Sneaking Suspicions

Archives-- April 28-May 4, 2002 (Week 17)

Commentary from a practical perspective

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This page includes posts from the site's seventeenth week, April 28-May 4, 2002 in the usual reverse order. Each week's postings are perma-linked to these pages.

May 4, 2002

Limited loyalties can produce limited tenures

A NYT/AP article about the potential removal of Thomas White as the Army Secretary over a weapon program and Congressional relations was at least as intriguing for what was missing from the story as for what was in it.

According to the report,

Thomas White's future as the Army's civilian chief appeared in doubt Friday amid allegations the service tried to undermine Defense Secretary Donald H. Rumsfeld's decision to pull the plug on an $11 billion weapon program....

Rumsfeld told reporters Thursday he was disturbed by reports that Army officials had gone behind his back to Congress in hopes that politics would overpower policy and save the Crusader program, which is developing an advanced artillery system to replace the Cold War-era Paladin artillery gun.

"I have a minimum of high regard for that kind of behavior,'' Rumsfeld said.

Victoria Clarke, Rumsfeld’s spokeswoman, made her boss’s sentiments about White’s potential responsibility fairly obvious, as reported in the breathless prose of Beltway-speak:

She did not mention White or say his job was in jeopardy but pointedly declined to give him a full endorsement.

When asked whether Rumsfeld remained confident in White, Clarke replied, "He has full confidence that they will get to the bottom of this.''

"Those who are responsible for inappropriate behavior ... will be held accountable,'' she added.

White ran into trouble after Deputy Secretary Paul Wolfowitz told him to produce a plan to close out the Crusader program and use the freed-up money for other programs.

It looks like somebody in the organization didn’t like receiving the memo:

"Some time after'' Wolfowitz did that, Army officials sent faxes and "talking points'' to congressional offices that did not support Rumsfeld's decision to kill Crusader, she said.

Clarke then made a comment that one would think military folks in particular would understand:

"When a decision has been reached, people are expected to support it,'' she added, referring to Army leaders.

This story is missing a couple of related elements. Perhaps it was a simple matter of space limitations for the deadtree edition. (That’s not a problem here, is it?)

From my perspective, the story brings up a few additional points.

For example, on numerous occasions in both state and city government, I have seen the same bureaucratic mindset on display in this case.

Some have expressed the sentiment to me directly, along these lines: "Cabinet secretaries come, and cabinet secretaries go. I ain’t going anywhere, and I’m not gonna stop doing things the way I want."

Others simply show the same attitude by what they do, or sometimes don’t do, to slow or stop the implementation of a new approach to doing the public’s business.

Anyone in the Defense Department who read Rumsfeld’s Rules, particularly the segment dealing with the DoD, could have predicted that attempted endruns of the Secretary could have ugly consequences:

Reserve the right to get into anything and exercise it. Make your deputies and staff realize that, although many responsibilities are delegated, no one should be surprised when the Secretary engages an important issue.

In a segment on serving in government, Rumsfeld told anyone working for him how he viewed his responsibility to carry out the Administration’s efforts at reforming the military’s programs:

Congress, the press, and the bureaucracy too often focus on how much money or effort is spent, rather than whether the money or effort actually achieves the announced goal.

On the personnel side of the issue, it’s not as if Rumsfeld and the Bush Administration hadn’t previously tried to make the Army understand who was in charge, in a fairly pointed fashion.

Recall, for example, the March 6 resignation of Mike Parker, the short-tenured head of the Army Corps of Engineers, after his departure from the Administration’s script.

As I wrote in a previous post, the Assistant Secretary of the Army for Public Works set himself on fire when he gave his loyalties to his former fellow Congressmen a greater priority than carrying out the responsibilities delegated to him in his new role.

You’d think that by now some folks would pick up on a brutally obvious hint or two about the likely results of disloyalty, now wouldn’t you?

Those who work in government in the executive branch often have the opportunity to influence policy choices by the elected leadership and their appointed officials. There’s nothing wrong with that effort, and much good can and does result from it.

On the other hand, if your position doesn’t carry the day, you have a few options: Carry out the policy choice made by others, vote with your feet, or run for office yourself.

If you also want to keep your job, deliberately screwing around with a decision with which you don’t agree is not among your alternatives.

May 3, 2002

Who's in charge here?

A NYT piece today indicates the potential for a really interesting backlash from Massachusetts residents.

