Commentary Magazine


Topic: IRS

The Worst Part of the IRS Asset-Seizure Abuse: Expect It to Continue

There are many outrageous details in the New York Times’s revelations about a law that lets the IRS seize the assets of Americans whose bank-deposit patterns the agency finds suspicious even if a crime wasn’t committed. There is the fact that “Law enforcement agencies get to keep a share of whatever is forfeited.” There is the fact that “The government can take the money without ever filing a criminal complaint,” and the related issue that “the owners are left to prove they are innocent. Many give up.” There is the fact that in some cases, the banks (or their financial advisors) recommend that supposedly suspicious deposit pattern (less than $10,000 at a time, repeatedly). But the most disturbing part of a very disturbing story might just be this:

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There are many outrageous details in the New York Times’s revelations about a law that lets the IRS seize the assets of Americans whose bank-deposit patterns the agency finds suspicious even if a crime wasn’t committed. There is the fact that “Law enforcement agencies get to keep a share of whatever is forfeited.” There is the fact that “The government can take the money without ever filing a criminal complaint,” and the related issue that “the owners are left to prove they are innocent. Many give up.” There is the fact that in some cases, the banks (or their financial advisors) recommend that supposedly suspicious deposit pattern (less than $10,000 at a time, repeatedly). But the most disturbing part of a very disturbing story might just be this:

On Thursday, in response to questions from The New York Times, the I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by “exceptional circumstances.”

Richard Weber, the chief of Criminal Investigation at the I.R.S., said in a written statement, “This policy update will ensure that C.I. continues to focus our limited investigative resources on identifying and investigating violations within our jurisdiction that closely align with C.I.’s mission and key priorities.” He added that making deposits under $10,000 to evade reporting requirements, called structuring, is still a crime whether the money is from legal or illegal sources. The new policy will not apply to past seizures.

Not nearly enough about the policy will change, nor will the law allowing it. And there won’t be consequences for those clearly abusing this authority. The IRS simply promises to use better discretion in deciding whose bank accounts they will–literally!–raid.

If you want a description of what happens when a federal agency operates with impunity and is incentivized to go trolling for cash, this is it. And the head of the relevant IRS department, after being exposed as the chief pillager, declares that you can trust him to pillage more responsibly. Any government that condones this is fundamentally at odds with the basic pillars of liberty, including presumption of innocence, due process, and private property protections. At least The Sopranos could be funny.

As the IRS goes blundering and plundering through America’s piggy banks, it’s important to revisit how we got here. Here is the explanation of the law in the Times piece:

The practice has swept up dairy farmers in Maryland, an Army sergeant in Virginia saving for his children’s college education and Ms. Hinders, 67, who has borrowed money, strained her credit cards and taken out a second mortgage to keep her restaurant going.

Their money was seized under an increasingly controversial area of law known as civil asset forfeiture, which allows law enforcement agents to take property they suspect of being tied to crime even if no criminal charges are filed. Law enforcement agencies get to keep a share of whatever is forfeited.

Critics say this incentive has led to the creation of a law enforcement dragnet, with more than 100 multiagency task forces combing through bank reports, looking for accounts to seize. Under the Bank Secrecy Act, banks and other financial institutions must report cash deposits greater than $10,000. But since many criminals are aware of that requirement, banks also are supposed to report any suspicious transactions, including deposit patterns below $10,000. Last year, banks filed more than 700,000 suspicious activity reports. Owners who are caught up in structuring cases often cannot afford to fight. The median amount seized by the I.R.S. was $34,000, according to the Institute for Justice analysis, while legal costs can easily mount to $20,000 or more.

Aside from the abuse of power–a pattern with the IRS, isn’t it?–this is a story about unintended consequences as well. The government put a regulation in place to catch depositors’ ill-gotten gains. Since criminals pay close attention to the laws they don’t follow, they started easily avoiding the paperwork. So the government simply cast a wider net, creating an air of suspicion around anyone who deposited less than $10,000. If that sounds like a lot of people to you, well, you’d be right, wouldn’t you?

One major objection to the sheer amount of regulation–especially that which is aimed at the financial industries–is that it virtually guarantees that anyone without a lobbyist and a D.C. lawyer on retainer will break the law fairly regularly. This is in part because so many of those laws are convoluted, nonsensical, or unconstitutional, and also because power corrupts and federal agencies have all the power.

This is your federal government in 2014: everyone’s a suspect. Madison is turning in his grave.

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Turkey Shows the Risk of Politicized Tax Collectors

There is little question now that at least some Internal Revenue Service (IRS) employees abused their position to allow partisanship to determine their actions. Who authorized such behavior, if anyone, remains subject to fierce partisan dispute. If the IRS targeted conservatives on the basis of their political belief and on the orders of anyone in the White House, most Americans would find such facts scandalous, and rightly so.

Many supporters of the Obama administration have pooh-poohed the scandal, or suggested that it comes from the fevered imaginations of Republican activists. They should not. Too many many fierce partisans will play hardball or engage in dirty tricks, all the more so if a precedent exists that leads them to believe they can get away with it.

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There is little question now that at least some Internal Revenue Service (IRS) employees abused their position to allow partisanship to determine their actions. Who authorized such behavior, if anyone, remains subject to fierce partisan dispute. If the IRS targeted conservatives on the basis of their political belief and on the orders of anyone in the White House, most Americans would find such facts scandalous, and rightly so.

Many supporters of the Obama administration have pooh-poohed the scandal, or suggested that it comes from the fevered imaginations of Republican activists. They should not. Too many many fierce partisans will play hardball or engage in dirty tricks, all the more so if a precedent exists that leads them to believe they can get away with it.

Here, Turkey illustrates just what can happen when politicized tax collection is allowed to continue unabated. Turkey today has threatened to go after Twitter on tax evasion charges. According to an Agence France Presse report:

“Twitter, YouTube and Facebook are international companies established for profit and making money,” Erdogan said. “Twitter is at the same time a tax evader. We will go after it,” he added. “These companies, like every international company, will abide by my country’s constitution, laws and tax rules”

In Turkey, the issue is not rule of law, for Prime Minister Recep Tayyip Erdoğan interprets the law through the narrow prism of his personal interest. Simply put, his philosophy is the 21st century equivalent of “L’État, c’est moi.” Erdoğan has a long history of using arbitrary tax enforcement to target opponents.  He leveled a multimillion-dollar tax fine against the owner of a newspaper critical of his abuse-of-power and, then, when that media group actually found the funds to pay up, he leveled a multi-billion dollar fine. The world saw the tax lien for what it was, and roundly condemned Erdoğan for using the tax man to crush opponents. It was a tried and true strategy. With one of his political allies facing tough competition in Istanbul, Erdoğan used the tax man to levy a fine against the chief secular competitor in the race for an allegedly unpaid loan, draining his campaign chest.  Turkey has effectively become a third world dictatorship, and its tax service more a mechanism to punish than simply raise revenue.

When tax collectors lose their credibility and become little more than political weapons, there is no restoring that credibility. How sad it is that so many supporters of President Obama for partisan reasons appear to turn a blind eye to the apparent attempt by some in the IRS to wield their power like a weapon. For Turkey shows what happens when such behavior is not nipped in the bud. Let us hope that Erdoğan’s embrace of executive order and financial punishment has not become a model which Obama knowingly or unconsciously follows.

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No Wonder Obama Was so Desperate to Pack the D.C. Circuit

The D.C. Circuit Court of Appeals struck down another Obama administration power grab yesterday. It ruled unanimously that the IRS did not have the statutory authority, under the so-called Horse Act of 1884 (passed 29 years before the income tax existed), to license tax preparers, require them to pay annual fees, and attend at least 15 hours of continuing education a year.

