Tuesday, May 5, 2015

Who's Cooking Your Laws?

And would you like a side of ulterior motive with that?

I was tidying up some draft posts – clearing out the fridge, if you will – when I found some scraps. And like a bunch of leftovers, I'll throw it on the kitchen counter to see if we can make a meal of it.

Renewable Fuel Standard (RFS)
  • From R Street Institute: RFS "was billed as an environmentally friendly alternative to gasoline ... It is neither."
  • Result: $10 billion in additional costs to motorist, higher food prices, higher land prices, and loss of wetland and grasslands. Oh, and because land prices have gone up we subsidize loans for beginning farmers.
  • Winners: Incumbent farmers, landowners

Homeownership: The American Dream – Let's subsidize debt!
  • From Financial Times: Florida has 1.4 million homes with negative equity – 19 percent of the nationwide total.
  • Result: Concentration of household wealth in a single immobile, illiquid asset that's subject to large variations in value and runs counter to risk-reducing asset diversification.
  • Winners: Real estate agents, homebuilders, mortgage originators

  • From CNBC.com: 401(k) plans are not really controlled by the individual, not really by the employer. Section 401(k) was a murky backwater in the Internal Revenue Code until someone figured out how to turn the section into employer-provided defined contribution retirement plans. Further, "as a result of high fees, fund balances in defined contribution plans are about 20 percent less than they need otherwise be."
  • Result: High administration fees, high-cost mutual funds, loss of control, loss of competition (IRA not really comparable because of differing contribution amounts), and asset lock in
  • Winners: Plan administrators, mutual fund companies and brokers

  • From the Internal Revenue Service: "The IRS is required by law to report to Congress each year on the sources of complexity in tax administration and on ways to reduce it. However, the IRS has issued only two such reports and none since 2002."
  • Result "The IRS’s decision to discontinue the reports has likely contributed to tax complexity, which burdens taxpayers and the IRS alike. Conversely, revisiting this decision could help improve tax law clarity, administrability, and fairness. If the IRS did this, it would further the taxpayer rights to be informed ... , to quality service ... , and to a fair and just tax system."
  • Winners: Tax preparers, lawyers, software companies like TurboTax

Complex, arcane legislation with unintended consequences seems to be everywhere: the Affordable Care Act is 1,990 pages and the Dodd-Frank financial reform law stands at 848 pages.

Since our representatives to Congress spend about half their day raising funds for the next election, you'd think they'd want concise, straightforward legislation to vote on. Instead, we see more complex and voluminous bills with fewer and fewer enacted.

Look – I'm not suggesting that all laws have a built-in hook, and not all laws can be 3 pages. Sometimes there are unforeseen effects; sometimes society and the economy are so dynamic that circumstances change quickly and in quirky ways. And that's yet another reason why legislation must be succinct, transparent, and limited.

So I hope you found some tasty sustenance. If only our politics and legislative processes could be the same.