Republicans joined with Democrats to give opponents of free enterprise 60 votes in the Senate to pass the bill.  And with energy to repeal even Obamacare is gradually waning, it’s becoming harder to rally Republicans against this un-American law.

While we are all focused on the more imminent threats of open borders, Obamacare, and our weak national defense, it’s important to remember that Dodd-Frank, rather than preventing a financial crisis, will serve as the foundation for the next financial meltdown.  Any Republican candidate for president must unequivocally pursue full repeal of Dodd-Frank.

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Our Plan for Stopping the Man-Made Problem at Southern Border

Monday, July 21st, 2014 by and is filed under Blog, Immigration

We are a country that has successfully fought two world wars and can deploy our military assets anywhere in the world within hours. We are the country that landed human beings on the moon. Yet, the political class would have you believe that we are helpless in stopping an endless flow of illegal immigrants across our border. They would have you believe that we are the ones on defense; that we must accommodate the needs of these people and their robust legal and political support structure lest we face reprisal.

It’s time we turn the tables and reassert control over our own borders, sovereignty, and destiny. This is not a natural disaster; it has been encouraged and facilitated by powerful forces within our country and the countries immediately to the south of us.

Instead of only treating the symptoms of the problem with legislative minutia concerning a human trafficking law–a law that has a mere perfunctory relevance to the border surge–Republicans must lay out a vision to stop the cause of the problem–the lawlessness. The time has come to reverse the climate that has encouraged and incentivized this behavior. Here are the actions that can easily work in changing the climate:

Read more at Breitbart:

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Republicans Must Avoid Shiny Objects in Immigration Debate

Wednesday, July 16th, 2014 by and is filed under Blog, Immigration

Republicans in Washington have been stymied by the President’s impertinence towards the rule of law and disrespect for the legislative authority of Congress.  The only tool that Congress can utilize against an imperial presidency is the power of the purse, yet Republicans have been reluctant to engage in such brinkmanship.  But now the President has given Republicans their best point of leverage yet – he is asking for new funding to clean up the immigration mess created by his lawless amnesties.  It’s time Republicans embrace the leverage instead of squandering it.

In June 2011, the Obama administration sent a memo (“Morton Memos”) to DHS law enforcement ostensibly suspending deportations against those illegals who would qualify for the Dream Act – a law the never passed Congress.  This policy, which was eventually formalized into the Deferred Action for Childhood Arrivals (DACA) program, was fully institutionalized on June 15, 2012.

It’s bad enough for a president to violate even minor laws and serve as his own ad hoc law-making body.  But it is downright dangerous for a president to shred our immigration laws, which are so fundamental to preserving our sovereignty and protecting our national security.  Obama was clearly in violation of federal law (8 U.S.C. § 1225) which requires ICE to place aliens who are not “clearly and beyond a doubt entitled to be admitted” to the United States into removal proceedings.  In its place, he unilaterally created his own law, yet most Republicans huffed and puffed but did not fight back with the power of the purse.

Fast-forward two years and we are now witnessing the failure of such lawlessness in spectacular fashion. Hundreds of thousands of people from Central America are chomping at the bit to take advantage of the new open borders policy while the going is good.  Now Obama is forced to ask Congress for more money to “clean up” his mess.  It goes without saying that the first demand of all Republicans should be the suspension of DACA and the repeal of Obama other lawless acts – the very impetus for this request for funding.

Yet many Republicans seem content to ignore DACA and focus on shiny objects, some of which actually help Obama with his deceptive messaging.  Senator John Cornyn has introduced a bill that includes vague border security language similar to the Senate Gang of 8 bill. He also proposed changes to the much-hyped 2008 human trafficking law (the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (TVPRA)), which supposedly requires ICE to hand-over unaccompanied child aliens from non-contiguous countries to HHS instead of deporting them.

Republicans must learn that this law is a complete shiny object.

Not only is the 2008 law not the impetus for causing this wave of illegal immigration, for the most part it is not an impediment to sending them back.  The administration has failed to provide ample data of those already apprehended, but as the Center for Immigration Studies notes, it is unclear how many of the illegals fit the description of an “Unaccompanied Alien Child.”  A large percentage of them are adults, many of the children are accompanied by an adult, and even among those who are unaccompanied many of them have relatives here.