The Horse Act was passed to bring an end to a rash of fraudulent claims stemming from the Civil War, where people would claim compensation from the government for horses and other property taken or killed in the war. They would often claim that some broken-down plow horse was actually a magnificent beast worth many times more. (That’s not at all dissimilar to the rash of allegedly fraudulent claims against BP for the Gulf oil spill of 2010 that’s going on right now.) It authorized the treasury secretary to establish standards for people representing claimants before the Treasury.

In 2011, rather than asking Congress for the power to license tax preparers, the Obama administration just went ahead and took the power, using the fig leaf of the Horse Act. But tax preparers, of course, don’t represent their clients before the IRS. They simply fill out the incredibly complicated forms. The clients, not the preparers, are representing that the information on the forms is correct. That was the opinion of the IRS itself up until the Obama administration came into being. In 2009 it wrote, “Just preparing a tax return [or] furnishing information at the request of the IRS … is not practice before the IRS ….”

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The D.C. Circuit Court of Appeals struck down another Obama administration power grab yesterday. It ruled unanimously that the IRS did not have the statutory authority, under the so-called Horse Act of 1884 (passed 29 years before the income tax existed), to license tax preparers, require them to pay annual fees, and attend at least 15 hours of continuing education a year.

The Horse Act was passed to bring an end to a rash of fraudulent claims stemming from the Civil War, where people would claim compensation from the government for horses and other property taken or killed in the war. They would often claim that some broken-down plow horse was actually a magnificent beast worth many times more. (That’s not at all dissimilar to the rash of allegedly fraudulent claims against BP for the Gulf oil spill of 2010 that’s going on right now.) It authorized the treasury secretary to establish standards for people representing claimants before the Treasury.

In 2011, rather than asking Congress for the power to license tax preparers, the Obama administration just went ahead and took the power, using the fig leaf of the Horse Act. But tax preparers, of course, don’t represent their clients before the IRS. They simply fill out the incredibly complicated forms. The clients, not the preparers, are representing that the information on the forms is correct. That was the opinion of the IRS itself up until the Obama administration came into being. In 2009 it wrote, “Just preparing a tax return [or] furnishing information at the request of the IRS … is not practice before the IRS ….”

The Circuit Court ruling was unequivocal: “If we were to accept the IRS’s interpretation of Section 330 [of the United States Code, where the Horse Act is enshrined today], the IRS would be empowered for the first time to regulate hundreds of thousands of individuals in the multi-billion dollar tax-preparation industry. Yet nothing in the statute’s text or the legislative record contemplates that vast expansion of the IRS’s authority.”

Why did the Obama IRS try to get away with this? Simple: to help out the big guys at the expense of the small guys, which is to say crony capitalism. Obeying the new regulations would have been no problem for, say, H&R Block or even full-time accountants. It was aimed at forcing out of the market the mom-and-pop operations who earn a few thousand dollars each spring helping friends and neighbors to file their income-tax returns.

The giveaway here is that the deputy IRS commissioner who crafted the new rules was none other than Mark Ernst, former CEO of—wait for it!—H&R Block. H&R Block, of course, was all in favor of the new rules that would have axed a considerable portion of their competition. Giving Ernst a political appointment to deal with matters directly concerning a former employer would have been flatly illegal, so he was given a “civil service” appointment instead, as though he were nothing more than one more bureaucrat moving up the ladder. His civil service career lasted less than two years.

President Obama presents himself as the champion of the poor and downtrodden. But that’s only the poor and downtrodden who are happy to be, effectively, wards of the state. The ordinary Joe who is just trying to make his own independent living is of no concern to Obama. Indeed Obama cares far more about the big guy who can attend $30,000-a-plate dinners and expects favors in return.

Despite frequent attribution, Commodore Cornelius Vanderbilt never said it, but President Obama should: “Law? What do I care about the law? I got the power ain’t I?”

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The Limbaugh Theorem

Earlier this week I wrote a piece about how Barack Obama was criticizing “Washington’s priorities” and the IRS scandal, as if he had not been president for the past four years and four months. There is something brazen and audacious in even attempting something like this. I speculated that Mr. Obama is unable to take responsibility for the problems that have occurred on his watch for reasons rooted in cognitive dissonance (failures cannot possibly happen on the watch of the Great and Mighty Obama). He is engaged in what psychiatrists call disassociation.

A friend alerted me to the fact that a version of this analysis had already been offered up by Rush Limbaugh, who in the aftermath of the 2012 election was trying to make sense of the president’s ability to escape responsibility for his multiple failures. Why did polls show massive dissatisfaction with the country’s direction while at the same time supporting Mr. Obama’s agenda?

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Earlier this week I wrote a piece about how Barack Obama was criticizing “Washington’s priorities” and the IRS scandal, as if he had not been president for the past four years and four months. There is something brazen and audacious in even attempting something like this. I speculated that Mr. Obama is unable to take responsibility for the problems that have occurred on his watch for reasons rooted in cognitive dissonance (failures cannot possibly happen on the watch of the Great and Mighty Obama). He is engaged in what psychiatrists call disassociation.

A friend alerted me to the fact that a version of this analysis had already been offered up by Rush Limbaugh, who in the aftermath of the 2012 election was trying to make sense of the president’s ability to escape responsibility for his multiple failures. Why did polls show massive dissatisfaction with the country’s direction while at the same time supporting Mr. Obama’s agenda?

This gave rise to what Rush calls the Limbaugh Theorem, which is that Obama has mastered the ability to always be seen as “opposing everything that’s happening, even the things he is causing to happen. He is on a perpetual campaign.” A variation of the Limbaugh Theorem can be seen in the unfolding scandals now buffeting the administration. According to Rush, “[Obama] gets away with everything precisely by appearing to have no involvement with it … He gets away with not being tied to [the IRS scandal] like he’s not tied to the jobs numbers, he’s not tied to the debt, he’s not tied to the economy. He’s not tied to anything going wrong.”

It seems to me the Limbaugh Theorem is on the mark, that Limbaugh once again got it right and got it early. Mr. Obama has shown a remarkable, Houdini-like ability to escape accountability for his mistakes. Part of the explanation for this undoubtedly has to do with an unprecedented bias in the press and how they choose to frame stories. Part of it may also have to do with what is known as “low information voters.” But the fact that the American people have allowed the president to escape responsibility for his failed policies time and again is clearly problematic. The question is whether Obama can replicate in his second term what he did in his first. I hope not, and in the end I believe the truth will out. But it’s not foreordained, and we’ll find out soon enough. 

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Accepting Responsibility Would Blow Obama’s Circuits

Barack Obama, speaking to a crowd in Baltimore on Friday, said, “I know it can seem frustrating sometimes when it seems like Washington’s priorities aren’t the same as your priorities. I know it often seems like folks down there are more concerned with their jobs than with yours.”

Earlier in the week, when speaking about the IRS scandal, Obama said, “I’ve reviewed the Treasury Department watchdog’s report, and the misconduct that it uncovered is inexcusable. It’s inexcusable, and Americans are right to be angry about it, and I am angry about it. I will not tolerate this kind of behavior in any agency, but especially in the IRS, given the power that it has and the reach that it has into all of our lives.”

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Barack Obama, speaking to a crowd in Baltimore on Friday, said, “I know it can seem frustrating sometimes when it seems like Washington’s priorities aren’t the same as your priorities. I know it often seems like folks down there are more concerned with their jobs than with yours.”

