In Name Only

Yesterday the Senate on a 51-50 vote (with Kamala Harris breaking the 50-50 tie) passed the so-called "Inflation Reduction Act". All 50 Democrats voted for the bill. All 50 Republicans voted against it.

The Democrats were pushing so hard that in the Senate they adopted a "Don't Ask, Don't Tell" policy on Covid over the last week in case a positive test in their ranks might prevent a member from voting.

Source: https://nypost.com/2022/08/05/senate-dems-skipping-covid-testing-to-push-spending-bill-vote-report/

Senate Democrats are embracing a “Don’t Test, Don’t Tell” policy this weekend as they try to ram a $764 billion spending bill through the 50-50 chamber — knowing that even one COVID-19 positive could blow up their plans.

“They’re not going to delay it if a member has gotten COVID,” a senior Senate aide told Puck News. “Counterparts are saying they’re not going to test anymore. It’s not an official mandate but we all know we’re not letting COVID get in the way. The deal is happening. Less testing, just wear masks and get it done.” 

The bill moves to the House this week where the Democrats hold a slim majority.

In case you think the bill has anything to do with inflation, you have been watching too much news on MSNBC or CNN or following the wrong Facebook friends for public policy guidance.

If you look closely at what is in the "Inflation Reduction Act" you will see that almost every provision was also a part of the proposed "Green New Deal" previously championed by Democrats or Biden's "Build Back Better" bill that passed the House last November but failed to gain approval in the Senate.

Rather than title this legislation "Build Back Somewhat Better" the Democrats just slapped on something that matches voter's concerns right now---INFLATION.

Of course, there is nothing in the bill that will actually reduce inflation.

The legislation will further increase deficit spending.

It doesn't direct the Federal Reserve to stop printing money.

It doesn't direct the Federal Reserve to reduce its balance sheet that now holds more than $8 trillion in debt securities.

It doesn't do anything to increase oil and gas supplies or lower gasoline prices.

It doesn't do anything to secure our food supplies or improve the supply chain.

It doesn't reduce taxes---it actually increases them.

This legislation is principally about providing all sorts of government subsidies--- from the purchase of electric vehicles, solar panels and the like to providing more subsidies for Obamacare plans.

Why are subsidies necessary for green energy initiatives or health care?

It is due to the fact that neither are affordable in the consumer marketplace today.

The average cost of family healthcare coverage is 3 times more expensive today than it was when Obamacare was passed on the promise that it was going to reduce healthcare costs.

Do you remember this campaign pledge by Barack Obama?

Source: https://www.politifact.com/truth-o-meter/promises/obameter/promise/521/cut-cost-typical-familys-health-insurance-premium-/

Electric cars and solar panel systems are generally too expensive today to make economic sense for most people. 

The argument is that the government subsidies are necessary to make the transition away from fossil fuels.

However, did the government subsidize automobiles to transition away from horses at the beginning of the 20th Century?

The transition occurred naturally when it made economic sense.

A big talking point of Democrats on the rationale for the legislation is that it will allow the United States to reduce carbon emissions by 40% below 2005 levels by the end of the decade.

However, the United States is already on track to reduce carbon emissions  by 27% by 2030 without this bill.

You have to wonder whether all the economic dislocation, disruptions and tax increases make sense when we are entering a recession. 

The Democrats claim that the legislation will reduce the deficit.

However, if there is any deficit reduction it only takes place in year 2027 and later. Federal budget estimates five year out are not very reliable. That is especially true when a subsequent Congress can simply change the law again.

A big portion of the deficit reduction is based on estimates that the IRS will take in $200 billion in additional revenue from increased IRS enforcement efforts.

This is going to be accomplished by hiring 87,000 new IRS agents and support personnel at a cost of over $80 billion.

To put that in context, in 2021 the IRS only had 78,661 full-time equivalent employees (FTE's) in conducting its work with an annual budget of $13.7 billion per year.

This legislation will double the size of the IRS. 

Credit: https://patriots.win/p/15JAOGrfLd/supersize-it/c/

Those employees oversee collections of $4.1 trillion today.

This means that the IRS currently spends just $1 dollar in costs for every $300 in revenues it collects.

This addition to the IRS workforce by the Democrats is estimated to bring in less than $3 in revenue for every $1 in additional cost according to the Congressional Budget Office estimates.

In other words, the payback on this increase is 99% less efficient than the IRS is right now at collecting revenue.

This is not surprising in that most of the revenue sources are already locked down pretty hard by the IRS as it is. 

There is little room to cheat by anyone who gets a W-2 for their wages or has their dividends and interest reported to the IRS on a 1099.

Large corporations are already under constant IRS audits.

When I was Corporate Director-Taxation for a Fortune 500 corporation we had two IRS agents permanently assigned to audit our returns. We were obligated to provide them spaces in our offices. They worked in our offices 40 hours per week and typically took three years to audit three years of returns. I had to generally service their document requests and other needs with two FTE's from my staff.

If the IRS is going to find additional revenue it is going to have to come from smaller businesses and sole proprietorships and subjecting hundreds of thousands of Americans (mostly at lower income levels) to IRS audits.

Here is one projection as to what that means.

Source: https://twitter.com/JacquiHeinrich/status/1555700945928929280

The only thing certain is that this expansion of the IRS will be intrusive, infuriating and incredibly inefficient.

To give you an idea of how large the IRS will be when they more than double their workforce consider this factoid.

It makes you wonder whether some of those new IRS employees might be better allocated to the Border Patrol right now.

Obama-era (and Trump) IRS Commissioner John Koskinen told The New York Times recently that he did not think that the IRS could effectively utilize $80 billion in new spending. He stated that $25 billion in additional spending was more realistic.

Source: https://twitter.com/johnkartch/status/1555963838528229377

The Democrats are going to throw three times the amount of money at the IRS that even its former commissioner admits is unlikely to be used efficiently?

This increase in employment at the IRS to increase compliance and enforcement makes even less sense when you consider the challenge in hiring that many people to work in these government jobs.

In its job descriptions for revenue agents the IRS requires a Bachelor's Degree in Accounting as a minimum requirement for the job.

The IRS wants to hire 87,000 agents and support personnel but there are only about 50,000 B.S. degrees awarded in Accounting each year in the United States.

How does this work without massively disrupting the private sector job market for accountants?

This is not even considering the fact that if the IRS is going to unleash 87,000 new employees intent on collecting more revenue and that the private sector is going to need to hire an army of accountants and lawyers to defend themselves.

I can confidently predict this bill is not going to do much to reduce inflation in the accounting job market.

I can also confidently predict that all of these so-called objectives in the bill will be found to be "in name only" when all said and done.

Inflation reduction will be in name only.

Deficit reduction will be in name only.

A meaningful reduction in carbon emissions will be in name only.

Any effects on so-called "climate change" will be in name only.

This is particularly true as if carbon emissions has anything to do with climate change, China is also  adept at doing things in name only.

China says they are fully committed to the Paris Accords in reducing carbon emissions but what they are actually doing says something else.

It is the same in Washington, D.C.

The name on it and the narrative used to promote it is always more important than the substance of what will be the end result when all is said and done.

And there will always be much more SAID...than done.