Taxpayer Bailout of Puerto Rico Can Be Avoided with Bankruptcy Solution

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Posted by Ryan Ellis on Tuesday, May 19th, 2015, 5:02 PM PERMALINK

If there's one thing the financial crisis taught taxpayers, it's that a bailout is one of the easiest ways to grow government and increase the corruption of crony capitalism in our system.

One such bailout may be brewing in Puerto Rico unless Congress acts soon.

Puerto Rico's insular electric company is out of money. In fact, its bonds have fallen to junk status. For any state municipality outside Puerto Rico (which is a territory, not a state), the next step would be obvious--apply for a structured bankruptcy settlement under Title IX of the federal bankruptcy code. That would be the best way for an ailing government entity to hit the reset button, pay debts equitably, and avoid a taxpayer bailout to keep it going. Investors would take a hit, but then life would go on without the need for extraordinary government measures.

Unfortunately, Puerto Rico does not have that option. Municipalities there were not included in the federal bankruptcy law, and the courts have said that the island cannot establish its own bankruptcy laws, either. That means Puerto Rico is stuck with a municipal power company with no money, a ton of debt, and no way out.

Why should taxpayers in the rest of the United States care?

The most likely outcome of this no-win scenario is a Congressional bailout of Puerto Rico and her ailing government-sponsored enterprises, starting with the power system. With no way to pay bills, and no bankruptcy option to get out of its insurmountable debt, the power company would be forced to shut down operations. This would immediately transform Puerto Rico into something less than a developing nation, a fate that is unimaginable in a territory owned and protected by the United States, and where 3.5 million U.S. citizens live and work.

Before this plunge into the dark ages, Congress would no doubt rush through emergency resources to prevent Puerto Rico from falling into a humanitarian calamity. This expenditure of funds--reasonable conservatives would call this a bailout--only has to happen because a structured bankruptcy is not an option.

This bailout scenario has been actively pushed for by Big Labor (the SEIU, UAW, and AFSCME), who has been lobbying the Obama Treasury Department to buy or guarantee Puerto Rican bonds. Some Puerto Rican Democrats would love to see a taxpayer bailout check from the Beltway. 

Another option very much on the table is for Puerto Rico to raise taxes, including the creation of a value-added tax, or VAT. That, too, would be a disaster for U.S. taxpayers as bad fiscal solutions on the island could easily spread north.

Thankfully, there is another way. H.R. 870, the "Puerto Rico Chapter 9 Uniformity Act of 2015," would allow Puerto Rican municipalities to do what the thousands of municipalities in the upper 50 states can already do--declare bankruptcy. Doing so would allow for a structured wind-down of this crisis under the administration of bankruptcy courts.

Clearly, that's a far better alternative than another bailout coming from Washington. Congress should pass H.R. 870 for the sake of avoiding a bailout of Puerto Rico.

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or maybe utility rates should be raised to levels comparable to other island utilities.


that is entirely too simple for the simpletons that run the US government


The power company is a corporation. The corporation sells its assets in a bulk sale to a third party. The third party is an entity that believes it can run the utility at a profit. The corporation has the sales proceeds and also has its obligations that it will not/cannot pay. It simply lets the creditors sue and collect what they might. You don't need a bankruptcy proceeding to accomplish that result.

ATR Supports Rep. Tom Cole’s FDA Deeming Authority Clarification Act of 2015

Posted by Paul Blair on Tuesday, May 19th, 2015, 3:21 PM PERMALINK

Congressman Tom Cole (R-Okla.) recently introduced H.R. 2058, the “FDA Deeming Authority Clarification Act of 2015.” This legislation would prevent the Food and Drug Administration (FDA) from banning tobacco products (like cigars) and 99 percent of the innovative vapor and electronic cigarette products that have hit the market since 2007.

The FDA is finalizing a regulatory framework for premium cigars and vapor products that stands to require pre-market approval for all products that have hit the market since February 15, 2007. Any product on the market prior to that date would largely be exempt and any product that has hit the market since then would be given two years to apply for approval.