Earlier in the week, when speaking about the IRS scandal, Obama said, “I’ve reviewed the Treasury Department watchdog’s report, and the misconduct that it uncovered is inexcusable. It’s inexcusable, and Americans are right to be angry about it, and I am angry about it. I will not tolerate this kind of behavior in any agency, but especially in the IRS, given the power that it has and the reach that it has into all of our lives.”

Cleaning up Washington’s various corruptions and insular, out-of-touch ways would make a powerful platform if he was preparing to run for president one day. The problem for Obama is that he is president and has been for four years and four months. In our modern-day system of government, he is first among equals when it comes to having responsibility for “Washington’s priorities.” And he certainly has responsibility for an agency which is part of the executive branch, which he after all oversees.

Mr. Obama has shown himself to be a chronic blame-shifter, whether he’s pointing fingers at his predecessor, ATMs, the Arab Spring, tsunamis and earthquakes, Europe, the GOP, Rush Limbaugh, Fox News, Super PACs, the Supreme Court, the Chamber of Commerce, and countless other people and organizations. He simply is unable to take responsibility for the problems that have occurred on his watch.

My guess is that the reasons are rooted in cognitive dissonance. Mr. Obama views himself as a transformational, world-historical figure. But as his failures mount one atop the other–from the Affordable Care Act and his stimulus package, to the worst economic recovery on record, to the collapse of his foreign policy, to mounting scandals–the president simply cannot process it. To accept responsibility would blow his circuits. And so he seems to have developed several coping mechanisms–including blaming others and pretending that what is happening in Washington has nothing at all to do with him.

But back here on Planet Earth, it does. Mr. Obama could be at the stage where he is simply unable to accept reality; it may be that the president now disassociates himself from his actions. This condition is not something you want to find in any individual; it’s one that’s particularly alarming to find in a chief executive.

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Pfeiffer’s Hypocrisy: IRS and Abu Ghraib

Speaking on Face the Nation, White House adviser Dan Pfeiffer tried to deflect blame for the brewing IRS scandal by arguing that the only way the scandal might have involved President Obama is if the president had actively sought to interfere in the IRS inspector general’s report. According to Politico.com’s coverage:

Pfeiffer said that the administration followed the “cardinal rule” of all White Houses. “You do nothing to interfere with an independent investigation and you do nothing to offer the appearance of interfering with investigations,” Pfeiffer said. Once informed, the White House officials responded after they had the facts, he said. Obama has come under fire from Republicans and others for being slow to respond and for saying that he learned only recently of the investigation into IRS officials targeting tea party groups. “What we waited for were the facts,” Pfeiffer said. “It’s important to get out there fast, but it’s important to get out there right.”

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Speaking on Face the Nation, White House adviser Dan Pfeiffer tried to deflect blame for the brewing IRS scandal by arguing that the only way the scandal might have involved President Obama is if the president had actively sought to interfere in the IRS inspector general’s report. According to Politico.com’s coverage:

Pfeiffer said that the administration followed the “cardinal rule” of all White Houses. “You do nothing to interfere with an independent investigation and you do nothing to offer the appearance of interfering with investigations,” Pfeiffer said. Once informed, the White House officials responded after they had the facts, he said. Obama has come under fire from Republicans and others for being slow to respond and for saying that he learned only recently of the investigation into IRS officials targeting tea party groups. “What we waited for were the facts,” Pfeiffer said. “It’s important to get out there fast, but it’s important to get out there right.”

To be fair, Pfeiffer is right that much of what we know about the scandal is because the inspector general’s office at the IRS was doing its job, although the bipartisan outrage has resulted from realization of just how corrupt the IRS became under Obama’s watch.

However, where Obama’s hypocrisy shines through is when Pfeiffer’s answer to this question is juxtaposed with the manner in which many partisans treated the Abu Ghraib prison scandal in Iraq. Here is Slate.com’s Fred Kaplan, for example:

The White House is about to get hit by the biggest tsunami since the Iran-Contra affair, maybe since Watergate. President George W. Bush is trapped inside the compound, immobilized by his own stay-the-course campaign strategy. Can he escape the massive tidal waves? Maybe. But at this point, it’s not clear how. If today’s investigative shockers—Seymour Hersh’s latest article in The New Yorker and a three-part piece in Newsweek—are true, it’s hard to avoid concluding that responsibility for the Abu Ghraib atrocities goes straight to the top, both in the Pentagon and the White House….

That scandal was not uncovered by investigative reporters but, in parallel to today’s IRS scandal, when the internal Defense Department investigation leaked to the press. Yep, that’s right: The Pentagon had learned about the abuses, had investigated them, and moved to shut them down. It was only after the abuses ceased that The New Yorker and Sixty Minutes II published word of what went on at Abu Ghraib. Make no mistake: the abuses at Abu Ghraib were inexcusable. Frankly, I wish Secretary of Defense Rumsfeld had heeded the policy recommendation the policy shop in which I had worked had put forward: dynamite Abu Ghraib as soon as control over Iraq is consolidated, because the prison was already a symbol of the worst excesses of Saddam Hussein’s rule. With the report’s damning findings, Rumsfeld rightly offered to resign. Twice. Whatever Rumsfeld’s faults, he did not view accountability as a dirty word.

With all due respect to Mr. Pfeiffer, that the IRS inspector general identified the abuse is neither here nor there, just as with Abu Ghraib. The fact of the matter is that the abuse occurred, and the IRS sought to use its powers to play politics, and then apparently held the report until after the elections in order to further insulate Obama’s team from public accountability.

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IRS Defenders Are Still Relying on Debunked Claims

One of the strangest and weakest defenses of the IRS’s campaign targeting conservative and pro-Israel nonprofit applicants was that the blatant violation of the constitutional rights of Americans who disagreed with President Obama was the natural reaction of the poor, overworked bureaucrat. We were told that conservatives “swamped” the IRS with nonprofit applications after the Supreme Court’s 2010 Citizens United decision struck down some restrictions on political speech.

This excuse never made much sense, and it certainly didn’t justify what happened: President Obama publicly slammed conservative nonprofits as shady and possibly foreign-funded and complained they had patriotic-sounding names to hide their nefarious purposes; he encouraged extra scrutiny of these groups; Democrats in the Senate then pushed the IRS to target the kinds of groups the president warned about; the IRS did so. Blaming conservatives for applying to participate in the nonprofit sector and thus forcing the IRS to harass and silence them is just as nonsensical as it sounds. But what about the underlying point: were those poor IRS officials flooded with conservative applicants? No, as the Atlantic’s Garance Franke-Ruta points out:

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One of the strangest and weakest defenses of the IRS’s campaign targeting conservative and pro-Israel nonprofit applicants was that the blatant violation of the constitutional rights of Americans who disagreed with President Obama was the natural reaction of the poor, overworked bureaucrat. We were told that conservatives “swamped” the IRS with nonprofit applications after the Supreme Court’s 2010 Citizens United decision struck down some restrictions on political speech.

This excuse never made much sense, and it certainly didn’t justify what happened: President Obama publicly slammed conservative nonprofits as shady and possibly foreign-funded and complained they had patriotic-sounding names to hide their nefarious purposes; he encouraged extra scrutiny of these groups; Democrats in the Senate then pushed the IRS to target the kinds of groups the president warned about; the IRS did so. Blaming conservatives for applying to participate in the nonprofit sector and thus forcing the IRS to harass and silence them is just as nonsensical as it sounds. But what about the underlying point: were those poor IRS officials flooded with conservative applicants? No, as the Atlantic’s Garance Franke-Ruta points out:

“[W]e saw a big increase in these kind of applications, many of which indicated that they were going to be involved in advocacy work,” Lerner said.