Even among those who are legitimately designated as UACs, only those who have been “severely” trafficked are eligible for the protected status that precludes expedited removal.  As the CIS report notes, there is scant evidence that a large amount of the recent arrivals have been severely trafficked as much as they were consensually smuggled.  Finally, even if the two aforementioned factors apply, the 2008 law exempts “exceptional circumstances.”  It’s hard to imagine waves of tens of thousands of illegals fitting into the spiriting of the original bill and not qualifying as an extraordinary circumstance.  Moreover, as the Heritage Foundation observed, Section 235 of the Immigration and Nationality Act (INA)  explicitly grants the administration the authority to deport anyone who has not been paroled or in the country for two years.

Hence, the 2008 trafficking law is nothing but a distraction tossed out by the White House.  Any attempt by Republicans to make this the main issue will only serve to buttress Obama’s attempt to distract from his man-made crisis.  They should demand a repeal of DACA and the dozens of other lawless acts, as laid out by Senator Sessions.  Not only has Obama made no attempt to restore the laws he’s already abrogated, he has promised to grant administrative amnesty to 5-6 million more illegal aliens.

Now is not the time to focus on shiny objects and distractions.  Now is the time to let Obama know that the days of lawlessness are over.

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Madison Project: GOP Should Reject Obama’s Supplemental, Focus on Stopping Lawlessness

Wednesday, July 16th, 2014 by and is filed under Blog, Press

For Immediate Release:

July 16, 2014

press@madisonproject.com

  

Madison Project: GOP Should Reject Obama’s Supplemental, Focus on Stopping Lawlessness

Fort Worth, Texas – The Madison Project PAC made the following statement Wednesday in response to President Obama’s request for supplemental funding to address the illegal immigrant border crisis that he was instrumental in creating:

“Giving this president new funding to deal with the man-made border crisis is akin to handing more fuel to an arsonist,” said Daniel Horowitz of the Madison Project.  “Many of us warned throughout the immigration debate last year that the public commitment to amnesty and consistent abrogation of our laws would invite in a new wave of illegal immigration.  Now that the grim predictions have come true, it is time for Republicans to focus on the source of the problem, which is Obama’s lawlessness.

“We fully support Senator Jeff Sessions (R-AL), in his call for the president to dismantle his illegal DACA amnesty program before any new funds are appropriated for new immigration enforcement. There is no reason to send more money down a rabbit hole for new enforcement measures when existing laws are being violated, especially when much of the funding will be used for processing the illegal immigrants instead of repatriating them to their home countries.

“Furthermore, Republicans should reject a plan being floated that would provide the president $3.7 billion in  supplemental funding in return for modification of the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008 (TVPRA). While this law does need to be changed, its current form does not prevent the president from protecting our sovereignty, as noted by the Heritage Foundation. The 2008 law certainly has nothing to do with the source of the problem, and is nothing more than a shiny object meant to distract Republicans from the real crux of the problem.

“Republicans should focus on existing appropriations through the annual DHS and HHS spending bills and use the power of the purse to restore the rule of law in a budget-neutral way instead of giving Obama new funding with no accountability.”

 

The Madison Project supports and raises money for conservative candidates that have demonstrated a commitment to full-spectrum conservatism. The Madison Project website can be found at http://madisonproject.com/

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CBO Report Shows Why National Debt is not Just a Number

Tuesday, July 15th, 2014 by and is filed under Blog, Debt, Economy

Earlier today, the Congressional Budget Office released its updated long-term budget projection, and there is not a lot of black ink in that report.  CBO estimates that, despite receiving record revenue gobbled up from the private economy, the Treasury will continue to run enormous deficits over the next 25 years.  By 2039, the public share of the debt is projected to rise from 74% of GDP to 106%.

In light of this new report, it’s worthwhile to go back a tally Obama’s debt tab from the past 5 years and explore what it means for our future.

At present, the gross federal debt stands at $17.589 trillion, which is more than 103% of our GDP.  That is an increase of almost $7 trillion since President Obama was inaugurated five and a half years ago.  To put that in perspective, it took from the presidency of George Washington until 2004 to accumulate $7 trillion in debt.  Concurrently, Obama accumulated roughly $2.9 trillion in foreign-held debt over a little more than 5 years – from $3.071 trillion to $5.96 trillion.

