Principle Justifies Penury

It ain't by princerples nor men
My preudunt course is steadied-
I scent wich pays the best, an'then
Go into it baldheaded.
-- James Russell Lowell, The Biglow Papers

A Politician's Dictionary:
Principle. n. Something to stand on.
Government. n. Something to shrink.

It is impossible for a simple columnist to put himself into the minds of some in the Republican Party. That explains the dilemma that confronts this writer as he tries to explain the most recent example of Republican House members refusing to increase federal revenue by taking steps that cost the taxpayer nothing.

An earlier example of this kind of thinking involved the IRS and took place over a period of 5 years. It started in 2006 when, at the urging of the Bush administration, the IRS turned over 12,500 delinquent tax accounts of $25,000 or less to private collection agencies. According to the New York Times, the expectation was that the private debt collectors would collect $1.4 billion over ten years at a cost of twenty two to twenty four cents on the dollar for each dollar collected. When turning delinquent tax payers over to private collection agencies was first proposed in 2002, then Commissioner of Internal Revenue, Charles Rossotti, told Congress that if it hired additional IRS employees to handle collections, the employees could collect delinquent taxes at a cost of only three cents per dollar collected. Notwithstanding Mr. Rossotti's cautionary tale, private debt collectors were hired in 2006. At first blush one thinks that given the reduced benefit to the government, such hiring made no sense. Then one realizes that the increased cost of collection benefits the much admired private sector whereas hiring more agents, even though economically efficient, has the lamentable side effect of increasing the size of the much disliked (by Republicans) federal bureaucracy.

In 2009, after Congress had been taken over by Democrats, it was announced that the IRS had concluded that what Mr. Rossotti had said 7 years earlier was correct and the private debt collection practice would end. Senator Charles Grassley (R. IA) was outraged. He said the IRS was caving in to "union-driven political pressure." (If there's anything Republican hate more than taxes it's unions. That's why on midnight July 22, 2011, the Federal Aviation Administration had to lay off 4000 workers and the government is, as this is written, losing $200 million a week in airline ticket taxes. Congressional Republicans refused to extend the FAA's operating authority because the Democrats refused to include a provision that would make it harder for airline and railroad workers to unionize.) Mr. Grassley may have been outraged when the IRS quit using private debt collectors, but, as it turns out, he and his colleagues had the last word.

In March of this year a budget compromise was reached. The White House had requested an increase in the IRS budget of approximately 9%. With that money an additional 5000 personnel could have been hired. In testimony before Congress, Treasury Secretary, Tim Geithner, said: "Every dollar invested in IRS yields nearly five dollars in increased revenue from non-compliant taxpayers." Abhorrence of big government prevailed. A release from John Boehner's office in early April said the IRS would not receive its requested increase in funding.

The more recent example of denying an agency increased funding even though the increased funding would generate additional revenue for the government, is offered by the House Appropriations Committee. When the Securities and Exchange Commission submitted its FY 2012 budget proposal to the Committee it requested $1.407 billion, an increase of $264 million over its FY 2011 appropriation. In explaining its request for increased funding it said the money sought would "support the agency's work to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." It said: "It is important to note that the SEC's FY 2012 funding request will be fully offset by matching collections of fees on securities transactions." It pointed out that under the Dodd-Frank Act the fees it collects from financial institutions must "match the total amount appropriated for the agency by Congress" and "under this mechanism, SEC funding will be deficit-neutral, as any increase or decrease in the SEC's budget would result in a corresponding rise or fall in offsetting fee collections."

The House Appropriations Committee refused to increase the SEC's budget. A New York Times report says that in denying the budget increase the Committee referred to the agency's "troubled past" and "lack of ability to manage funds" and further said it "remains concerned with the S.E.C.'s track record in dealing with Ponzi schemes.

According to the NYT, in 2010 the S.E.C. "turned over $2.2 billion to victims of financial wrongdoing and paid hundreds of millions more to the Treasury, helping to reduce the deficit." Such figures did not impress the Republicans. They stood on principle thus proving that unlike many people, when Republicans say "it's not the money, it's the principle of the thing" they actually mean it.