But Todd Young, a Republican congressman from Indiana, pointed out at Friday’s House Ways and Means Committee hearing with former acting IRS commissioner Steve Miller and Treasury Inspector General J. Russell George that this was not the case, according to the very data the IRS provided to the Treasury IG’s office.

There were, he noted, actually fewer applications for tax-exempt status by groups seeking to be recognized as social-welfare organizations that year than the previous one, according to this IRS data. The real surge in applications did not come until 2012 — the year the IRS stopped the practice of treating the Tea Party class of groups differently from others.

Franke-Ruta provides the numbers, and they debunk a poor excuse that never should have been trotted out in the first place. Franke-Ruta also points out that on Wednesday, the Chronicle of Philanthropy was already on the case. Indeed they were. An article by Doug Donovan notes that not only does the narrative about a flood of 501(c)4 applicants fall apart when looking at the data, but an even larger portion of the IRS’s justification for its actions is completely undone by the numbers as well:

Mr. Miller wrote in USA Today on Monday that the IRS began to centralize those applications in 2010 because the division that supervises tax-exempt organizations observed a sharp increase in the number of applications from groups “potentially engaged in political campaign intervention” that were seeking either 501(c)(4) status or designation as a 501(c)(3) charity. He then cites the increase between 2010 and 2012.

The audit shows that 501(c)(3) applications also declined in both 2010 and 2011 from the previous years.

Now, to be fair to liberal commentators, they often unquestioningly accept the false narratives about conservatives pushed by this White House, and so they naturally heard all the fuss Obama was making about foreign-funded fake nonprofits and just assumed he wasn’t making it all up. It turns out he was making it up. But for liberals it was too good to check.

So liberals carried the corrupt IRS’s water. But at least most of those writers didn’t push that narrative explicitly as a defense of the IRS’s actions. Most of the time it was simply qualifying it, putting it in context. So it’s surprising, I suppose, to read Norm Ornstein’s take on the scandal–because he’s happy to defend the IRS.

In a piece titled, you guessed it, “In Defense of the IRS,” Ornstein writes as though he hasn’t read a newspaper or watched the news in a week. We now know, of course, that the IRS targeted conservative groups. That fact has been clearly established. But Ornstein says there’s no way the IRS targeted conservative groups because if they did they would have gone after large groups like American Crossroads. Since they didn’t go after American Crossroads, Ornstein claims, they couldn’t have been targeting conservative groups–even though documentation from the IRS demonstrates without a doubt that that is exactly what they were doing. Ornstein continues:

In the meantime, a slew of other organizations, encouraged by the example of American Crossroads, saw an opening and flooded the agency with applications, leaving staffers to find their own ways to cope– and they did so repeatedly in foolish and destructive ways.

Conservatives “flooded the agency,” so what else was a nebbish IRS bureaucrat to do besides send letters to applicants asking them what they pray about and how they feel about Planned Parenthood? Again, the excuse doesn’t hold even if the “flood” of applicants actually happened. But it appears the entire foundation of this corrupt campaign was false.

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Bob Woodward on Benghazi

The Washington Post’s Bob Woodward, America’s greatest living investigative reporter, was on MSNBC’s “Morning Joe” and said this: “I would not dismiss Benghazi. It’s a very serious matter.” Mr. Woodward recounted his own memories of Richard Nixon’s role in editing Watergate transcripts in order to mislead the public.

The Benghazi scandal is obviously not comparable to Watergate at this stage and may never be. Watergate, after all, involved the president being at the center of a criminal conspiracy. But not every scandal has to be Watergate to be serious; and a scandal need not lead to impeachment to be deeply problematic.

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The Washington Post’s Bob Woodward, America’s greatest living investigative reporter, was on MSNBC’s “Morning Joe” and said this: “I would not dismiss Benghazi. It’s a very serious matter.” Mr. Woodward recounted his own memories of Richard Nixon’s role in editing Watergate transcripts in order to mislead the public.

The Benghazi scandal is obviously not comparable to Watergate at this stage and may never be. Watergate, after all, involved the president being at the center of a criminal conspiracy. But not every scandal has to be Watergate to be serious; and a scandal need not lead to impeachment to be deeply problematic.

What we know right now about the lethal attacks on the diplomatic outpost in Benghazi and the subsequent cover-up is serious enough. And one cannot help but feel that if the truth is finally revealed, it will reveal even more damaging things about the ethical grounding of the Obama administration. Whether the truth is finally unveiled is an open question. That’s why we have things called investigations. And unfortunately for the president, but fortunately for the truth, they are proceeding.

Stay tuned. 

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Obama’s Defenders: He’s Not Corrupt, Just Dishonest and Incompetent

There was a running joke in the fall of 2008 that John McCain should simply re-air Hillary Clinton’s “3 a.m. phone call” ad, which highlighted Barack Obama’s lack of experience and meager knowledge of world affairs, and just tack on “I’m John McCain, and I approve this message” at the end of the ad. The point was that thanks to the bitter primary battle between the Clintons and Obama, Democrats had already developed the most effective lines of attack against Obama, and Republicans needed only to nod their heads in agreement.

Something similar is taking place amid the several Obama administration scandals that have surfaced almost simultaneously. (There has been new information on Benghazi, but the issue itself isn’t new; the IRS and AP phone records scandals, in contrast, hit less than a week apart.) Both Democrats and Republicans are raising the prospect that the GOP could get carried away or bungle their response to the scandals–surely a possibility. One way to prevent that, however, would be to simply echo the way Obama’s supporters have tried to defend him.

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There was a running joke in the fall of 2008 that John McCain should simply re-air Hillary Clinton’s “3 a.m. phone call” ad, which highlighted Barack Obama’s lack of experience and meager knowledge of world affairs, and just tack on “I’m John McCain, and I approve this message” at the end of the ad. The point was that thanks to the bitter primary battle between the Clintons and Obama, Democrats had already developed the most effective lines of attack against Obama, and Republicans needed only to nod their heads in agreement.

Something similar is taking place amid the several Obama administration scandals that have surfaced almost simultaneously. (There has been new information on Benghazi, but the issue itself isn’t new; the IRS and AP phone records scandals, in contrast, hit less than a week apart.) Both Democrats and Republicans are raising the prospect that the GOP could get carried away or bungle their response to the scandals–surely a possibility. One way to prevent that, however, would be to simply echo the way Obama’s supporters have tried to defend him.

As I wrote on Monday, one clear lesson from this is the danger of ever-expanding, unelected, unaccountable bureaucracy at the center of an increasingly powerful central government. That also happens to be the crux of President Obama’s governing strategy. Indeed, the IRS’s reach and power is expanded as part of ObamaCare–itself an expansion of government along demonstrably failed strategic lines. So it’s no surprise that after the IRS systematically targeted conservative and pro-Israel groups in order to eviscerate the First Amendment rights of those who disagreed with President Obama (and at the direction of high-ranking elected Democrats), the IRS official responsible for overseeing tax-exempt groups has since been moved over to run the IRS office responsible for ObamaCare.