More importantly, roughly 90%, or $6.2 trillion, of that $7 trillion increase is comprised of the public debt, not the so-called intra-governmental debt from Social Security (the money we ‘owe ourselves’).  It took from 1789 until the final months of the Bush administration for us to accumulate $6.2 trillion in public debt, which now stands at $12.6 trillion, roughly 74% of the economy.  It is this number that is projected to rise to 106% over the next 25 years, according to the CBO.  And remember, this president still has another two and half years to radically transform America.

So what does all of this mean?  Who cares about some banal numbers on a federal balance sheet?

Contrary to the perception of many policy-makers, the national debt is not some abstract problem that will only affect future generations once investors no longer trust the security of federal treasures.  As CBO explains (page 10), this is an immediate and near-term problem:

  • The large amount of federal borrowing would draw money away from private investment in productive capital in the long term, because the portion of people’s savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income than would otherwise be the case, all else being equal. (Despite those reductions, the continued growth of productivity would make output and income per person, adjusted for inflation, higher in the future than they are now.)

  • Federal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt.

  • The large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, those challenges would tend to have larger negative effects on the economy and on people’s well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis.

Much like over-burdensome regulations, high levels of debt serve as a hidden tax on the economy by sucking out private investments through an inefficient allocation of capital diverted towards growing dependency and perpetuating political careers.  Also, the relatively-low annual payments for interest on the debt, hovering around $230 billion a year, are only a temporary reprieve due to historically low interest rates.  According to Investors’ Business Daily, “if Washington had to pay the average interest now that it paid in 2000 (6.4%), it would be paying $500 billion more each year to stay afloat.”

Sadly, Americans are used to navigating opportunities and challenges based upon instant gratification or imminent danger.  Warning voters about the threat of our national debt to the future of their grandchildren is not enough.  Conservatives need to make the case that the current level of debt is a mitigating factor to current economic growth and that it will continue to diminish their wages and job opportunities.

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Madison Project PAC Endorses Jody Hice in Georgia’s 10th Congressional District

Tuesday, July 15th, 2014 by and is filed under Blog, Elections, Press

For Immediate Release:

July 15, 2014

press@madisonproject.com

 

Madison Project PAC Endorses
Jody Hice in Georgia’s 10th Congressional District

Fort Worth, TX – The Madison Project PAC announced today that it is supporting Jody Hice for Congress in Georgia’s 10th district.

“Jody Hice is the only candidate in this race who will put his conservative values ahead of the priorities of the party elite in Washington, much like Rep. Paul Broun has done during his tenure,” said Drew Ryun of The Madison Project.  “Hice’s entry into politics is firmly rooted in his Christian upbringing and constitutional values, not a desire to rub shoulders with the permanent political class.  He will serve as a bulwark against Obama’s agenda of open borders, perennial debt, crushing regulations, and a weak national defense.  Jody has energized fiscal and social conservatives in his district.  At a time when our religious liberties are under an unprecedented assault, Hice brings with him an impressive record of defending those rights.

“His opponent, who has already endorsed automatic debt ceiling increases, is left with nothing but Thad Cochran’s strategy of enticing Democrats to vote in the GOP primary.  We will do everything we can to help empower Republican voters in the final week to overcome the entrenched politicians.”

The Madison Project supports and raises money for conservative candidates that have demonstrated a commitment to full-spectrum conservatism. The Madison Project website can be found at http://madisonproject.com/

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This Week in Washington

Monday, July 14th, 2014 by and is filed under Blog, Immigration

As the clock winds down to the August summer recess, both houses of Congress will begin to heat up and quicken their pace of “must-pass” legislation.  As always, conservatives must be careful for last-minute tricks and new spending bills.  Moreover, we must continue to go on offense with the immigration issue and demand that no new money is spent until this president begins to reinstate our laws and protect our sovereignty.

Immigration

Last week, President Obama sent Congress a request for $3.7 billion in supplemental appropriations to deal with the surge of illegal immigration, which was completely engendered by his open border policies.  Instead of using existing funds to follow the laws already on the books, Obama is asking for new funding, which will largely go towards “processing” the illegals, not deporting them.  A whopping $1.8 billion will go to HHS in order to care for the unaccompanied minors.  Only a small percentage will go towards enforcement efforts.

