PERSUASION IN INK

House Cloakroom: October 31 – November 4

Analysis: This week the House will take up two bills to reduce regulations on capital.  Additionally, the House will vote on legislation relating to wireless taxes as well as protecting Peace Corp workers from sexual assault.

Major Floor Action:

• HR 2940 – Access to Capital for Job Creators Act
• HR 2930 – Entrepreneur Access to Capital Act
• HR 1002 – Wireless Tax Fairness Act
• S 1280 – Kate Puzey Peace Corps Volunteer Protection Act

Major Committee Action:

• The House Oversight and Government Reform Committee will hold a hearing on “EPA Clean Air Rules.”
• The House Natural Resources Subcommittee on Energy and Mineral Resources will hold a hearing on “North American Offshore Energy.”
• The House Oversight and Government Reform Committee Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending will hold a hearing on “Issues with Government Investment in ‘Green’ Energy.”
• The House Financial Services Subcommittee on Financial Institutions and Consumer Credit will hold a hearing on “Consumer Financial Protection Bureau Assessment.”
• The House Foreign Affairs Subcommittee on Middle East and South Asia will hold a hearing on “US Policy Toward Afghanistan and Pakistan.”

Senate Cloakroom: October 31 – November 4

Analysis: This week the Senate will continue work on the “minibus” appropriations bill that includes Agriculture, Commerce, Justice, Science, Transportation and Housing and Urban Development funding bills.  Last week the Senate was unable to finish the votes on all the amendments that were offered and so will do so this week.  The Senate is also expected to take up another portion of President Obama’s jobs plan.  This section is expected in include $50 billion for infrastructure spending, $10 billion for a new infrastructure bank, and a 0.7% surtax on individual filers making for than $1 million dollars.

Major Floor Action:

• HR 2112 – Agriculture, Food and Drug Administration and Related Agencies Appropriations Act (includes Commerce, Justice, Science, Transportation, and Housing and Urban Development)
• The infrastructure section of the President’s jobs bill

Major Committee Action

• The Senate Foreign Relations Subcommittee on African Affairs will hold a hearing on “China’s Role in Africa.”
• The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on “Ten Years After 9/11.”
• The Senate Foreign Relations Subcommittee on European Affairs will hold a hearing on the “Implications of the European Debt Crisis.”
• The Senate Judiciary Committee will hold a markup on bill to repeal the Defense of Marriage Act.

Washington politicians talk a good game when it comes to job creation. But when it comes to actually doing something, they’ve been unable to provide long-term stability on tax policy and reassure business leaders they’re serious about deficit reduction. The result is a cloudy economic climate that has left businesses sitting on cash rather than spending it. Bankrupting America compiled the views of four CEOs from American companies: Starbucks, Honeywell, EA Sports and Coca-Cola. They’re ready for Congress to take bold action.

Democrats on the Joint Select Committee on Deficit Reduction last week floated a proposal that includes massive tax increases on wealthy Americans. While their plan would also include some cuts to entitlement programs, the tax-code changes make up a significant portion, according to press reports.

The Los Angeles Times reported: “Revenue would be raised mostly by bumping up the high-end tax bracket and limiting deductions for upper-income earners, those familiar with the talks said.”

This isn’t exactly a surprise. President Obama and his liberal allies in Congress are waging a war against successful Americans. House Budget Chairman Paul Ryan (R-WI) spoke at Heritage last week about the divisive nature of Obama’s scheme.

The so-called Super Committee, of course, could be an opportunity for Congress to reform the tax code. Writing in the Washington Times last week, Heritage’s J.D. Foster observed:

But if tax reform is part of a deficit-reduction exercise because the language of tax reform has been co-opted to disguise a tax hike, then both the hike and the reform should and likely will fail. Be very clear — tax reform is revenue neutral as traditionally scored. If a tax proposal is shown to raise revenue, then it’s not tax reform, it’s just another big-government tax hike.

As for that proposal floated by Democrats this week, it’s simply not a viable solution. This chart from Heritage’s 2001 Budget Chart Book reveals that Congress would need to increase tax rates on wealthy Americans to mathematically impossible levels to close future deficits.