H.R. 2058 moves up the 2007 date to the date of the announced “deeming regulation,” which is likely to occur later this year. This would permit products that have hit the market since 2007 to remain on the shelves, pending approval. This is important for a number of reasons. First, nearly every vapor product on the market today did not exist in 2007. The thousands of e-liquids and countless versions of electronic cigarettes available to smokers looking for an effective way to quit would be banned pending FDA approval without a change to the Federal Food, Drug, and Cosmetic Act or subsequent Tobacco Control Act of 2009, which established the 2007 date.

That Act was intended to apply to cigarettes, smokeless tobacco, and roll your own products. The FDA’s attempt to categorize new products under the authority given to them by that legislation lays out two pathways to “legalization” for new products on the market. The first is “substantial equivalence,” whereby a manufacturer must file for a tobacco product application, which includes clinical trials and would be relatively expensive for small and medium sized businesses.

Rep. Cole’s common-sense legislation moves up this substantial equivalence 2007 date to date of deeming regulation in 2015 and would prevent countless companies from having to cease operations given the cost of compliance for products that are already being sold to consumers.

If this legislative change if not made, and for the companies who could afford compliance, the FDA would be inundated with applications that the agency is not equipped to fast-track for approval. For combustible cigarette smokers looking to or considering quitting with e-cigarettes, this would be a tragedy as countless innovative smoking cessation devices would be at risk of never being sold.

The FDA has claimed that it does not have the power to modify the February 15, 2007 date, making a Congressional solution imperative. Americans for Tax Reform supports H.R. 2058 and urges more members to join on as co-sponsors in the coming weeks. This legislation will encourage innovation and teardown an unnecessary federal barrier to the sale of many products that stand to improve public health. 

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I contacted my reps about it. Good reply from my state senator (Washington State) who is actually on the committee. Sure hope I'll wind up being happy I voted for her. I, of course, am a CASAA member and all for it. Best wishes, Tom Cole and sponsors.

No Hope for American Free Trade without Trade Promotion Authority

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Posted by Alexander Hendrie on Tuesday, May 19th, 2015, 1:27 PM PERMALINK

Congress is currently considering Trade Promotion Authority (TPA), legislation that is essential to the prospect of any US free trade agreement. Although the US Constitutional system of checks and balances makes TPA essential, no other country has the same reliance on a TPA type mechanism. This reliance puts the US at a disadvantage in the global competition to lower trade barriers and hurts local exporters. As a result, approval of TPA is not only a precondition for US trade, it is essential if America wants to be viewed as a genuine trading partner by the rest of the world.

While free trade opponents are characterizing TPA as Congress recklessly ceding its authority to the President, nothing could be further from the truth. Congress has delegated trade authority to the President since 1934, and has granted TPA to Republican and Democrat Presidents five times over the past 30 years. The proposed TPA bill contains strong oversight provisions and ensures that Congress always has the final say.

But TPA’s importance goes beyond providing the President with a set of guidelines and rules. Without TPA, trade agreements stand little chance of approval because members of Congress can, and will continually offer amendments when an agreement is being considered. This forces US negotiators to go back to table and restart negotiations on an otherwise concluded agreement.

TPA solves this problem by requiring Congress to consider trade agreements on an up-or-down vote, with no amendments allowed. However, the fact that TPA is needed at all puts the United States at a disadvantage in the global race for trade.

It goes without saying that having 535 negotiators, all with their own parochial objectives, does not work. In fact, no other country grants each and every representative such broad influence over trade agreements. At best, this uncertainty makes the US a difficult partner, at worst it discourages other nations from negotiating an agreement with them altogether.