There are signs that Republicans are already going to capitulate to Obama in return for a shiny object.  Conservatives must be clear that this is not a funding problem, rather a policy problem caused by years’ worth of public incentives inviting these people in through lawlessness.

House Republicans must refuse to pass any new funding unless and until Obama repeals his DACA administrative amnesty, restores the 287(g) state-federal immigration enforcement program, and generally resumes deportations.  Any conditions attached to appropriations should be done through the existing DHS appropriations bill, not a new funding bill.

The main concern this week is that Republicans will agree to pass the supplemental bill in return for the shiny object of repealing 2008 Trafficking Victims Protection Reauthorization Act, or TVPRA, which proscribes that children from Central American be processed instead of deported like their Mexican counterparts (because Mexico is geographically contiguous).  This would be a huge mistake for a number of reasons.  First, it buttresses the false notion that the 2008 law is responsible for the crisis, whereas we all know that Obama’s lawlessness and the calls for amnesty are at fault.  Second, the law only governs victims of severe forms of human trafficking, which does not aptly describe the situation of most UACs.  Finally, repeal of this law would only remove an excuse, but it would not compel Obama to deport them.

The other concern is that Republicans would offer Congressman Michael McCaul’s (R–TX) “border security bill,” H.R. 1417, in return for passing the supplemental funding bill.  McCaul’s bill is deeply flawed because it merely offers vague metrics for determining whether the border is secure, not mandating that the administration build the fence, cut off magnets, and expedite deportations.

Conservatives should demand that House leadership bring up the FY 2015 DHS spending bill, and condition all existing funding to restoration of our laws and sovereignty.

Highway Bill -

On Tuesday, the House will begin consideration of its stop-gap highway bill to continue funding for highway projects past the supposed August 1 deadline, when Department of Transportation officials say we will run out of funds for states.

The House proposal, HR 5021, sponsored by Rep. Dave Camp (R-MI), would plug the shortfall in the HTF through May 2015 by using a combination of notional and superfluous offsets that have been trotted out as an accounting gimmick for many reauthorization bills in recent years.  The projected $10.9 billion cost would be “offset” by extending custom fees for another year in 2024 – 10 years from now.  Additionally, the bill would “save money” by extending a “pension smoothing” provision for taxpayer-backed pension insurance for another few years.

Needless to say, these offsets are notional at best, and even if we ever actualize the savings, it will be over the course of 10 years to pay for new spending over the next 10 months.  It would be one thing for conservatives to sign onto this proposal so that we can work on crafting a long-term bill returning transportation authority to the states.  But it is clear that this short-term bill full of budget gimmicks and no structural changes will bid time for a long-term bill full of budget gimmicks and no policy changes.  As such, there is no reason conservatives should vote for this bill.

Terrorism Risk Insurance Act (TRIA) -

In the aftermath, of the 9/11 terrorist attacks, the feeling of uncertainty with regard to the risk of terrorism left the American economy flummoxed with how to assess the future risk.  In what was considered a useful temporary response, the federal government created TRIA, which backed a number of insurance plans by providers of insurance from terrorist attacks.  However, more than a decade later, the industry is thriving and most corporations have bought into some sort of insurance plan to protect from the costs of a terrorist attack.

Unfortunately, overwhelming bipartisan majorities in both houses of congress are prepared to reauthorize the program this week (S. 2244, HR 4871).  The senate bill actually expands the threshold for federal assistance.  We have an opportunity to get the federal government out of yet another insurance scheme before this program becomes immutable, much like crop and flood insurance.  There are often temporary catastrophic circumstances in which there is a role for the federal government to play in preserving the market place, the problem is that they never know when to shut the spigot off, especially in the face of inveterate rent-seekers in government.  It will be very telling to watch the roll call votes in the House and Senate to see which members succumb to the demagoguery behind the mellifluous-sounding name of “terrorist insurance.”

Financial Services Appropriations Bill -

Continuing on the annual appropriations process, the House will consider their 7th spending bill this year – the FY 2015 Financial Services and General Government Appropriations Act.  This bill funds the Treasury Department, including the IRS, as well as the Judiciary branch and the Executive Office of the Presidency.  Like every other appropriations bill, this one will contain some conservative spending cut amendments, which we will tally at the end of the week.