In its push to get electric vehicles on the road, the Obama administration has partnered with a company in dire financial straits that is also under investigation by the Securities and Exchange Commission for insider trading.

San Francisco-based green technology company ECOtality received roughly $115 million in two separate Energy Department grants to build 14,000 electric vehicle charging stations in 18 cities. President Obama cited ECOtality in last year’s State of the Union address as a success story of his stimulus law. Ted Karner, president and CEO of ECOtality subsidiary eTec (now called ECOtality North America) watched from the crowd as the First Lady’s guest.

Energy Secretary Steven Chu boasted that his department was “working very closely [with eTec] to get EVs on the road.”

But the administration’s poster child for its electric vehicle project is riddled with financial and legal problems. According to ECOtality’s 10Q filing from the second quarter of this year, the SEC opened an investigation into allegations of insider trading.

On October 28, 2010, we and our ECOtality North America subsidiary, as well as certain individuals, received subpoenas from the SEC, pursuant to a formal Private Order of Investigation, in connection with a fact-finding inquiry as to trading in shares of our common stock from the period between August 1, 2008 and August 31, 2009.

The “certain individuals” under investigation are not public record, and the SEC said it could not provide the names of people involved in an ongoing investigation. ECOtality likewise declined to comment. But as the form notes, both ECOtality and its subsidiary – in addition to the unnamed individuals – are targets of the investigation.

In addition to its legal troubles, ECOtality’s financial health is tenuous. In the first six months of 2011, the company reported a net loss of more than $12 million, according to its 10Q. More than half of its income during that period came from its Energy Department grants.

ECOtality attributes its increasing losses (they increased by about $3 million from the previous year) to “the ramp up of activity and associated costs incurred under the DOE Contract in 2011.” The electric vehicle project for which ECOtality received federal money is behind schedule, according to Karner. As of last month, only about 3,000 electric vehicle charging units had been installed. Karner said the company would be requesting an extension of the program to accommodate the slow pace of production.

The extension of the company’s work on the EV project raises concerns about its financial health, given the large costs apparently associated with the project and its lack of other sources of income.

The wisdom of large government expenditures on electric vehicles is itself a dubious policy, as Heritage’s Nick Loris pointed out:

It should not be the focus of the Department of Energy to work to get EVs on the road.  The world petroleum market is a multi-trillion one.  That should be enough incentive for innovators, venture capitalists and entrepreneurs to get EVs on the road because if they make economic sense they’ll capture part of that market share and make billions. The economic reality is that PHEVs are not ready for primetime, and the best indicator for when they will be is when the government stops using taxpayer dollars to subsidize their production and consumption.

The echo chamber of Washington is hard at work. The consensus is growing that the U.S. military will need to aim for a slimmer but still perfectly effective military, thanks to the budget and capability cuts of the past three years. However, given the magnitude of ongoing defense budget cuts, a hollowing force simply does not translate into a “meaner” military.

For the past half-century and more, America has taken a leadership role in the world. This has manifest vital national interests all around the globe. As a result, the U.S. military has global responsibilities and reach. Our soldiers, sailors, airmen, and Marines are forward deployed, and the Armed Services project power around the globe every day to protect our citizens and our economy. This serves to maintain and deter strategic interests (from trade routes to countering powers like Iran) and fight and win wars.

However, the military’s role is even broader, because our forces also respond to domestic emergencies and natural disasters here at home and abroad for tsunami and earthquake victims, for example.

These are hefty responsibilities that require an adequate budget. However, Washington continues to raid the military’s budget like a piggy bank, and the effects are starting to show, with rapidly declining readiness across the military.

Still, some are calling for reduced defense budgets on the assumption (or hope) that America’s military will be less engaged around the world. But a smaller military would still be charged with meeting the threats, demands, and challenges of the 21st century.

The argument for a leaner but meaner military just doesn’t add up. This is particularly true if the military goes hollow or becomes less capable as a result. A world without the U.S. military as the guarantor of freedom is not pretty. With even more defense cuts being considered today, the U.S. military could quickly become only a regional power and cede our long-held military supremacy that has contributed to our role as a global superpower.

