Economy & Budget

All hands on deck to preserve the JAGM program

When Washington, D.C. spins into a frenzy over defense cuts, even good programs can be ditched in a panic. Sadly, at times like this joint programs and supposed “extras” like new missiles are particularly vulnerable.
That’s the case with the Joint Air-to-Ground Missile program, known as JAGM. JAGM does not have a zippy name or a big marketing campaign behind it. Basically, it’s a replacement for three famous but aging missile types: the Hellfire, the Air-Launched TOW and the Maverick. Despite incremental improvements over the years, there’s no getting around the fact that all three of those missiles are 1960s-era designs at the end of their service lives.
Enter JAGM, a nearly $1 billion dollar initiative to develop a single missile that all branches of the military can share. Because it’s a joint program it has to make it through triple the budget reviews to survive. Fear is spreading that the Navy or Army will pull out, try to stick the other service with the whole bill, and end up collapsing the JAGM program like a house of cards.
That would be a mistake, because JAGM comes with important new capabilities that the warfighter has long been asking for. And it does so at lesser cost to the taxpayer than the legacy missiles it replaces.


A patient in need

Our economy is like a sick patient, languishing in the hospital. The patient is sick in part because of doctor (Federal Reserve) failure. And yet, we continue to depend on the doctor to treat the patient. The truth is that the doctor’s treatment options are limited and those options will not effectively heal the patient. The patient needs to be rushed to a different unit, with different doctors who will initiate a new treatment strategy, one that does not rely on the Fed for its economic salvation.
This seems to have finally been recognized in Washington, with members of both political parties pivoting to the issue of “jobs, jobs, jobs,” and Fed Chairman Ben Bernanke admitting that “most of the economic policies that support robust growth in the long run are outside the province of the central bank.” And while we can debate the relative merits and demerits of President Barack Obama’s job plan, one thing is clear: It is incumbent on Congress and the President to restore the economy. But the current political logjam means that we may continue to depend on Fed action, even though it is increasingly apparent that the Fed is not as omnipotent and infallible as some previously thought.


Trade deals negotiated in ignorance?

If the Senate learned right before a ratification vote that America’s chief arms control negotiator knew little about arms control, any treaty this official concluded would be dead on arrival.  Ditto for a peace treaty produced by a diplomat demonstrably short of knowledge about the adversary.  Why, then, do both the House and Senate seem so gung ho about three trade agreements handled by a U.S. Trade Representative who recently revealed major misconceptions about both America’s international commerce and its domestic economy?

Anyone doubting that this description applies to Ron Kirk should read an interview that President Obama’s chief trade envoy gave to Tim Robertson of the California Fair Trade Coalition in late August.  Even allowing for impromptu nature of the exchange, several of Kirk’s answers to Robertson’s questions about the pending trade deals with Colombia, South Korea, and Panama, make painfully clear that America’s trade policy point man is largely unaware what kinds of products the United States imports and, at least as important, what kinds Americans make.  Consequently, it’s hard to imagine him knowing whether the provisions he agreed to in these deals and trade-offs he accepted will help or harm America’s faltering economy – the acid test of U.S. trade policy.

Like President Obama and the rest of his team, Kirk has usually treated imports as if they didn’t exist.  Even though America’s purchases from abroad subtract from gross domestic product and therefore reduce employment, Kirk’s assessment of trade policies and their effects has focused almost solely on their potential to increase exports.   


Misleading job claims cloud defense spending debate

Secretary of Defense Leon Panetta, Boeing Corporation Vice-President James Albaugh, and House Armed Services Committee Chair Howard P. “Buck” McKeon have something in common: they are all arguing that scaling back the Pentagon’s spending plans will cost large numbers of jobs. Specifically, they suggest that if the budget “super committee” fails and automatic cuts in defense spending are triggered, unemployment could rise by as much as one percent.

Secretary Panetta has been making these claims in calls to members of Congress, and McKeon’s committee staff has made similar assertions in a memo whose findings will be submitted to the super committee.

