Economy & Budget

What glaring oversight was a top driving factor in Congress’s failure to avert $1.2 trillion in automatic spending cuts? As the partisan posturing drags on after Congress’s failure to strike a deal by the March 1 deadline, a bipartisan lapse comes into focus: refusal to face the fact that we need to reshape the Pentagon budget. Because Congress dropped the ball and failed to address out of control Pentagon spending, critical government programs will now be slashed across the board.

Everyone from former Defense Secretary Leon Panetta to weapons contractors cried wolf about the devastating impact of reductions in Pentagon spending. But when done the right way, smart Pentagon cuts won’t harm our security. Instead they make the country stronger by contributing to our economic health.

As we mark the 100th anniversary of the income tax this year, most taxpayers won’t be celebrating. Instead, they will continue to loathe a tax system that’s so complex, unfair, and riddled with loopholes that average taxpayers have little idea what they actually owe. It’s a system so riddled with inefficiency and complexity that an entire industry has sprung up around it to help taxpayers figure out how to pay the least amount of tax or avoid paying taxes altogether.

In fact, tax avoidance has reached an art form in today’s economy. Individuals and businesses spend tens of billions of dollars each year on accountants, attorneys, tax software, and storefront tax-preparation services to help them pay the least amount of taxes possible.

Many people were getting in their licks yesterday as the Committee on Banking, Housing, and Urban Affairs gave three top government officials a tongue lashing about the way they are not handling the failure of major financial institutions to comply with two complex regulations governing money laundering and sanctions.

As sequestration takes effect, our lawmakers will be asked to once again step up and pass a major debt-reduction deal.

Let’s be clear: passing a sensible debt deal will be better for every single person in this country, from the Jaguar drivers to the bus-takers. Failure to bring this to a swift and decisive conclusion will be okay for the 1 percent and an absolute disaster for the 99 percent. As a relatively recent entrant to the former group and as a lifelong advocate for the latter, I say this with certainty.

Here’s why:

Next week [Thursday, March 14], the House Armed Services Committee will hold a hearing on whether the time is right for a round of Base Realignment and Closure (BRAC).
 
Last year, then Secretary of Defense Leon Panetta requested authority for two rounds--one in 2013 and the other in 2015. The suggestion was not well received. Moderate Sen. Claire McCaskill (D-Mo.), left no doubt that the idea would not fly. “There is one area where there is absolutely no room for compromise this year, and that is BRAC,” she said. “I will not support the request for a BRAC process to be carried out in 2013.”

In recent years, Virginia’s General Assembly has not distinguished itself as a serious or effective bipartisan legislature. In fact, the venerable reputation of the oldest legislative body in the Western Hemisphere has devolved into something of a joke.

The sometimes stunning antics of the Republican-dominated General Assembly and Republican Gov. Bob McDonnell have provided plenty of comedic fodder for Jon Stewart, Jay Leno, and their late night counterparts.

When the Federal Reserve slashes interest rates, the presumption is that it will lift the economy. The lower cost of credit is supposed to result in more investment and expansion, possibly at the expense of higher inflation. This has been central bankers’ approach since time immemorial, yet recent experience turns this notion on its head. 

The Fed is now in year five of its zero interest rate policy in which it has held the federal funds rate close to nil. But the result has not been what was expected: the U.S. economy has neither reignited nor been torched by inflation. Instead, it has been stuck in neutral, unable to mount a strong recovery that typically follows recessions. The Fed presses on, though, announcing recently that it will not raise rates until the unemployment level is below 6.5 percent.

Today, a Senate Banking Committee hearing will examine the extent, causes, and consequences of banks’ failure to adhere to anti-money laundering laws, and the laxity of regulators who are meant to keep the banks in line.

The hearing – entitled “Patterns of Abuse: Assessing Bank Secrecy Act Compliance and Enforcement” – follows a string of banking scandals that have raised serious questions about financial institutions’ compliance with anti-money laundering rules. Illicit flows of money through the financial system have been linked to corruption, international drug trafficking organizations, terrorist groups and sanctioned nations.

Despite all the chatter to the contrary, it’s likely that Americans will indeed feel the short term impacts of the across-the-board budget cuts required by the sequester. However, it’s the long-term effects of drastic reductions in federal investment in innovation that could have even greater repercussions for the economic health of the nation.

President Obama speaks frequently about the need to strengthen America’s middle class by creating more good-paying jobs and making the tax system more equitable. How the Congress will react to his proposals is highly uncertain, and what will emerge from the legislative process is unpredictable. But there is one action the president can take now that will accelerate movement of millions of Americans into the middle class, reduce inequality – and improve care for the nation’s elders and people with disability at the same time. With the stroke of his pen, the president can remove from the Fair Labor Standards Act the archaic “companionship exemption,” which excludes home care workers from federal wage protections.