Rep. Paul Ryan (R-WI) is mighty disappointed with President Obama. The chairman of the House Budget Committee, who has bested Obama in head-to-head policy showdowns, blames the president for failing to outline a solution to the debt crisis while dividing America with talk of class warfare.

Ryan’s speech at Heritage yesterday made news for its strong critique of Obama. He sat down for an interview afterward to outline why he’s so disheartened by Obama. Ryan also redefined how Americans should look at class warfare, taking aim at crony capitalism and the politically connected who drive American further into debt.

Despite the monumental challenges facing America, Ryan said he remains an optimist. He’s hopeful the Joint Select Committee on Deficit Reduction will include some of the House-passed budget reforms in its final report.

The interview runs 5 minutes. Hosted by Rob Bluey and produced by Kyle Tuckness with the help of Hannah Sternberg. For more videos from Heritage, subscribe to our YouTube channel.

There’s more bad news for Obamacare. A new poll from the Kaiser Family Foundation shows that 51 percent of Americans have an unfavorable view of President Barack Obama’s signature health care law, while only 34 percent see it favorably.

Kaiser reports that this is “a low point in Kaiser polls since the law was passed,” and that the reason for the law’s declining popularity is rooted in decreased Democrat support:

While Democrats continue to be substantially more supportive of the law than independents or Republicans, the change in favorability this month was driven by waning enthusiasm for the law among Democrats, among whom the share with a favorable view dropped from nearly two-thirds in September to just over half (52%) in October.

The poll is the bitter icing on the cake for Obamacare’s bad month. In late September, Kaiser reported that Americans are paying more and more for their health insurance every year, with the price of family premiums increasing in cost by 9 percent between 2010 and 2011. Of that amount, Obamacare was responsible for between 1 and 2 percentage points, or approximately 20 percent, of the increase in premiums, according to Kaiser Family Foundation CEO Drew Altman. Obamacare was supposed to reduce costs, not increase it.

Then there’s the collapse of the CLASS Act — the long-term care insurance component of the health care legislation. In mid-October, Secretary of Health and Human Services Kathleen Sebelius admitted that the CLASS program can’t work, after months of insisting that it could. Sebelius said that “despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time.”

Increased health care costs and an untenable long-term care plan? Is it any wonder that Americans aren’t happy with the law? It’s possible for Washington to enact reforms that reduce health care costs for all Americans, but Obamacare isn’t the way to do it.

Evidence shows that “austerity” during a sharp downturn in 1920 coincided with quick economic recovery and robust growth throughout the rest of the decade. Nevertheless, there is a belief that the example of President Herbert Hoover from 1929–1933 was a failure of austerity, which pushed the economy into the Great Depression. It was not. Hoover never cut spending or slashed tax rates.

In fact, Hoover doubled spending in real terms during his four years in office. When FDR arrived at the White House, according to Cato economist Steven Horowitz, FDR’s advisors noted that, “‘When we all burst into Washington . . . we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administra­tion itself.’”

Economist Tim Taylor adds that “The budget ran a small deficit of .6% of GDP in 1931, followed by much larger deficits of 4.0% of GDP in 1932 and 4.5% of GDP in fiscal year 1933.”

And in 1932, Hoover raised taxes from a top individual income rate of 25 percent up to 63 percent, and the bottom rate from 1 percent to 4 percent.

Small wonder, then, why the economy didn’t quickly recover like it did after the downturn of 1920. Hoover followed the opposite path. Rather than cutting government to let the free market grow, he grew government, which shrank the free market and staved off recovery.

In his straightforward and scathing piece for today’s New York Post, Heritage senior fellow Peter Brookes discussed the devastating impact a sequestration of the defense budget would have on America’s military.

If the congressional “super committee” cannot find $1.5 trillion in budget savings over the next 10 years by November 23, the law would trigger automatic spending “sequestration” cuts of $1.2 trillion—of which roughly half a trillion or more would be from the defense budget. This spells major trouble for U.S. national security.