The Massachusetts House has overwhelmingly approved a sweeping $1 billion tax package aimed at staving off deep cuts to state programs.

Among the collection of targeted tax hikes are increases in the cigarette tax and the capital gains tax rate. It also reduces personal exemptions for singles and married couples, and alters the deduction for charitable donations.

The most intriguing part of the package, which would "freeze a voter-approved income tax rollback," seems designed to infuriate.

I can well imagine those who successfully pushed for the voter initiative having a field day with that decision.

Look for commercials on Boston television channels, shouting something like "What part of ‘cut our taxes’ didn’t you understand?"

Ways and Means Chairman Rep. John Rogers, a Democrat (surprise!), issued a Claude-like statement:

"We can no longer tax and spend, we have to tax and cut. It's really the worst of both worlds. It's extremely unpopular politically,'' he said.

Massachusetts has a well-deserved reputation for being a high-tax state. The vote for the increases seems to be enough to override the promised veto. The ultimate veto, however, may come from voters who may remind individual House members about the consequences of not taking them seriously.

I plan to keep tabs on this story. Looks like it could be fun to watch--from a distance.

Click here for this week's golf column, if you'd like.

May 2, 2002

This gesture's for you.

From a news report at MSNBC:

A defiant Yasser Arafat emerged from his shattered headquarters on Thursday for the first time since the end of a monthlong Israeli siege, flashing a V-for-victory sign to cheering supporters.

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Agence France-Presse

In response, I’d like to make my own two-fingered salute—the British version, in which the back of my hand is facing Arafat.

My salute is not a V-for-victory sign. It has its own, special meaning.

I feel better already.

May 2, 2002

I didn’t mean it.
(In which life imitates art just a little too well.)

A while back I wrote an essay for this site that proposed a whole new set of taxes for state governments, based on the original seven deadly sins.

Among the proposals, for example, I suggested the following:

All 7-11 Big Gulp or similar oversized carbonated sugar water drinks sold at convenience stores incur a Gluttony Tax of $3 above the retail price.

It looks like someone took the idea seriously, at least for a while, anyway.

A controversial California bill aimed to slim down overweight children by slapping a new tax on popular soft drinks fizzled after receiving a lackluster response from lawmakers.

State Sen. Deborah Ortiz, who sponsored the proposal to slap a 2 cent per can tax on sodas, said Wednesday she was stripping the tax proposal out of her bill ....

Ortiz’ original bill had sought to raise revenues for state-funded health and fitness programs aimed at young people....

I’m not sure how else to say this, so here goes:

It was a joke.

I didn’t mean for this idea to be taken seriously.

I’m flattered, but really, you shouldn’t have.


May 1, 2002

Hearing Mr. Softee again

As we sat in church in Philadelphia on Sunday afternoon, the familiar sound of the Mr. Softee theme warbled through the open stained glass windows. My wife and I looked at each other and smiled, both thinking back to our childhood.

She said, "It’s been a long while since I heard that."

I said, "That, and the Jack ‘n’ Jill truck. We’ll have to explain it to Julie [our daughter]. I’m sure she’s never heard it before."

Apparently a group of Connecticut citizens would prefer to never hear Mr. Softee’s sound ever again.

Community activists in Hartford are trying to eliminate the musical announcements that for decades have successfully drawn kids to the ice cream trucks like, well, kids going for ice cream.

"I can't stand it anymore," said Hyacinth Yennie, a South End community activist who has helped lead the charge against Mister Softee. "Every night, it's the same songs, over and over. It drives you crazy."

Police issued noise ordinance citations to Felix Rios, the local Mr. Softee operator, but the soft serve ice cream seller’s lawyer defends the practice on eminently conservative grounds:

"The way the city's noise ordinance is written is unconstitutional," [Ron] Johnson said last week. "The music coming from an ice cream truck is a time-honored tradition."

I agree.

Keep playing that song, Mr. Rios; but first, give Ms. Yennie a pair of earplugs and a free cone--with jimmies.

April 30, 2002

Tax Preferences, Tax Subsidies, Tax Expenditures, AMT, and Other Loaded Terms

When discussing tax policy, choosing what to call something is as important as when contemplating any other emotionally charged political issue.

One person’s tax credit is another person’s tax dodge, for example.

As someone once said, a rose would smell as sweet regardless. However, any proposed change in the tax law won’t go anywhere unless it can be sold. Although the lame titles often given to potentially unpopular legislation may cause smirks among the cognoscenti, the power of effective marketing cannot be denied.

