This week our country celebrated President’s Day. Ironically while rooted in our first President’s February birthday (Feb. 22), none of our country’s presidents’ with February birthdays will ever fall on the third Monday of February (Washington, William Henry Harrison, Lincoln, and Reagan) because they’re all too early or too late. Also ironically, while there is much to celebrate about our past presidents there are other policy outcomes that we’d rather either not have happen, or in retrospect, think badly need tweaking. Just looking the last 100 years or so, here are a few.
Special Interest Tax Breaks: Very early in the 20th century a corporate income tax was adopted, followed by the 16th amendment in 1913 and personal income taxes shortly thereafter. President Wilson signed the Revenue Act of 1913, and exceptions for various entities followed quickly. By 1916 the oil industry, hardly a corporate weakling (the antitrust breakup of Rockefeller’s Standard Oil occurred in 1911) was handed the first of its tax breaks, a deduction for Intangible Drilling Costs – it’s still on the books more than a century later. Many unnecessary tax breaks – for oil and gas and other entities – have followed and persisted.
Tariff Tussle: President Trump wasn’t the first to embrace tariffs, which in fact go back to the earliest days of the republic. Of course they were originally used to fund government, not policy ends (President Madison took it a different way). Most notably are the Smoot-Hawley tariffs signed into law by President Hoover. Starting out as an ill-fated attempt to support agriculture these became a honey pot for all sorts of protectionist approaches and by all accounts deepened the depression. Then-Vice President Gore used Smoot-Hawley to a devastating effect in a debate with Ross Perot. But sadly, we have later seen similar ill-advised tariffs, most notably under President Trump.
Farm Feast: With an executive order, FDR created the Commodity Credit Corporation (CCC) in 1933 as a vehicle to carry out new agriculture subsidy programs. The CCC authority allowed money to unilaterally go out the door the last three years of the Trump Administration, without Congressional approval, to subsidize farm income. Through using CCC authority to distribute aid to offset damages from the Trump trade wars, COVID-19 pandemic relief, and biofuels infrastructure spending, government payments as a percent of net farm income reached nearly 40 percent in 2020. That’s the highest since 2001. Even in “good” years, CCC doles out billions in farm checks, but unprecedented taxpayer spending has occurred the last few years. Total direct government payments in 2020 nearly tripled since 2017. Add in more spending due to the recent cold snap – livestock disaster programs for instance – plus a derecho in Iowa last year and the numbers keep ticking.
Department of War/Defense: In July of 1947 President Harry Truman signed the National Security Act. This legislation established the modern apparatus of the Department of Defense, the National Security Council (NSC) and the Central Intelligence Agency. Prior to its passage the Navy had its own cabinet-level department, separate from the Department of War, which included the Department of the Army. (Those Navy guys had a lot of power in those days!) The Air Force was also established, removing most fixed-wing air assets from the Army Air Corps. And while this reorganization was necessary to bring all military services under one roof, the multi-headed beast that is now the Pentagon could use another reorganization. The Trump Administration’s establishment of the Space Force and its new “Guardians” was an unnecessary vanity project which adds more layers of bureaucracy to the behemoth department. It’s time for another “Roles and Missions” review, like the one done in the 1990s, to re-set the Pentagon for the challenges of the future.
Budgeting Control: By the Summer of 1974, President Richard Nixon’s back was against the wall and his exit from the pinnacle of American political power was just around the corner. In mid-July the Congress passed the Congressional Budget and Impoundment Control Act of 1974. Among other things, the bill established the Budget Committees in the House and Senate and set up the modern process for the consideration of the annual President’s Budget Request. Something that in and of itself needs an overhaul – the spending bills to fund government have been enacted before the start of the fiscal year precisely four times in the more than 45 years this law has governed the budget process.
This legislation also established the lesser-known Impoundment Control Act (ICA), which is one of TCS’ very favorite pieces of legislation. This was in response to President Nixon’s actions to withhold the spending of duly appropriated funds and Congress crafted the bill to lay out the only legal ways in which a President can withhold funds appropriated for a specific purpose: rescission or deferment. President Trump’s first impeachment was triggered by, among other things, his refusal to send legally appropriated military aid funds to Ukraine in violation of the ICA.
President Nixon resigned on August 8, 1974, roughly three weeks after signing a bill into law that codified greater powers of appropriation with the Legislative Branch.
Bioenergy Bust: It’s not our country’s first rodeo with fiscal and energy challenges. The 1970s oil and energy crisis prompted an energy independence push, resulting in President Carter signing the ethanol tax credit (VEETC) into law in 1978. While 2021 marks 10 years since it expired, VEETC set the stage for decades of wasteful biofuels subsidies – such as the Renewable Fuel Standard (RFS) and biodiesel tax credit – that have failed to achieve energy independence and climate goals. President George W. Bush signed the current RFS – a mandate for annual biofuels consumption – into law in 2007 after he declared in his State of the Union that the US was addicted to oil. Bush also signed the now-$3 billion/year biodiesel tax credit into law in 2004, but it has done little more than distort markets and waste taxpayer dollars. Both the RFS and biodiesel tax credit will likely outlive their “end” dates of 2022 unless Congress heeds the National Academies’ advice to end the tax credit (which would benefit the climate), contrary to what the House just proposed. Perpetually extending narrow, special interest tax breaks fails to prepare us for the inevitable emergencies and disasters of tomorrow.
We’ll stop there so this Wastebasket doesn’t become a pamphlet, or worse, a book. Because you can be sure there are a lot more in the last 40 years. Perhaps we’ll write about that next President’s Day.