Because this critique of big government is so difficult to deny without appearing foolish, many on the left have tried another tack to minimize the scandals. They argue that President Obama is not corrupt, but rather that he is dishonest and incompetent. This was the defense (such as it was) of Obama and Clinton with regard to Benghazi. The Accountability Review Board, which sought to exonerate Clinton as much as possible, noted that the State Department was a complete mess under Clinton. Security requests were ignored, because Clinton didn’t take the time to understand what was going on in Libya. And the chain of command was difficult to discern, leading to total chaos within the department. In other words, Clinton, who seems to be planning a run for the presidency, is a dangerously poor executive with a shallow grasp of geopolitical realities.

And a similar defense has arisen from the left of Obama on the issue. Here is Jackson Diehl of the Washington Post claiming that Benghazi was brought about by incompetence and carelessness. And here is the New York Times editorial board trying to shift the conversation from Obama’s initial failure in Libya to his ongoing failure in Libya. Liberal “defenses” of Obama and Clinton paint a picture of two hopelessly unqualified leaders.

It doesn’t get much better from there. As Pete noted this morning, Obama’s former chief strategist David Axelrod defended his former boss by saying that the government has become so vast and unwieldy that Obama couldn’t possibly know what his own government was doing or why it was doing it. The fact that Democrats can acknowledge this while still planning to make the government larger and less accountable shows the ideological nature of their obsession with expanding the state at the expense of the people.

And Jeffrey Rosen utilizes this explanation for the Obama administration’s seizure of the Associated Press phone records. Obama isn’t Nixon, Rosen argues, nor George W. Bush. According to Rosen he’s more like the maniacally antidemocratic Woodrow Wilson (again, this is a defense of Obama):

Unlike Obama, George W. Bush never ran for president by touting his praise of government transparency and whistleblowing. As a result, while Bush never pretended to be a defender of whistleblowers, he was sensitive, at least in his first term, to avoiding subpoenas that might threaten press freedom…. Obama has no similar self-doubts about his own credentials as a First Amendment advocate: Didn’t he defend the American free speech tradition at the U.N. even as he put pressure on YouTube to reconsider its decision not to remove the Innocence of the Muslims video?

[…]

And that law points to a better historic comparison. Obama’s rediscovery of the 1917 Espionage Act is grimly appropriate, since the president whose behavior on civil liberties he is most directly channeling isn’t, in fact, Richard Nixon or George W. Bush. It’s Woodrow Wilson.

Rosen, who calls this “technocratic arrogance,” is making two separate points here. One point is the inevitability of abuse when the president locks out criticism and empowers unelected bureaucrats to put his worldview into practice. The other point is that Rosen makes Obama out to be a fundamentally dishonest person. Obama gave grand addresses praising free speech while acting to undermine it. Obama offered self-righteous blather about the supposed evils conducted by his predecessors, and therefore he was entitled to expand on those supposed evils.

Conservatives are probably thinking they couldn’t have said it better themselves. And liberals seem determined to save them the trouble.

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David Axelrod, Limited Government Conservative?

David Axelrod was once Barack Obama’s closest chief political adviser. He now comments for MSNBC, where he trotted out the latest defense of President Obama, who is being buffeted by three unfolding scandals: misleading the public in the aftermath of the lethal assault on the U.S. diplomatic outpost in Benghazi, the seizure of phone records of Associated Press reporters, and the targeting of conservative groups by the IRS.

On the latter, the Axelrod defense goes like this: “There’s so much underneath you that you can’t know because the government is so vast.”

Now isn’t that convenient.

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David Axelrod was once Barack Obama’s closest chief political adviser. He now comments for MSNBC, where he trotted out the latest defense of President Obama, who is being buffeted by three unfolding scandals: misleading the public in the aftermath of the lethal assault on the U.S. diplomatic outpost in Benghazi, the seizure of phone records of Associated Press reporters, and the targeting of conservative groups by the IRS.

On the latter, the Axelrod defense goes like this: “There’s so much underneath you that you can’t know because the government is so vast.”

Now isn’t that convenient.

Mr. Axelrod has suddenly discovered the problems associated with a federal government that is so vast that the president cannot possibility be held accountable for what goes wrong underneath him. Barack Obama is president of the United States; he simply shouldn’t be held accountable by the misdeeds of the government of the United States. Funny, I don’t recall Mr. Axelrod making this same argument during the Bush years.

In any event, one of the political effects of these scandals is that Republicans, who until now have been sullen in the aftermath of the 2012 election, will be re-energized. I say that because these scandals go some distance toward confirming some of their worst suspicions about the president and the threat posed by the Nanny State.

To put it another way: If Republicans were animated by the policy overreach of Obama/Big Government in 2010, in the form of the stimulus package and the Affordable Care Act, they may well be energized by the abuse of power by Obama/Big Government in 2014.

Now the 2014 elections are still a long way off, and the full ramifications of these scandals are impossible to know at this stage. But one thing that is being vindicated is the concern conservatives have about the vast size, scope and reach of the federal government. Even David Axelrod is now acknowledging it.

Can a subscription to COMMENTARY be far behind?

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Obama is the Ultimate Ad Hominem President

At a fundraising event earlier this week in New York City, President Obama said this:

What’s blocking us right now is a sort of hyper-partisanship in Washington that I was, frankly, hoping to overcome in 2008. My thinking was when we beat them in 2012 that might break the fever, and it’s not quite broken yet. But I am persistent. And I am staying at it. And I genuinely believe there are Republicans out there who would like to work with us but they’re fearful of their base and they’re concerned about what Rush Limbaugh might say about them…

As a consequence we get the kind of gridlock that makes people cynical about government. My intentions over the next 3 ½ years are to govern. … If there are folks who are more interested in winning elections than they are thinking about the next generation then I want to make sure there are consequences to that.

Mr. Obama’s statement, a variation of what he’s said countless times in the past, is worth examining for what it reveals about him.

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At a fundraising event earlier this week in New York City, President Obama said this:

What’s blocking us right now is a sort of hyper-partisanship in Washington that I was, frankly, hoping to overcome in 2008. My thinking was when we beat them in 2012 that might break the fever, and it’s not quite broken yet. But I am persistent. And I am staying at it. And I genuinely believe there are Republicans out there who would like to work with us but they’re fearful of their base and they’re concerned about what Rush Limbaugh might say about them…

As a consequence we get the kind of gridlock that makes people cynical about government. My intentions over the next 3 ½ years are to govern. … If there are folks who are more interested in winning elections than they are thinking about the next generation then I want to make sure there are consequences to that.

Mr. Obama’s statement, a variation of what he’s said countless times in the past, is worth examining for what it reveals about him.

1. President Obama is once again engaging in what psychiatrists refer to as projection, in which people lay their worst attributes on others.

In this instance, the most hyper-partisan president in modern times is ascribing that trait to Congressional Republicans. What we’ve learned about Mr. Obama over the years is that he that while he is unusually inept at governing, he’s quite good at campaigning. He certainly enjoys it, having taken the concept of the Permanent Campaign beyond anything we’ve ever seen. It turns out it’s the only thing he does well—no human being in history has raised campaign cash quite like he has—and it’s all he seems interested in doing.

On some deep, subconscious level, though, Mr. Obama seems ashamed of the path he’s chosen. And so the president projects those traits he loathes in himself on to others. To give you a sense of how deep the malady runs, the president does more than merely project; he actually preaches against the very character flaws he himself cannot overcome.

2. The president can hardly go a day without impugning the motivations of his opponents. They never have honest differences with the president. Instead they are suffering from an illness (“fever”), cowardice (afraid of what Rush Limbaugh might say about them), and lack of patriotism (caring about elections rather than future generations). Mr. Obama is the ultimate ad hominem president.