(For a brutally funny parable on public policy wordsmithing in legislative titles, trade association names, and otherwise, read Christopher Buckley’s Thank You For Smoking.)

In any event, the issue for government finance is never limited to the relatively simple question of how much revenue a tax will produce. That question is persistently and inevitably tied to two additional political questions: who will pay it, and what to call it.

Two recent posts remind us of these fundamental limits.

On April 27 the financial guru at More Than Zero Sum wrote a useful explanation of company-owned life insurance policies (COLIs), in reaction to recent negative news stories about these products. As "Mr. Dreck" noted:

Proceeds from life insurance are not taxable. Furthermore, a life insurance "wrapper" avoids taxation on funds building up inside a policy that ultimately fund the death benefit. Even if the policy is not held until the insured's death, the owner has taxes deferred until cancellation when this inside build-up is returned to the policy owner and taxed….

The real issue is whether such a transaction should be sheltered from taxation….

BTW, I refuse to describe tax exemptions as subsidies….

Mr. Dreck takes a perfectly understandable position on the use of the term "subsidy," but it is not one shared by all, as he certainly knows.

Bruce Bartlett’s piece posted April 29 on National Review Online took issue with the increasing impact of the AMT on an ever-widening group of taxpayers.

He recalled the testimony of LBJ’s Treasury Secretary Joseph Barr in January 1969, just before Nixon took office, discussing

the growth of tax expenditures. In passing, he noted that 155 Americans with incomes above $200,000 in 1967 paid no federal income taxes that year. Twenty-one of them had incomes above $1 million. The respective income thresholds would be $1.1 million and $5.3 million in today's dollars.

Bartlett credits Barr’s testimony, which described how a few citizens took completely legal and extremely effective advantage of the tax code’s provisions, with the eventual creation of the AMT:

[I]t required millions of Americans to calculate their taxes two ways: first the normal way, and then again without many so-called tax preferences, such as the personal exemption and deduction for state and local taxes.

Compared to its original intent, the AMT’s reach is now spreading to lower income brackets. As Bartlett explains, the net result is simply another version of an old story:

[T]he AMT is becoming a tax on the middle class, rather than the rich. Indeed, this is the history of all tax-the-rich schemes. The rich figure out how to get around them and the middle class can't. The result is that the latter end up paying taxes designed for the former.

Bartlett’s policy prescription is not one that I would wholeheartedly support, but I can see why he feels this way:

That is why it is in the interest of the middle class to support reductions in tax rates on the wealthy. Though they may not benefit immediately, it puts a cap on what they and their children ultimately can pay.

My own position about the AMT, as previously posted, is that it is both misnamed and misdirected. It is only concerned with restoring some taxation upon the relatively few in the upper income brackets who legally pay little or no tax. The AMT does nothing to address the fact that many more millions of citizens pay no income tax at all. Therefore, the AMT is not really a minimum income tax. At best, it is a flawed attempt at one particular form of the politics of envy.

So, we have a misnamed "minimum" tax. Dreck refers to tax "exemptions" and "subsidies". Bartlett refers to "tax preferences" and "tax expenditures".

Can we at least agree on the real meaning of these terms?

Probably not, unfortunately.

Nonetheless, I found a very interesting site to help keep in the forefront a useful understanding of at least some of these potentially loaded turns of phrase.

Under Delaware law, every two years the Finance Department’s Division of Revenue must produce a report on the effect of tax preference laws. (29 Del.C. Section 8305(6); the report's online edition requires an Adobe reader.)

The report details the actual fiscal impacts of the various tax exemptions and protections that affect the State's revenue stream from a whole range of tax laws, from corporate and personal income to fuel taxes. (I did not find an online version of a similar tax preference reporting law in other states, and I'll be happy to update this post with any citations sent to me.)

As defined in the Delaware statute, however, 

'Tax preferences' means any law of the United States or of the State of Delaware which exempts, in whole or in part, certain persons, income, goods, services or property from the impact of established taxes, including, but not limited because of a failure of enumeration, to those devices known as tax deductions, tax exclusions, tax credits, tax deferrals, and tax exemptions.

From my perspective, even this definition is flawed, although I certainly understand the political dynamic that kept it from being universally applied to all such laws. Here are the critical missing parts of the definition:

‘Tax preferences’ shall not include variations in the rate of income tax...standard deductions...or personal exemptions.