This is actually a relatively good bill.  It defunds Obamacare as it relates to the IRS’s ability to enforce the law. It makes drastic reforms to Dodd-Frank and it cuts the IRS’s budget.  The bill also conditions funding for the White House to his commitment not to abrogate federal laws with executive orders.  The problem is that Republicans are just doing this for show and have no intention of standing behind any of the core policy changes in this bill when the real budget battle commences in September.

Oped: U.S. Shouldn’t Give $500 Million To Palestinian Terrorists

Sunday, July 13th, 2014 by and is filed under Blog, Foreign Policy

Here is our latest op-ed advocating for suspension of all foreign aid to the Palestinians.  Read the full piece at Investor’s Business Daily.

Now that we live in a post-constitutional era, there will always be sharp political debates over the role of the federal government and what we choose to fund with taxpayer dollars.

But can’t we all agree that there is no benefit to sending $500 million to the Palestinian Authority? What national interests does it serve for us to fund ruthless terrorists?

While aid to the PA should have been cut off years ago, the recent unity pact with Hamas, which is responsible for murdering three Israeli teens, should serve as the last straw even for the most naive foreign service workers at the State Department.

Under current law, given that Hamas is designated as an official terror group, they should immediately suspend aid. However, inasmuch as this administration will never follow the law, Congress should move directly to cut off aid.

According to the Congressional Research Service, we have sent roughly $5 billion to the Palestinian government since the mid 1990s. Our annual aid has fluctuated a bit, but has hovered around $500 million per year.

Moreover, at roughly $275 million a year, the U.S. is the largest donor to the United Nations Relief and Works Agency, a multinational group that has long harbored Palestinian terrorists under the guise of humanitarian aid.

It’s time for Congress to stop playing the Palestinian game. The notion that Mahmoud Abbas and his Fatah gang are any better than Hamas has always been absurd. Just last week, Israel National News reported that Fatah has declared full solidarity with Hamas and Islamic Jihad by declaring the Palestinian Authority and Hamas share “one goal.”

A post on the official Facebook page of Abbas’ Fatah faction showed a picture of terrorists in the military wings of Fatah, Hamas and Islamic Jihad, featuring the words “brothers-in-arms: one G-d, one homeland, one enemy, one goal.”

Hence, the liberal foreign policy establishment can no longer attempt to decipher between uniformed terrorists and “suit” terrorists.

Thankfully, a number of rank-and-file Republicans have already taken the initiative to cut off aid. Reps. Trent Franks, R-Ariz., and Michele Bachmann, R-Minn., have introduced a resolution to bar all aid to the Palestinians under any circumstances.

Read More At Investor’s Business Daily
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ACLU’s Absurd Lawsuits Show Need to Shelve Amnesty

Thursday, July 10th, 2014 by and is filed under Blog, Immigration

When it comes to intellectual and moral dyslexia, the ACLU never disappoints our expectations of their absurdity.  Yesterday, the ACLU and the American Immigration Council filed a class-action lawsuit on behalf of some of the recent illegal immigrants accusing the federal government of denying them legal counsel.  They are trying to use the courts to compel the Justice Department to providing the illegal children with taxpayer-funded legal services.

The irony of this lawsuit is that the Justice Department is indeed providing taxpayer-provided legal services to these illegals – and it is against the law!  Last month, Eric Holder announced that the Justice Department would be providing young illegal entering deportation proceedings with 100 lawyers and paralegals through the Corporation for National and Community Service.  But as the Heritage Foundation has already noted, Section 1229a(b)(4)(A) of the Immigration and Nationality Act explicitly bars legal services to illegal aliens that are provided at government expense.

As maddening as this ACLU lawsuit is, conservatives should let this serve as an ominous warning against cutting a deal with Democrats who claim they support enforcement first.

The notion that we are going to grant amnesty once again before securing our borders is so absurd that even the most militant followers of this dogma are forced to outwardly reject it.  Even Senator John McCain and Lindsey Graham are now touting the importance of doing enforcement first.  But as we’ve painfully learned over the past few years, their version of “enforcement first” means passing an amnesty bill that promises enforcement before legalization.