These claims are misleading and irresponsible. They inject an economic fear factor into the defense budget debate that stands in the way of clear thinking about what level of spending is needed to protect the country and our interests.


America needs a balanced budget

Sixteen years ago, Congress failed to pass a balanced budget amendment by a single Senate vote. At that time, the national debt was approximately $5 trillion. That solitary vote resulted in our nation adding almost $10 trillion to the debt in the years since.

For those who were confident that Washington could show self-restraint without legal force, this has been an extremely expensive lesson. Both Republicans and Democrats alike are guilty for the hefty tab on our national credit card. Unfortunately, it is one that our children and our grandchildren will be forced to pay.


Small business owners support bold policies to spur innovation

Lawmakers have been spooning extra helpings of anti-regulatory rhetoric onto the small business plate for months, blaming government rules for the lack of small business growth and the nation’s ongoing economic problems. While legislators are right to view small business as the key to economic recovery, the record must be set straight: small businesses simply don’t view regulations as the culprit.

The Small Business Majority released research on Sept. 20 indicating that a mere 13 percent of small business owners believe government regulations are what burden their business most. Economic uncertainty about the future was the biggest issue for small business owners at 46 percent, while 43 percent said the rising costs of doing business, including the cost of fuel, electricity, heating and cooling, was their top concern.

While a broad array of factors influence economic uncertainty, it’s simply not logical to label regulations as the No. 1 problem. Do regulations need to be closely monitored? Of course. Do they cause some small businesses headaches? Sure. But claiming that regulations are the primary cause of stagnant small business growth is misguided. Our opinion poll found 86 percent of small businesses believe the federal government does not understand how small businesses really work, and the regulation uproar perfectly illustrates that point. Another example is a bill named the Regulatory Accountability Act of 2011, which was introduced last month to reform the regulatory process. Its authors claim small businesses have stopped hiring because of regulations, but, really, they’re just playing politics. 


Subcommittee members should oppose PBM merger

Recently, the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet began hearings that will play a significant role in deciding the fate of Express Script's proposed acquisition of Medco Health Solutions.  The outcome is tremendously important - especially to lower-income and minority communities across the country.  These communities are already at a significant disadvantage when it comes to having access to equal and affordable healthcare.  An approved merger could make things a lot harder for a sector of Americans already struggling just to make ends meet.  I hope that the subcommittee members will carefully consider this, and all of the potentially negative effects of an approved merger, before making their decision.

Most Americans today are feeling the effects of our troubled economy in some way or another.  This is especially true for the underserved communities that were struggling just to keep up even when our economy was doing well.  Education, housing, healthcare and jobs are just a few of the areas where underserved Americans have historically lagged behind.  Our economic downturn has only exacerbated these disparities.

For instance, according to the Department of Labor, African American unemployment reached 16.7 percent last month - the highest level since 1984.   Similarly, communities that are traditionally less likely to own their own home are even more likely to have lost their homes as a result of the recession.  And finally, the number of Americans without health insurance grew to 49.9 million last year - this number includes a disproportionate number of lower-income and minority Americans.


These statistics are not pretty, and we need to work together to get things moving in a more positive direction.  To start, we can avoid making things worse for those that have been hit the hardest by taking away access to local community pharmacies and increasing prescription prices.  Unfortunately, this is what could result from an approved merger between two of the largest pharmacy benefit management (PBM) companies.

Not all mergers are bad - and there are certainly cases where merging two industry leaders would be a good thing.  However, in this particular case with these two specific companies, the consequences greatly outweigh any potential good.

PBM companies, which serve as middlemen between pharmacies, insurance companies, and patients, already wield a one-sided advantage in setting prescription medicine contract and reimbursement terms for community-based pharmacies. Express Scripts, one of the larger PBM companies, has already taken an aggressive stance against one of the country's leading community chain pharmacies - a stance that will potentially harm one in three Americans who use this national pharmacy by denying patients access to their local trusted pharmacist and cutting off the availability and convenience of the largest network of 24-hour pharmacies.