The online edition of the report also quotes from a federal law on the same subject, whose definition is a bit more complete:

"those revenue losses attributable to provisions of the federal tax laws which allow a special exclusion, exemption, or other deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability."

From the perspective of a state budget or revenue office, "tax preferences" are interchangeable with "tax expenditures":

Tax preferences are no different from additional state spending in terms of their budgetary implications and thus are sometimes referred to as "tax expenditures."

A reduction in revenues has the same fiscal impact as a direct expenditure of equal magnitude -- both consume finite public resources.

Here’s another fairly blunt admission:

Reducing the number of tax preferences reassures taxpayers that other citizens are "paying their fair share" and enhances their willingness to comply voluntarily.

That is exactly my point about the AMT’s insufficient reach, at least by analogy. Thanks for agreeing.

As one reads this 94-page report, the truth keeps floating to the surface:

Not only does society lose resources by limiting tax payments from certain taxpayers, but tax preferences also may shift economic resources towards less productive uses. Tax preferences can cause resources to be allocated where they can receive the most favorable tax treatment rather than where they can produce the goods and services most in demand by consumers, or earn the highest economic return.

If you are interested in government finance (and most taxpayers should be, if only to protect themselves) read this report. It's not only a handy guide to tax terms with political overtones; it's also an honest assessment of the real impacts of tax policy choices.

I’ll discuss a few other terms the preference report defines, such as horizontal and vertical equity, in a future post.

April 29, 2002

A celebration of service to an ever-changing community

It’s been a long while since I felt so rewarded for going to church.

We traveled to the big city yesterday to attend the 100th anniversary Mass for Most Blessed Sacrament Roman Catholic Church in southwest Philadelphia.

My wife graduated from the parish elementary school there, and before they moved to the suburbs west of town in the early seventies, her family had been part of MBS (as it’s called) for over fifty years.

Her identification with MBS is shared by tens of thousands.

In the early 60’s, MBS became the largest Roman Catholic school in the nation, with over 3,800 students enrolled. Classrooms holding 90-100 first graders each were typical. Up 40 nuns from the Immaculate Heart of Mary resided at the MBS convent and handled the primary teaching load. Nine priests were needed each Sunday to handle the crowded Mass schedule.

All this served a parish only 8 blocks long and 12 blocks wide.

Hundreds of former parishioners converged on the old building on Sunday, all seeming to seek a reaffirmation of their fond memories of a life centered around MBS.

Times change.

The church sits at the corner of 56th Street and Chester Avenue, an imposing presence among streets filled with modest rowhouses and corner storefronts. Many of the homes have seen far better days. A check-cashing store sits diagonally across the street. One house opposite the church entrance serves the local Pentacostal community.

The former meeting hall of the Ancient Order of Hibernians, where local girls first learned to step dance, sits a few blocks away. It’s now home to yet another small church.

The shift in the community’s demographics eventually caused a steep decline in MBS school attendance. This year only about 170 students are enrolled, and according to a report earlier this year, two-thirds are not Catholic. The archdiocese was forced to make a painful cut in its education support, and the MBS parish school will close its doors in June. At least one other parochial school in southwest Philadelphia will also close.

The convent now serves the community as a home for chemically dependent women. A Philadelphia Police Department substation uses one of the school buildings.

Sunday’s celebration set aside all these changes, and recalled once again the glory days of MBS several decades ago.

A project to restore the interior of the church to its former splendor finished just in time. We were frankly stunned at its quiet beauty. Sixteen stained glass windows on the sides were separated by huge paintings of the Stations of the Cross. Beautiful paintings graced the lightly colored walls and ceilings. The statuary of the Baby Jesus and the Blessed Virgin stood watch on either side of the altar, as they always have.

My wife excitedly told our younger daughter and me about going to Mass at MBS as a child, staring for hours at the religious artwork.

Our hosts, the current parishioners, were clearly pleased to see the church fill up with former members and their guests. The white-gloved ushers gently guided the participants to their seats, as the choir and pianist readied for the mass.

The celebrants for the Mass included Louis De Simone, an auxiliary bishop for Cardinal Bevilacqua; Roland Slobogin, the pastor; and at least fifteen other priests. Several of the concelebrants graduated from the MBS school during its heyday.