At its heart, our border crisis is not a legislative problem, it is an executive problem.  We have had successive administrations, culminating with the current malfeasant president, who have refused to follow the laws on the books.  Therefore, any promises to secure the border without actually waiting to see if those new laws are implemented, will only lead to a perennial cycle of amnesty and open borders.

But there is one more important angle to the order of operations – even to the extent that one can think amnesty is ever a good idea.  Not only do we need an administration that actually implements the laws on the books, we need to wait a number of years thereafter to even consider any legalization.

Why?

We cannot forget the most powerful branch of government – the judiciary.

Even if we had an administration that preserved our sovereignty and implemented the said enforcement measures, we will still have to contend with the courts.  The illegal immigration lobby has unlimited resources and access to truculent pro-bono lawyers.  They will litigate every aspect of enforcement; from workplace enforcement and visa tracking to reforms to our welfare system and birthright citizenship status.  They will even challenge construction of a border fence on environmental grounds, and have already done so in the past.

Sadly, judges all over the country have already thrown out enforcement measures across the country.  Hence, by granting amnesty before these laws are given time to succeed in court, we run the risk of repeating the mistakes of the past.

The alacrity of the ACLU to create chaos and encourage lawlessness is just one more reason why we need to bury any discussion of amnesty for a very long time.

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New Highway Stop-Gap Bill a Consummate Washington Budget Gimmick

Wednesday, July 9th, 2014 by and is filed under Blog, Debt, Economy

After years of controlling most of our transportation policy from Washington, there is no longer enough money in the Highway Trust Fund (HTF), to cover the cost of construction projects for the remainder of the year.  Naturally, instead of looking for policy changes to solve the problem, such as returning transportation authority to the states, repealing Davis-Bacon wage mandates, and cutting mass transit funding, the politicians in both parties are reverting to their comfort zone.  They are doubling down on our failed federal transportation system by either proposing new taxes or increasing spending to cover the projected $16 billion annual shortfall in the trust fund.

With the August 1st deadline looming, when the DOT is expected to cut back on federal funding for projects, the House and Senate are now working on two short-term patches.  Short-term fixes would be palpable if they were used to make structural policy changes in the long-run.  However, as is the case with most reauthorizations, both parties are looking for immediate notional spending offsets so they can plan a long-term package that either increases taxes or spending on a failed system.

The House proposal, HR 5021, sponsored by Rep. Dave Camp (R-MI), would plug the shortfall in the HTF through May 2015 by using a combination of notional and superfluous offsets that have been trotted out as an accounting gimmick for many reauthorization bills in recent years.  The projected $10.9 billion cost would be “offset” by extending custom fees for another year in 2024 – 10 years from now.  Additionally, the bill would “save money” by extending a “pension smoothing” provision for taxpayer-backed pension insurance for another few years.

The pension smoothing provision is one of the most laughable budget gimmicks, yet it has been trotted out as a savior every time Congress wants to increase spending.  This plan allows corporations to cut the level of payments into the retirement funds backed by the taxpayer-funded Pension Benefit Guaranty Corporation (PBGC).  By allowing companies to contribute less to pensions, they are entitled to less tax deductions, and in turn, incur a higher tax liability.  That tortured labyrinth of projected new revenue, estimated at $6.4 billion over 10 years, is what will be used to offset the new highway spending.

Not only is this intangible 10-year offset for a 10-month expenditure reflective of the most absurd budget tricks in Washington – it is also bad policy.

Typically, when interest rates decline to the levels we have seen in recent years, companies must contribute more to their pension funds to ensure that the principle compounds enough for them to meet their overall obligation to retirees.  If we lower the threshold for minimum contributions, taxpayers will likely be on the hook to bail out underfunded pensions in the coming years.

Alternatively, if companies are able to fill in the pension gaps in the coming years to compensate for the short-term underpayments, it will create a rubber-band effect on federal revenue.  They will be entitled to increases in tax deduction commensurate with their added pension contributions, thereby voiding out the potential revenue increase being used as an offset in this bill.  Garbage in, garbage out.

If Congress is committed to kicking the can down the road with a short-term extension, they should just be honest with the taxpayers and drop the phony offsets from the bill.

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