3. The president spoke about cynicism toward government. But if the president is really concerned about this phenomenon, he might look at his own administration, which is dealing with multiplying scandals. I would submit that misleading the country in the aftermath of the deadly siege on the diplomatic outpost in Benghazi, the IRS’s targeting of political opponents, and seizing the phone records of journalists might well deepen the public’s cynicism toward government. And for the record, trust in the federal government has reached new lows during the Obama years. Might he have some responsibility for that?

4. Mr. Obama professes deep concern “about the next generation.” Those words would be a bit more believable if he were not handing off to the next generation a crushing debt burden that will take generations to undo, if  it is ever undone. No president holds a candle to Mr. Obama when it comes to engaging in generational theft.

5. As for gridlock: This is actually inherent in our system of government. It’s called “checks and balances” and “separation of powers.” The president might want to consult this document for more. 

I understand Mr. Obama has complained many times that there are checks on his power, but I prefer the wisdom of James Madison to the ambitions of Barack Obama. And, oh, by the way: greater gridlock in Mr. Obama’s first two years in office would have prevented passage of the Affordable Care Act, which the presidential historian George Edwards has called “perhaps the least popular major domestic policy passed in the last century” and which Democratic Senator Max Baucus has warned is a “huge train wreck coming down.” It turns out that gridlock, if not always ideal, beats passing really bad legislation.

Just over a hundred days into his second term, the president finds himself weak, wounded, and on the defensive. Which means Mr. Obama will need to find new enemies to blame, new people to target, and new divisions to exploit.

This is what Hope and Change looks like five years in. 

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Are Obama’s Scandals Reaching Critical Mass?

Last week was one of the worst for Obama in his presidency. This week looks no better. Indeed, it may be a long, hot summer for the White House. As Jonathan has pointed out, the IRS scandal is growing bigger, seemingly by the minute. The Benghazi scandal is continuing to percolate.

Now, the brand-new AP scandal has erupted. This one, because the victims are newsmen, is likely to have a powerful effect on the mainstream media. If the Justice Department has been going after the phone records of AP reporters, what other reporters are having their privacy violated? Even the New York Times, which thought page 11 was just fine for the IRS scandal, put this one on page 1, above the fold. The White House is “dodging and weaving” today according to the Times.

But wait, there’s more, as the TV commercials have it.

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Last week was one of the worst for Obama in his presidency. This week looks no better. Indeed, it may be a long, hot summer for the White House. As Jonathan has pointed out, the IRS scandal is growing bigger, seemingly by the minute. The Benghazi scandal is continuing to percolate.

Now, the brand-new AP scandal has erupted. This one, because the victims are newsmen, is likely to have a powerful effect on the mainstream media. If the Justice Department has been going after the phone records of AP reporters, what other reporters are having their privacy violated? Even the New York Times, which thought page 11 was just fine for the IRS scandal, put this one on page 1, above the fold. The White House is “dodging and weaving” today according to the Times.

But wait, there’s more, as the TV commercials have it.

The Washington Post is reporting that Senator Lamar Alexander (R-Tenn.) is comparing Kathleen Sebelius’s attempt to raise money from private organizations to help implement ObamaCare to Iran-Contra. Alexander says,

This is arguably an even bigger issue because, in Iran-Contra, you had $30 million that was spent by Oliver North through private organizations for a purpose congress refused to authorize, in support of the rebels. Here, you’re wanting to spend millions more in support of private organizations to do something that Congress has refused.

And now the Washington Examiner is reporting that the EPA routinely waives the fees for FOIA requests made by liberal organizations and media outlets, but does not for those from conservative ones.

Let’s consider a few things here.

One is that separate scandals, such as IRS and Benghazi, tend to have synergistic effects on each other even though they are dissimilar. The whole is greater than the sum of the parts.

Another is that scandals such as the IRS and EPA that are similar inevitably produce a hunt for an overall pattern. Where else has the federal government under Obama been stiffing conservatives and giving liberals a pass?

A third is that reports of abuse produce more and more reports of abuse, as people and organizations realize that what happened to them was part of a pattern. John Podhoretz’s tale of COMMENTARY magazine’s woe at the hands of the IRS is very unlikely to be the only one to come out.

Finally, as the separate scandals begin to grow and, worse for Obama, begin to coalesce, even a media that has been an army of water-carriers for the Obama administration up until now will, despite themselves, smell the blood in the water and their instincts as journalists will kick in. Off they will go on the hunt for scoops. Undoubtedly they will find them.

When and if that happens, the scandals will have reached critical mass and the Obama presidency will be in mortal danger. The beating up of Jay Carney at the White House daily news briefing last Friday by the media generally was not a good sign.

If Obama loses the media, what does he have left? A record of accomplishment at home and abroad? Not exactly.

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The Times Joins the Six-Penny Press

An addendum, if I may, to Peter’s excellent dissection of the New York Times editorial page and Jonathan’s equally excellent dissection of the Times’s journalistically astonishing story on the IRS this morning and, especially, its even more astonishing headline. It should be noted that the Times has, apparently, decided to jettison 180 years of newspaper history and revert to the journalism of the six-penny press that flourished in this country in the early days of the Republic.

To see what I mean, just compare the Times’s egregiously and unabashedly slanted story on this hot-button political issue to today’s story in the Washington Post, which is hardly a wholly-owned subsidiary of the far right. The latter’s headline is, “IRS targeted groups critical of government, documents from agency show.” The Post’s editorial opinion can be summed up in one word, finding the IRS action, “appalling.”

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An addendum, if I may, to Peter’s excellent dissection of the New York Times editorial page and Jonathan’s equally excellent dissection of the Times’s journalistically astonishing story on the IRS this morning and, especially, its even more astonishing headline. It should be noted that the Times has, apparently, decided to jettison 180 years of newspaper history and revert to the journalism of the six-penny press that flourished in this country in the early days of the Republic.

To see what I mean, just compare the Times’s egregiously and unabashedly slanted story on this hot-button political issue to today’s story in the Washington Post, which is hardly a wholly-owned subsidiary of the far right. The latter’s headline is, “IRS targeted groups critical of government, documents from agency show.” The Post’s editorial opinion can be summed up in one word, finding the IRS action, “appalling.”

In the early days, newspapers were all unabashedly partisan and, usually, funded by the political parties whose causes they espoused. They were little more than editorial pages surrounded by a few pages of highly tendentious news. That is what the Times has become, at least with regard to domestic political news. Even the Times’s public editor, Margaret Sullivan, writes regarding the IRS story, “Many on the right . . . do not think they can get a fair shake from The Times. This coverage won’t do anything to dispel that belief.”

But the six-penny press disappeared beginning in 1835, when a grumpy, disheveled, (and extremely cross-eyed) journalist named James Gordon Bennett founded the New York Herald and changed journalism forever. Although he was a Democrat, his paper was not. Instead of telling his readers what he thought they ought to know, he told them what he thought they wanted to know: the news of the world that was beyond their immediate ken. And he told it straight, keeping his opinions to the editorial page.

His journalistic innovations were almost endless. He was the first to print, in a general circulation newspaper, a weather report, stock tables, sports news, society gossip, and crimes (the bloodier the better, to be sure). His was the first out-of-town newspaper to have correspondents in Washington, making him the founder of the Washington press corps. He was the first to have correspondents in foreign capitals. He even coined the word leak in its journalistic sense.

The Herald was an immediate success and would have the largest circulation of any American newspaper for much of the 19th century. Later newspapers such as the New York Tribune (founded in 1841) and the New York Times (1851) necessarily modeled themselves after the Herald.

