Friday, January 9, 2015

More on Congress failing small business

Mr. Victor Brown
Vice President, Minority Business and Small Business Development
Birmingham Business Alliance
Birmingham, AL

Dear Mr. Brown,

I am writing in follow up to my November 26th email to you, which email I posted at this link: Small business and money in politics.

I wish to call to the attention of the small business community the Wall Street Journal op/ed piece on December 26th  entitled "How Congress Bribes States to Give Up Power", by former United States Senator James Buckley.

This op/ed piece is reproduced below and deserves a full read by you. The op/ed piece says a lot about what I think is wrong with Congress and with our Federal government which Congress oversees.

Here are some questions that I think the op/ed piece should raise for your small business constituents:

First, what does the op/ed piece signify about the kind of environment that Congress creates for the conduct of small business in the United States.

I would particularly ask your small business constituents to think about how impaired and diverted Congress is in doing a "decent" job in what it legislates, such impairment and diversion resulting from lawmakers being dedicated to serving whatever will get and keep campaign contributions flowing to them that are needed for the lawmakers to win elections and stay in office.

Many donors get rewarded by the lawmakers for the campaign contributions the donors make, but at what cost and consequence for everyone else?

The op/ed piece does an excellent job of describing some of the cost and consequence.

After your small business constituents make their own determinations about that, those who agree things are wrong with Congress and the Federal government which Congress oversees, should next ask, "Can anything be done about this?"

On this question, note particularly the op/ed piece's reference to "the newly elected members of Congress becom[ing] contaminated by the prevailing congressional culture," and the warning:
Congressional freshmen should be warned, however, that if they accept this suggestion [for reform] they will be fiercely opposed by their senior colleagues who have found the creation and exploitation of lucrative grants-in-aid programs the surest way to scratch their constituents’ backs (think “entitlements”) and ensure their re-election.
Would you care to apply the preceding to Alabama 6th Congressional district's freshman Congressman Gary Palmer?

I have been applying the same for months to Mr. Palmer, and it has not been a pretty picture. See, e.g., what I said in July about Why Gary Palmer will be ineffective.

In short, on the question of "can anything be done about this," your small business constituents could be well justified in concluding, "no, we are stuck with a Congress that is a failure for us."

I hope you will pass this letter along to your small business constituents. I expect to be communicating with some of them directly about this.

Thank you very much.

Rob Shattuck

How Congress Bribes States to Give Up Power

It’s time to end the more than 1,100 grants-in-aid programs that spend one-sixth of the federal budget.

Before the newly elected members of Congress become contaminated by the prevailing congressional culture, they should consider a reform that would achieve a broader range of benefits than any other they might embrace: dismantling the more than 1,100 grants-in-aid programs that spend one-sixth of the federal budget on matters that are the exclusive business of state and local governments.
Congressional freshmen should be warned, however, that if they accept this suggestion they will be fiercely opposed by their senior colleagues who have found the creation and exploitation of lucrative grants-in-aid programs the surest way to scratch their constituents’ backs (think “entitlements”) and ensure their re-election. But that should add zest to the enterprise.
Those programs, which provide funding for Medicaid as well as everything from road and bridge construction to rural housing, job training and fighting childhood obesity—now touch virtually every activity in which state and local governments are engaged. Their direct cost has grown, according to the federal budget, to an estimated $640.8 billion in 2015 from $24.1 billion in 1970.
Their indirect costs, however, go far beyond those numbers both in terms of dollars wasted and the profound distortions they have brought about in how we govern ourselves. Because the grants come with detailed federal directives, they deprive state and local officials of the flexibility to meet their own responsibilities in the most effective ways, and undermine their citizens’ ability to ensure that their taxes will be used to meet their priorities rather than those of distant federal regulators. The irony is that the money the states and local governments receive from Washington is derived either from federal taxes paid by residents of the states or from the sale of bonds that their children will have to redeem.
Congress finds the authority to enact those programs in the Supreme Court’s interpretation of the Constitution’s general-welfare clause in Steward Machine Co. v. Davis (1937). More recently, in the court’s 2012 NFIB v. Sebelius decision upholding the Affordable Care Act’s individual mandate, Chief Justice John Roberts wrote that Congress may use federal funds to “induce the States to adopt policies that the Federal Government itself could not impose,” so long as participation by the states is voluntary. To put it another way, Congress is licensed to dabble in areas in which it is forbidden to act, which it does by bribing the states to adopt Congress’s approaches to problems that are the states’ exclusive responsibility.
It is impossible, in this article, to detail all the costs imposed by those programs, but here are some of the most egregious ones: They add layers of federal and state administrative expenses to the cost of the subsidized projects; distort state priorities by offering lucrative grants for purposes of often trivial importance; and undermine accountability because state officials bound by federal regulations can’t be held responsible for the costs and failures of the projects they administer.
Finally, and of prime importance, those programs have subverted the Constitution’s federalism, its division of federal and state responsibilities, that was intended to prevent a concentration of power in a central government that could threaten individual liberties.
The states are free to decline to participate in the programs, but that has proved very hard to do. Money from Washington is still regarded as “free,” and state officials are delighted to accept grants, strings and all, rather than raise the extra money that would be required to pay the full cost of the projects they freely undertake with federal subsidies. What makes declining grants particularly difficult is the fact that if a state does not participate in a program, its share of the money—derived in whole or part from its own taxpayers—will go elsewhere.
There is only one way to resolve the problems that have resulted from Congress’s addiction to grants-in-aid programs, and that is to terminate all of them. They must all go because none is free of the added costs described above. If any exception is made, members of Congress will be encouraged to launch a new wave of grants on the assurance that theirs will be exempt from the problems and costs that have plagued the existing ones, and it would take another generation to prove them wrong.
Yet because federal transfers now constitute about 30% of the states’ revenues, Congress cannot cut off the funds overnight. Therefore, it should terminate the programs by converting all the grants the states and localities are currently relying on into single, no-strings-attached block grants, one for each state, that would be phased out over six years. That would allow Congress and the states the time to adjust their respective tax codes to accommodate the successive reductions in the federal transfers.
If the newcomers to Congress embrace the reform, the timing could not be more propitious. Recent stories concerning the incompetence, and worse, at the IRS, the Veterans Health Administration, the Centers for Disease Control and Prevention, and other federal agencies have undermined the myth that Washington necessarily knows best. Once Americans have learned the true cost of those programs, they will know they have everything to gain from their termination both as citizens and taxpayers.
Mr. Buckley is a retired federal appellate judge and a former U.S. senator. He is the author of “Saving Congress From Itself” (Encounter Books, 2014).

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