Tom Coburn, the Oklahoma Senator, isn’t exactly my ideological soul mate. But there’s at least one thing we agree on: having the government subsidize people who don’t need to be subsidized isn’t kosher.
From the report he issued today:
From tax write-offs for gambling losses, vacation homes, and luxury yachts to subsidies for their ranches and estates, the government is subsidizing the lifestyles of the rich and famous. Multimillionaires are even receiving government checks for not working. This welfare for the well-off – costing billions of dollars a year – is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and IOUs to be paid off by future generations.
This is not an accidental loophole in the law. To the contrary, this reverse Robin Hood style of wealth redistribution is an intentional effort to get all Americans bought into a system where everyone appears to benefit.
[...] The government’s social safety net, which has long existed to catch those who are down and help them get back up, is now being used as a hammock by some millionaires, some who are paying less taxes than average middle class families. Comprehensive information on the full range of government benefits enjoyed by millionaires has never been collected previously.
This report provides the first such compilation. What it reveals is sheer Washington stupidity with government policies pampering the wealthy costing taxpayers billions of dollars every year.
These billions of dollars for millionaires include $74 million of unemployment checks, $316 million in farm subsidies, $89 million for preservation of ranches and estates, $9 billion of retirement checks, $75.6 million in residential energy tax credits, and $7.5 million to compensate for damages caused by emergencies to property that should have been insured. All and all, over $9.5 billion in government benefits have been paid to millionaires since 2003. Millionaires also borrowed $16 million in government backed education loans to attend college.
On average, each year, this report found that millionaires enjoy benefits from tax giveaways and federal grant programs totaling $30 billion. As a result, almost 1,500 millionaires paid no federal income tax in 2009.
Interestingly, this report comes a day after 60 Minutes informed the average American (including me) that it’s not illegal for members of Congress to use inside information to pad their wallets. 60 Minutes made mention of the Stop Trading on Congressional Knowledge Act, which first reached the floors of Congress in 2006 and hasn’t seen the light of day since. Govtrack.com says that the purpose of the bill is:
To prohibit securities and commodities trading based on nonpublic information relating to Congress, and to require additional reporting by Members and employees of Congress of securities transaction, and for other purposes.
The non-partisan Congressional Research Service summary of the bill:
Amends the Securities Exchange Act of 1934 and the Commodities Exchange Act to direct both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to prohibit purchase or sale of either securities or commodities for future delivery by a person in possession of material nonpublic information regarding pending or prospective legislative action if the information was obtained: (1) knowingly from a Member or employee of Congress; (2) by reason of being a Member or employee of Congress; and (3) other federal employees. Amends the Code of Official Conduct of the Rules of the House of Representatives to prohibit designated House personnel from disclosing material nonpublic information relating to any pending or prospective legislative action relating to either securities of a publicly-traded company or a commodity if such personnel has reason to believe that the information will be used to buy or sell the securities or commodity based on such information. Amends the Ethics in Government Act of 1978 to require formal disclosure of certain securities and commodities futures transactions to either the Clerk of the House of Representatives or the Secretary of the Senate. Amends the Lobbying Disclosure Act of 1995 to subject to its registration, reporting, and disclosure requirements, as well as requirements for identification of clients and covered legislative and executive officials, all political intelligence activities, contacts, firms, and consultants. Requires the Comptroller General to include political intelligence activities, contacts, firms, and consultants in its annual compliance audits and reports.
One of the self-serving politicans I mentioned in yesterday’s post is Representative Spencer Bachus, who, in 2008, was the ranking member of the House Financial Services Committee. According to Slate, the 60 Minutes report was based largely on a new book, Throw Them All Out, written by the conservative scholar/sometime Sarah Palin speechwriter Peter Schweizer.
Here’s a juicy tidbit from Schweizer’s book:
On the evening of September 18, at 7 p.m., Bachus received [a] private briefing for congressional leaders by Hank Paulson and Federal Reserve Bank Chairman Ben Bernanke about the current state of the economy. They sat around a long table in the office of Nancy Pelosi, then the Speaker of the House. These briefings were secretive. Often, cell phones and Blackberrys had to be surrendered outside the room to avoid leaks.
What Bachus and his colleagues heard behind closed doors was stunning. As Paulson recounts, “Ben [Bernanke] emphasized how the financial crisis could spill into the real economy. As stocks dropped perhaps a further 20 percent, General Motors would go bankrupt, and unemployment would rise . . . if we did nothing.” The members of Congress around the table were, in Paulson’s words, “ashen-faced.”
Bernanke continued, “It is a matter of days before there is a meltdown in the global financial system.” Bachus was among those who spoke. According to Paulson, he suggested recapitalizing the banks by buying shares.
The meeting broke up. The next day, September 19, Congressman Bachus bought contract options on Proshares Ultra-Short QQQ, an index fund that seeks results that are 200% of the inverse of the Nasdaq 100 index. In other words, he was shorting the market. It was an inexpensive way to bet that the market would fall. He bought options for $7,846 on a day when the Dow Jones Industrial Average opened at 8,604. A few days later, on September 23, after the market had indeed fallen, he sold the options for over $13,000 and nearly doubled his money.
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