And the Times used that model to become, unquestionably, the greatest newsgathering organization in the world, with the Pulitzer Prizes to prove it. In many ways it still is. But not, these days, when it comes to any story touching on American politics. With politics, like the old six-penny press before the revolution in journalism wrought by Bennett and the Herald, it now is merely a conveyor of the party line, a preacher to the choir, its political content not to be trusted by honest men.

That is an American tragedy.

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The IRS Scandal: the Future of Big Government Is Now

Regardless of where the investigation into the IRS’s enormous abuse of power leads, the scandal is already a headache for the Obama administration–and the Democratic Party in general–for the simple reason that it highlights the irresponsibility of the left’s project of ever-expanding and unaccountable big government. The fact that the IRS has been engaged in a campaign of harassment, intimidation, and suppression of conservative non-profits during the Obama presidency has rightly been the focus of reporting on the scandal. But there is an important detail that should not be overlooked.

We now know that the IRS campaign targeted not just explicitly “Tea Party” or other patriotic-sounding organizations, but “ones worried about government spending” and those who “criticize[d] how the country is being run,” as the Wall Street Journal reported. In other words, the IRS targeted anyone who disagreed with the president. Yet as outrageous as this is, there is an element of inevitability to it. The IRS is empowered to silence groups that IRS officials believe may oppose the IRS’s powers–which the IRS is abusing at will for its own financial and political benefit. So they simply used the powers they were given, and which are expanding under ObamaCare, to protect themselves and the administration from their common foes.

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Regardless of where the investigation into the IRS’s enormous abuse of power leads, the scandal is already a headache for the Obama administration–and the Democratic Party in general–for the simple reason that it highlights the irresponsibility of the left’s project of ever-expanding and unaccountable big government. The fact that the IRS has been engaged in a campaign of harassment, intimidation, and suppression of conservative non-profits during the Obama presidency has rightly been the focus of reporting on the scandal. But there is an important detail that should not be overlooked.

We now know that the IRS campaign targeted not just explicitly “Tea Party” or other patriotic-sounding organizations, but “ones worried about government spending” and those who “criticize[d] how the country is being run,” as the Wall Street Journal reported. In other words, the IRS targeted anyone who disagreed with the president. Yet as outrageous as this is, there is an element of inevitability to it. The IRS is empowered to silence groups that IRS officials believe may oppose the IRS’s powers–which the IRS is abusing at will for its own financial and political benefit. So they simply used the powers they were given, and which are expanding under ObamaCare, to protect themselves and the administration from their common foes.

Conservatives and liberals have been engaged in a debate over the size and scope of government to a greater degree in the Obama era in part because the president takes a radically different approach to the issue than his predecessors, both Republican and Democrat. (It was the Democrat Bill Clinton, after all, who declared the era of big government to be over.) Conservatives have long argued that restraining big government is a worthy goal in itself. But in the era of Obama, Democrats have been arguing just the opposite nonstop.

That’s why liberals scoffed at the recent Medicaid study showing, once again, that a central and expensive element of ObamaCare doesn’t work. But as was clear from Paul Krugman’s response, with few exceptions Democrats don’t see ObamaCare as a means to improving health; they see it as a massive expansion of government empowered to transfer wealth and play favorites. Expanding government’s power and reach–if possible, without a related increase in transparency or accountability–is the central ideological component of the modern Democratic Party’s worldview.

When Republicans warned of “death panels,” the overheated rhetoric was describing an entirely realistic scenario: ObamaCare putting unaccountable bureaucrats between patients and their doctors. And the line of attack resonated because the Democrats’ plans were so baldly undemocratic and invasive. As the Washington Post reported in February, a new Pew poll showed that “for the first time in at least the last two decades, a majority of Americans say Washington actually poses a threat to their ‘personal rights and freedoms.’”

The rise in bureaucracy alarmed Robert Nisbet, who wrote nearly 40 years ago:

Few things so clearly separate the liberalism of the nineteenth century from twentieth-century liberalism and progressivism as the nearly complete acceptance by the latter of bureaucracy. It is one of the tragedies of our age that the pluralism to be seen in so much of the social thought of the late nineteenth century and the concomitant inclination toward the local and the voluntary have virtually disappeared in our time, commonly referred to, if referred to at all, as archaisms and atavisms….

This is, of course, precisely the situation that Weber had in mind when he wrote early in the century about the conflict between bureaucracy and democracy, with the latter tending toward ever greater excesses of demagoguery. The paradox presented is tragic indeed. Through democracy, historically, bureaucracy has constantly expanded, the result of the rising number of social and economic functions taken on by the democratic state. But when bureaucracy reaches a certain degree of mass and power, it becomes almost automatically resistant to any will, including the elected will of the people, that is not of its own making….

Poll after poll among all elements of the population will reveal widespread hostility, but for the bureaucracy such evidence bespeaks only ignorance and the need of still greater bureaucracy for the purpose of liberating the people from their prejudices.

Nisbet closes that particular train of though on a quite pessimistic note:

More and more, I suspect, revolt in the West in whatever form it takes–peaceful and political, violent and terroristic, or military–will consist of hatred of bureaucracy and passionate desire to destroy it. It is the immensity of bureaucracy at the present time, and the growing immensity of opposition to it, that promises a drive toward total reconstruction that must itself be laden with implications of despotism.

Put simply, growing and unaccountable bureaucracy pits the government against the people. That is what we are seeing on a chilling scale with the IRS scandal. That is why Americans have remained so opposed to ObamaCare and other elevations of the bureaucracy over the public will–at the public’s personal expense, it should be noted, and for which the IRS comes collecting each year to fund its further insulation from the democratic process.

And that is why Americans expect the administration to take this scandal as seriously as they do and take action that would sufficiently curtail the taxman’s ability to run interference for the president and suppress his political opponents. Significant steps to rein in the IRS have to be taken–that much we know. The only question remaining is whether Democrats will move to clean up IRS corruption or continue profiting from it.

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Value: $0, Taxes: $40 Million

This week’s winner of the you-can’t-make-this-stuff-up contest is undoubtedly a front-page story in this morning’s New York Times. When New York art dealer Ileana Sonnabend died in 2007, she left her children a fabulous collection of modern art valued at $1 billion. Her children have already paid $471 million in estate taxes on the collection, being forced to sell off most of it to meet the bill. (This is a beautiful example, by the way, of why estate taxes should be abolished and replaced with a capital gains tax on inherited assets—the collection, an artistic whole in itself, had to be destroyed to pay the taxes due.)

But there is one item in the collection, a work by Robert Rauschenberg that cannot be sold. It contains a stuffed bald eagle and under the terms of the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Act, it is a felony to “possess, sell, purchase, barter, transport, import or export any bald eagle — alive or dead.” The estate, advised by three experts, including one from Christie’s, therefore, valued the work at zero. The IRS decided it was worth $65 million, and is demanding $29.2 million in taxes and $11 million in penalties because the heirs “inaccurately” stated its value.

The trouble, of course, is that the heirs didn’t inaccurately state its value. Anything that cannot, for whatever reason, be sold, is worth zero by economic definition. The value of anything is only what someone else is willing to pay for it. And to pay a dime for this particular artwork would be to commit a federal felony. To sell it for a dime would be to commit a federal felony.

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This week’s winner of the you-can’t-make-this-stuff-up contest is undoubtedly a front-page story in this morning’s New York Times. When New York art dealer Ileana Sonnabend died in 2007, she left her children a fabulous collection of modern art valued at $1 billion. Her children have already paid $471 million in estate taxes on the collection, being forced to sell off most of it to meet the bill. (This is a beautiful example, by the way, of why estate taxes should be abolished and replaced with a capital gains tax on inherited assets—the collection, an artistic whole in itself, had to be destroyed to pay the taxes due.)