Since President Obama has been in office, Brookes points out, there have already been some $850 billion in Defense Department spending cuts (past, present, and future) over a 10-year period. These cuts eliminate 50 major weapons programs, and any more cuts would, in the words of Defense Secretary Leon Panetta, “be shooting ourselves in the head.”

These are scary words coming from (in Brookes’s words) “previously a green eye-shade ‘budgeteer’” like Panetta, but they are backed up by a recent House Armed Services Committee report that spells doom and gloom for our military and our economy if more cuts are made.

According to the report, the cuts would effectively “hollow out” America’s military. They would deeply undermine the Marine Corps and the expeditionary fighting force, leading to the smallest force in 50 years and compromising their ability to deploy to hot spots quickly in the event of a crisis—a hard-learned lesson from the Korean War. The cuts would take the Army below pre-9/11 troop levels and lead to an Air Force with two-thirds fewer fighters and strategic bombers than in 1990.

And last but not least, the Navy would have to mothball over 60 ships, including two carrier battle groups, shrinking it below pre–World War I levels.

America’s nuclear deterrent force—the foundation of U.S. national security—would be undermined as we would likely lose one of the legs of the U.S. nuclear triad. As the U.S. nuclear deterrent shrinks and loses credibility, some of the 31 countries that enjoy protection under the U.S. nuclear umbrella may consider going nuclear out of growing fears about their vulnerability. This would be extremely destabilizing and could lead to costly conflicts.

These cuts, Brookes warns, would “harm our ability to deter, dissuade or deal with adversarial activities and shape world events in our favor.” This is particularly the case with Iran and North Korea as well as with China, which has increased its yearly defense budget by double digits for the past two decades and has shown itself to be increasingly assertive in Asia Pacific. With rising threats to America’s interests at home and abroad, now is not the time to reduce America’s military deterrence.

Finally, America needs to reform the real drivers of the debt crisis—the big three entitlements—instead of trying to balance the budget on the backs of the U.S. military and compromising U.S. national security.

What is America? What is this country fundamentally about? By and large, pundits and politicians on the right and the left don’t seem to get it. Some come close, but there is a widespread failure to explain why the Founders established this republic.

On this date in history, two of the clearest expressions of the American ideal were first articulated.

On October 27, 1787, a young Alexander Hamilton, writing under the pen name Publius, published the first Federalist paper in New York’s Independent Journal. In the very first paragraph, he laid out the implications for “mankind” of the momentous choice before the American people:

[I]t seems to have been reserved to the people of this country, by their conduct and example, to decide the important question, whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend for their political constitutions on accident and force.

At stake in the debate to ratify the Constitution was more than “your liberty, your dignity, and your happiness”—important as they were and remain: Americans were embarking on an experiment in self-government that would, if successful, vindicate man before all the princes, kings, and assorted thinkers who had firmly denied that men could govern themselves.

At the heart of the Founding, as James Madison would later explain in Federalist No. 39, was “that honorable determination, which animates every votary of freedom, to rest all of our political experiments on the capacity of mankind for self-government.”

One hundred and seventy-seven years later, on October 27, 1964, Ronald Reagan, a former actor who had only recently started dabbling in politics, delivered a speech entitled “A Time for Choosing” in support of Senator Barry Goldwater’s presidential run. The choice Reagan asked his audience to make was not simply between Goldwater and LBJ but between two views of America—one rooted in the Founding, the other in progressive liberalism:

This is the issue of this election: whether we believe in our capacity for self-government or whether we abandon the American revolution and confess that a little intellectual elite in a far-distant capitol can plan our lives for us better than we can plan them ourselves.

Reagan sought a counterrevolution against the Progressive faith in the rule of experts and the rise of the administrative state. He sought to reestablish the Founders’ vision of republican self-government.

Nearly 50 years later, the world has changed, in no small part thanks to Reagan. The choice however, remains the same: Will we uphold the Constitution’s republican framework of limited government and continue to prove that men and women are capable of governing themselves and running their own lives? Or will we embrace the Progressive faith in the rule of benevolent experts—unelected, unaccountable, and largely unknown—and entrust them with the care to issue regulations governing every aspect of our lives?