Most countries already grant their executive the authority to negotiate trade agreements, or have mechanisms that allow the executive to secure approval in a straightforward way. Countries in the European Union have an efficient process that delegates negotiating authority to the European Commission and approval authority (with no amendments allowed) to the European Council. In fact, this streamlined process shortens the negotiating process substantially, with many EU trade agreements taking two to three years.

Parliamentary systems like Australia and Canada link their executive and legislative branches, and so the trade minister has clear authority from the political majority, making approval of trade agreements a streamlined process.

America’s method of approving trade agreements is convoluted and complex by comparison. In fact, the need for TPA puts the US at a significant disadvantage, because it makes the complexity of negotiating with the US a difficult partner to negotiate with. According to the World Trade Organization, over 400 trade agreements are in effect around the world. But despite being the world’s largest economy, the US is only part of 14 agreements with 20 other countries. In contrast, the EU has agreements with over 50 countries. As a result, the EU is the top trading partner for 80 countries while the US is the top trading partner for just over 20 countries. Clearly, America is falling behind.

When the US does not have barriers with a trading partner, the economic benefits are enormous. America’s 20 free trade partners purchased 12.8 times more US goods per capita compared to non-free trade partners. In addition, 46 percent of US exports go to a free trade partner, despite these agreements not covering some of the largest markets in the world such as China, India, Japan, Germany, and the United Kingdom. Despite substantial barriers existing with these and other major markets, trade already accounts for 1 in 5 jobs in America. Clearly, if the US had more free trade agreements, the economy would be much, much stronger.

If Congress is serious about free trade, TPA is an absolute necessity. It will provide strong guidelines and structure around the approval of pro-growth free trade agreements. But without TPA, the United States will continue to fall behind in the world economy. 

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"Currency Manipulation" Is a Red Herring in Trade Debate

Posted by Ryan Ellis on Tuesday, May 19th, 2015, 12:03 PM PERMALINK

The U.S. Senate this week is considering Trade Promotion Authority (TPA), a measure to guarantee that Congress votes up-or-down on free trade agreements negotiated by the executive branch.

One amendment which has been offered to TPA is on the subject of so-called "currency manipulation." Offered by Senator Rob Portman (R-Ohio), the amendment further defines the negotiation objectives on currency issues in any trade agreement. It does so in a way that goes beyond the strong protections already written into the TPA under consideration.

This amendment is not needed in this version of TPA. For the first time ever, currency manipulation is a mandated principle negotiating objective for the executive in a TPA. The TPA currency language has strong standards and enforceable rules. If all else fails, Congress can subject a currency-faulty trade agreement to a disapproval resolution.

Going beyond this with the Portman amendment is not necessary. Sufficient protections already exist in the TPA as drafted. Going any further upsets a negotiated agreement and could hamstring the executive in trade negotiations down the line.

ATR urges opposition to the currency manipulation amendment.

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Top Comments Consultant Gets Tax-Free Golden Parachute in Latest Obamacare Exchange Scandal

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Posted by Alexander Hendrie on Monday, May 18th, 2015, 4:41 PM PERMALINK

In more bad news for Obamacare exchanges, QSSI, the information technology firm that manages the federally run unexpectedly quit last Thursday. The IT firm, which is the third to manage in its brief two year history, has been marred by controversy over its relationship with administration officials.

While QSSI has been credited with saving the federal exchange following its disastrous 2013 rollout, its relationship with the Centers for Medicare and Medicaid Services (CMS) has come under scrutiny for possible conflicts of interest. Andy Slavitt, formerly an executive at QSSI’s parent groups United Healthcare Group and Optum, was later made a senior advisor at CMS.

Slavitt was strangely allowed to pocket at least $4.8 million in tax-free income by indefinitely deferring capital gains taxes on the sales of millions in stock upon joining CMS. Slavitt was also granted a rare federal ethics waiver which allowed him ignore the one-year mandatory cooling off period and simultaneously be involved in contracting issues for Optum and United Healthcare while working at CMS.

