Thursday, April 9, 2015

Governance failures

On the books federal or public debt is about $18.2 trillion and increasing about $2.27 billion/day. Many or most conservative people and politicians and even some liberals express at least moderate concern over the federal debt and its continued growth. Depending on the estimate and time frame, off the books unfunded federal debt obligations range from roughly $80 trillion to $130 trillion. That seems like a lot of money, but since President Clinton was in office, debt concerns have not powerfully affected competing spending.

Liberals and conservatives agree on essentially nothing, but neither side appears to generally argue that needlessly wasting significant amounts of federal revenue makes any sense or is desirable.[1] When the federal government fails to collect recoverable revenues that are owed to the U.S. Treasury, it arguably constitutes a failure that betrays the American people and a failure of governance by the two-party system. The Wall Street Journal (WSJ) recently published an article that exemplifies an example of such a governance failure.

The WSJ article (September 18, 2014, pages C1, C2 and published online) that described the inability of the Justice Department (DoJ) to collect most of $97 billion from white collar criminals and others. The money is owed from enforcement actions and criminal cases. Some of the debtors simply can't pay, but assuming that if $50 billion of that is recoverable and owed to the U.S. Treasury, one might think that in view of budget constraints and federal debt, it would be worthwhile to try to recover as much of that as is economically reasonable. According to the WSJ article, each DoJ dollar spent to recover uncollected debt, the Treasury gets $3. That is worthwhile, both economically and in terms of vindicating the rule of law. Since this is just a matter of debt collection, maybe some or most of the work could be farmed out to the private sector for an equal or better return than the current 3 for 1. 

Unfortunately, with our ideologically-broken congress, there is no hope of any significant improvement in this situation. "Only" a few tens of billions of dollars are at stake. Since congress knowingly allows tax cheats to steal hundreds of billions per year via tax evasion, maybe $460 - $540 billion for tax year 2014, there is no real chance that our dysfunctional congress will even consider addressing the far smaller DoJ situation. These things are just routine failures of governance.[3]

1. Some conservatives do argue that it is better for revenues that are owed to the federal government to go uncollected than to continue to feed the federal Leviathan's bottomless pit. Maybe that makes sense to some, but from this point of view that thinking completely irrational and indefensible.  
2. IRS data: In 2001, the net tax gap was $290 billion and $385 billion in 2006, an increase of $19 billion/year. At an increase rate of $10 billion/year from 2006 to 2014, the 2014 gap would be $465 billion and $537 billion at an increase rate of $19 billion/year. Congress could give the IRS the budget it needs to collect most of those amounts, but congress refuses to do that each year. Presumably, congress permits the theft as payback for campaign contributors. If that isn't the main reason for aiding and abetting the annual theft of hundreds of billions from American taxpayers, it isn't clear why such an outrageous situation has been allowed to persist for years.
3. There are other areas where tens or maybe hundreds of billions have disappeared. The Department of Defense has not been able to audit its books for decades. Trillions in spending are not fully audited so the size of the losses cannot be known. 

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