But there is one item in the collection, a work by Robert Rauschenberg that cannot be sold. It contains a stuffed bald eagle and under the terms of the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Act, it is a felony to “possess, sell, purchase, barter, transport, import or export any bald eagle — alive or dead.” The estate, advised by three experts, including one from Christie’s, therefore, valued the work at zero. The IRS decided it was worth $65 million, and is demanding $29.2 million in taxes and $11 million in penalties because the heirs “inaccurately” stated its value.

The trouble, of course, is that the heirs didn’t inaccurately state its value. Anything that cannot, for whatever reason, be sold, is worth zero by economic definition. The value of anything is only what someone else is willing to pay for it. And to pay a dime for this particular artwork would be to commit a federal felony. To sell it for a dime would be to commit a federal felony.

The IRS has an “Art Advisory Panel,” that provides expert advice on the value of art works involved in estates. It was the panel that decided it was worth $65 million. Stephanie Barron, a member of the panel and an art curator at the Los Angeles County Museum of Art, said that, “It’s a stunning work of art and we all just cringed at the idea of saying that this had zero value. It just didn’t make any sense.”

It makes perfect sense and Ms. Barron’s statement is a classic example of the fallacy of the just price, that things have inherent value independent of the marketplace. They may have artistic value, emotional value, religious value, etc. But if they cannot be sold then they have no monetary value because they cannot be converted into money.

The IRS Art Advisory Board, I assume, is made up of art experts. It should add an economist to give the other board members a lesson in economics 101 when necessary. And the IRS should have someone empowered to tell the Bureau, “Are you crazy? This will make us look like idiots, and vindictive idiots at that.”

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Do the Rich Pay Their Fair Share of Taxes?

I must admit I’ve never understood the concept that some people would be excused from paying zero taxes and so would be completely disinvested in the system. I doubt I’m alone in favoring a far simpler tax code or my unease at the government’s willingness to push social or random political agendas through taxation. I doubt I am alone among residents of Montgomery County, Maryland, when I avoid shopping at local outlets and instead head to more consumer-friendly locations in Virginia. I can save 60 cents (!) a gallon simply by driving 15 minutes to Fairfax, Virginia. When it comes to tax burden, a new posting from my colleague Mark Perry offers some damning statistics:

We hear all the time that the “rich don’t pay their fair share of taxes” (123,000 Google search results for that phrase). Here’s an analysis using recent IRS data that suggests otherwise.

1. In 2009, the top 400 taxpayers based on Adjusted Gross Income earned $81 billion as a group, and paid $16.1 billion in federal income taxes (see chart).

2. In 2009, the bottom 50% of taxpayers, a group totaling 69 million, earned collectively more than $1 trillion and paid $19.5 billion in federal income taxes (see chart).

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I must admit I’ve never understood the concept that some people would be excused from paying zero taxes and so would be completely disinvested in the system. I doubt I’m alone in favoring a far simpler tax code or my unease at the government’s willingness to push social or random political agendas through taxation. I doubt I am alone among residents of Montgomery County, Maryland, when I avoid shopping at local outlets and instead head to more consumer-friendly locations in Virginia. I can save 60 cents (!) a gallon simply by driving 15 minutes to Fairfax, Virginia. When it comes to tax burden, a new posting from my colleague Mark Perry offers some damning statistics:

We hear all the time that the “rich don’t pay their fair share of taxes” (123,000 Google search results for that phrase). Here’s an analysis using recent IRS data that suggests otherwise.

1. In 2009, the top 400 taxpayers based on Adjusted Gross Income earned $81 billion as a group, and paid $16.1 billion in federal income taxes (see chart).

2. In 2009, the bottom 50% of taxpayers, a group totaling 69 million, earned collectively more than $1 trillion and paid $19.5 billion in federal income taxes (see chart).

Democracy breaks down when the majority of American citizens pay far less in taxes than they receive in benefits. When the majority expects entitlements for which they need not pay and candidates can win elections not by promoting fiscal responsibility but rather by promising the populist status quo, then we really have become Greece. Here, the web application “Soak the Rich” really is worth a look. How ironic that Greece was once the model for democracy, but now we follow it off the precipice.

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IRS and “Stalinist” Powers?

“Stalinist” is how IBD describes a provision in the new transportation bill, which would give the IRS the power to revoke passport rights for individuals they suspect of owing more than $50k in taxes. The key word here is “suspect,” because apparently no court ruling is required:

“America, Love It Or Leave It” might be an obsolete slogan if the “bipartisan transportation bill” that just passed the Senate is approved by the House and becomes law. Contained within the suspiciously titled “Moving Ahead for Progress in the 21st Century Act,” or “MAP 21,” is a provision that gives the Internal Revenue Service the power to keep U.S. citizens from leaving the country if it finds that they owe $50,000 or more in unpaid taxes — no court ruling necessary.

It is hard to imagine any law more reminiscent of the Soviet Union that America toppled, or its Eastern Bloc slave satellites.

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“Stalinist” is how IBD describes a provision in the new transportation bill, which would give the IRS the power to revoke passport rights for individuals they suspect of owing more than $50k in taxes. The key word here is “suspect,” because apparently no court ruling is required:

“America, Love It Or Leave It” might be an obsolete slogan if the “bipartisan transportation bill” that just passed the Senate is approved by the House and becomes law. Contained within the suspiciously titled “Moving Ahead for Progress in the 21st Century Act,” or “MAP 21,” is a provision that gives the Internal Revenue Service the power to keep U.S. citizens from leaving the country if it finds that they owe $50,000 or more in unpaid taxes — no court ruling necessary.

It is hard to imagine any law more reminiscent of the Soviet Union that America toppled, or its Eastern Bloc slave satellites.

The rule certainly seems excessive. There are already plenty of ways for the IRS to badger tax delinquents, including legal claims on personal property. Where is the evidence that a law like this is even necessary?

And could the bureaucrats at the IRS really be trusted to handle this smoothly? Even the TSA has made mistakes with its own, much more critical No-Fly List. Now the information is passing through two government agencies. Imagine getting incorrectly flagged as a suspected tax evader while trying to catch a flight.

The proposed law isn’t as unprecedented as one might think, though. The federal government already has the power to limit your overseas travel for a variety of reasons, including unpaid child support, The Atlantic reports. Plus, you can get the travel ban lifted if you officially contest the IRS allegations:

As [University of Georgia Professor Timothy] Meyer points out, MAP 21 certainly isn’t the first law to limit a person’s right to travel because they owe somebody money. The State Department screens passport applications every day for people who owe child support of more than $2500–a lot less than the $50,000 proposed here. And the tax system is routinely used to get Americans to make good on their outstanding liabilities. In fact, over the next few weeks, some folks won’t be getting the refund check they’re expecting if, for instance, they’ve defaulted on their student loans, owe state or local taxes, or haven’t ponied up for the child support they owe. Most people don’t realize it, but the IRS is in contact with federal and state agencies throughout the year, making sure you’ve paid your debts before they send you a chunk of change back in the mail.

The bill has already passed the Senate, but the chances of it being signed into law decreased after House Republicans tacked a provision to it that would require the Obama administration to approve the Keystone XL pipeline. So of course, Obama now says he will veto it. The House GOP should really consider adding Keystone XL approval to any related bills they’re not crazy about – instant Obama-veto, and more news stories about his problematic energy record.

 

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