If Express Scripts is allowed to merge with Medco, it is very possible that the merged PBM will not only continue this bullying behavior, but will use its size and dominance to cause even greater harm to patients, community-based pharmacies and healthcare outcomes.

The potential harm posed by this merger is nationwide.  Many in the African-American and poorer communities across this country will be adversely affected if this merger is allowed to continue.  Their medical and economic well being are on the line at a time when they at their greatest vulnerability.

In these tough economic times, we can't afford to push policies or plans that increase the already heavy burden on hard-working Americans. Unfortunately, that is exactly what the planned merger would do.  I hope that subcommittee members do not support this potentially harmful course of action and stand with those in need of basic medical care.
Eva M. Clayton is a former member of Congress who represented eastern North Carolina (1992-2003), Member of the Agriculture & Budget Committee, and Chair of the Congressional Black Caucus Foundation.



An easy solution that saves billions of dollars

A recent government report reveals that illegal immigrants improperly received billions in taxpayer dollars due to an easy-to-fix loophole in the tax code.  The tax benefit at the heart of the debate is the popular child tax credit, which can eliminate up to $1,000 per child off a parent's tax bill.
Because this credit is refundable, as it stands parents who owe no taxes can receive cash back from the government for their children through the tax code.  Since the credit has been expanded over the years to help people make ends meet in the recession, the number of people claiming the credit has skyrocketed.   Defying common sense, this refundable tax credit can be provided to an illegal immigrant so long as the immigrant is able to obtain an Individual Taxpayer Identification Number (ITIN) from the IRS.
The new report shows that in 2010, the government's award of $4.2 billion through the credit to illegal immigrants was up from $924 million in 2005.   In 2010, illegal immigrants received about 15 percent of the total $28.3 billion awarded through child tax credits.  That’s just wrong.


Obama tax reforms are misguided

Leaking out of Washington recently are numerous silver bullets for raising tax revenues that will help solve the deficit and unemployment problems.  Unfortunately, they are cloaked in terms of class warfare, and a closer examination reveals that they are either unfair or counterproductive.  Two such proposals are the so-called “Buffet Rule” that seeks to raise the effective tax rate on millionaires to that of their employees; and the elimination of many present deductions on “High Earners” i.e. those earning over $200,000 (single) or $250,000 (joint).  The basic reasoning underlying the lower millionaires’ rates is that much of their income is taxed as dividends or capital gains, and the belief is that “High Earners” can afford to lose deductions for such items as mortgage interest, real estate taxes on their homes and charitable contributions.
In reality, a dividend is already taxed twice – once when the profits are earned, and a second time when distributed (three times in the case of a corporate shareholder who distributes the same to its shareholder).  Furthermore, higher taxes on dividends creates an unhealthy bias in favor of debt versus equity in that interest on the debt is tax deductible to the corporation, whereas dividends it pays out are not.  This bias creates an incentive on the part of corporations to borrow for their capital needs instead of through equity capital — a practice that leads to dangerous overleveraging of corporate balance sheets.  Interestingly — and I am not suggesting this – if one is looking to tax millionaires on all their income at the same rate no matter how different the origin or nature, why do we exempt huge amounts millionaires earn as interest on tax free Municipal and State obligations?  The answer is that making such interest taxable would raise the interest rate states and municipalities would pay to borrow, and that simply would be “politically unthinkable.”


Fighting the wrong kind of trade wars

With markets in turmoil and consumer confidence at record lows, it is time for the U.S. to overtly become more selfish. In fact, looking out for number one is likely the best way to remain number one. To be clear, by selfish I do not mean senseless.  Focusing first on the nation’s self-interest should not be a proxy for surface level patriotism or protectionist policies. Selfish, in today’s economic context, means engaging in a national effort that is singularly focused on competing and winning in a globally competitive and interconnected society.
The President and Congress can do just that over the next 60 days.  We have a window of opportunity right now in which the United States can spur much-needed growth by passing the pending free trade agreements and then pivoting to upgrading our trade agenda. By passing free trade agreements with Colombia, South Korea and Panama the U.S. can increase exports by more than $12 billion a year and create or sustain 70,000 jobs.