The choir’s musicianship was inspirational. Most of the attendees joined with them for nearly every song, such as He Arose, How Great Thou Art, and Joyful, Joyful, We Adore Thee. The choir’s only solo performance was limited to a truly exceptional version of Handel’s Hallelujah Chorus, which the rest of us simply enjoyed.

The participants during the Offertory illustrated the continuity of the parish over its century of existence. These included a couple married at MBS fifty years ago; a woman who graduated from the parochial school in 1922; a beautiful little girl from this year’s kindergarten class; and a young lady from this year’s final graduating class.

During the homily, Reverend Slobogin reminded the assembly how many thousands of people living in Philadelphia could successfully identify themselves to other Philadelphians simply by reference to the local parish, as in "I’m from MBS." It didn’t matter if the residents were Catholic, Methodist, or Jewish. The influence of the Catholic Churches in these neighborhoods was simply a fact of life recognized by all.

When MBS was founded in May 1901, it served the needs of the burgeoning immigrant population then filling the neighborhood’s rowhouses. According to the church’s website, the tradition of helping immigrants continues, with parishioners now coming from Korea, Liberia, Trinidad, Barbados, and Sierra Leone.

With all the loving effort put into restoring MBS as it adjusts to the changes in the community, there is every reason for hope that the area’s current residents will continue to be able to use that phrase successfully.

April 28, 2002

What do the numbers tell us?

An AP article and sidebar include data that, while woefully incomplete, still provide some useful clues to certain aspects of the American Roman Catholic sex scandal.

Rachel Zoll’s report leads with the results of a nationwide survey the news organization conducted:

At least 177 priests suspected of molesting minors have either resigned or been taken off duty in 28 states and the District of Columbia since the clerical sex scandal erupted in January....

The reporter was careful to note that this figure had its limitations. Some of the cases involving discipline were from many years ago, and the recent disclosures have obviously caused many dioceses to ramp up their enforcement. Dioceses in 18 other states are using different approaches than removal or suspension. In addition, several dioceses did not cooperate with the review and did not disclose the number of priests they suspended. Therefore, it can’t be concluded that the number involved since January reflects a sort of "steady state" of priests at risk of discipline for this awful conduct.

Zoll wrote that Patrick Schiltz, an attorney who’s defended several dioceses in abuse cases, felt that the number developed in the AP review seemed low to him.

The story also reminded readers of the relative scale of the problem, relative to the total number of priests in the U.S.:

Even if the figure were higher, it would still likely represent less than half of 1 percent of the 46,075 priests in the United States.

It’s easy to say that one predator priest is too many. Nonetheless, with that many people in the "candidate pool," one would be hard-pressed to argue that there would be no such crimes committed, even with a zero tolerance policy in place. Given the human predilection for evil, and the opportunity presented in routine diocesan work, at least a few of these incidents would be bound to occur.

I was also intrigued by the sidebar story that listed the number of cases by state:

California: 30 Connecticut: 4
Delaware: 1 District of Columbia: 1
Florida: 7 Illinois: 5
Kansas: 1 Kentucky: 4
Louisiana: 3 Maine: 3
Maryland: 1 Massachusetts: 17
Michigan: 7 Mississippi: 2
Missouri: 7 Nebraska: 2
New Hampshire: 17 New Mexico: 2
New York: 8 New Jersey: 3
North Carolina: 6 North Dakota: 3
Ohio: 11 Pennsylvania: 23
Rhode Island: 1 South Carolina: 1
Texas: 1 Washington: 1 Wisconsin: 5

This state-by-state listing would be far more informative if it also provided the total number of priests in each state. The population distribution of Catholics (and therefore the number of priests available to serve them) varies tremendously from state to state, in the same way as many other religions.

Even so, some of these numbers leap off the page.

What is going on in New England, for example? Or, more to the point, what was not going on in the Church hierarchy there?

I can readily imagine that in the aftermath of the recent Rome meeting, Church officials will pay very close attention to where these cases crop up. Even with this flawed survey, it’s pretty clear that failures in management were not spread evenly among the American Catholic leadership. A few interesting and targeted reassignments, retirements, or even resignations should result from the increased emphasis on dealing with this scandal.

Contact Information:

Fritz Schranck
P.O. Box 88
Nassau, DE  19969

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Official small print disclaimer: This is, after all, a personal web site. Any opinions or comments I express here are my own, and don't necessarily reflect the official position of my work as a government attorney or any of my clients.

That fact may become obvious later on, but it needs to be said here anyway.

Frederick H. Schranck 2002