This potential conflict of interest led Senators Chuck Grassley (R-Iowa) and Orrin Hatch (R-Utah) to investigate whether United Healthcare was receiving preferential treatment from CMS.

The United Healthcare – CMS relationship is the latest in a long line of suspicious unexplained events surrounding the implementation of Obamacare exchanges.

Earlier this year, Oregon abolished its Obamacare exchange, at the cost of $41 million. Since 2011, the state received nearly $305 million with no strings attached, and no direction to construct its website. 

Despite a three million dollar acid-trip themed ad campaign encouraging Oregonians to enroll on the exchange, individuals were unable to do so months after the November 2013 deadline. With a tough reelection campaign looming, then-Governor Kitzhaber appointed a favored political consultant, known as the “Princess of Darkness” to oversee the website. The debacle led to a flurry of investigations from the FBI, the Government Accountability Office, the Department of Health and Human Services, and the U.S. House oversight committee. 

Unfortunately, Oregon is not alone.  Exchanges in Hawaii, Massachusetts, Maryland, Vermont, New Mexico, and Nevada have all been spectacular failures that set back taxpayers billions of dollars.

Hawaii’s state exchange appears doomed to fail despite desperate attempts by the Democrat governor to salvage it. The website cost taxpayers $205 million but was only able to enroll 8,592 individuals in year one, for an average of $23,899 spent per enroll. Unsurprisingly, the website is now unable to support itself and appears poised to shut down, at an additional cost of $30 million.

With so many unexplained cases of wasted taxpayer dollars and inappropriate behavior from administration officials, Congress must step up its oversight on Obamacare exchanges and get to the bottom of how billions of dollars were wasted. 

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$205 MILLION for a state with a population of 1 million people of all income levels. Disgusting. Combined with their $6 Billion Rail System boondoggle that keeps going up in price and you can see how rampant corruption and incompetence is in Hawaii, Obama's home state. Abercrombie, Ige, Cardwell, Hanneman, Inouye, Hanabusa, Schatz and Carlisle are not the smartest men in the room. Just the most corrupt. *shakes head in disgust*


The sleaze gets around, doesn't it? United Healthcare was solely profit driven, patients be damned, QSSI is as crooked as the day is long on the summer equinox, and Obamacare is a Titanic with a big hole in the side.

ATR Supports the “No Hires for the Delinquent IRS Act”

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Posted by Alexander Hendrie on Monday, May 18th, 2015, 9:47 AM PERMALINK

Congressman David Rouzer (R-N.C.) recently introduced H.R. 1206, the “No Hires for Delinquent IRS Act.” This common-sense legislation prevents the IRS from hiring additional employees until the Secretary of the Treasury confirms that no current employee of the IRS has a seriously delinquent tax debt. ATR supports this legislation and urges all members of Congress to vote for and otherwise support this bill.

H.R. 1206 holds IRS employees to a fair standard and ensures that the workforce practices what it preaches. Each year, IRS employees are expected to process the tax returns of millions of Americans from across the nation. In the process, they come across the confidential information of taxpayers, and must be trusted to perform this task in a responsible manner.

Recently, it was revealed that the agency has failed to properly discipline employees that “willfully violate tax law.” Despite being legally required to fire employees who committed this serious transgression, only 25 percent of employees were terminated. Clearly, it is time for the agency to clean up its act. This legislation will help hold the IRS accountable to the American people and ensure that its employees act in a responsible way. ATR fully supports this legislation and urges all members to support it.

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ATR, CWF Promote Right-to-Work in Bowling Green, Kentucky

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Posted by Margaret Mire on Friday, May 15th, 2015, 2:33 PM PERMALINK

Until recently, the economic benefits and personal freedoms of right-to-work were not available to Kentuckians because state lawmakers have blocked such laws. But late last year, this began to change thanks to brave local officials.

Starting with Warren County in December 2014, local authorities used Kentucky’s home rule statute – which gives significant economic development authority to Kentucky counties – to successfully pass a right-to-work ordinance. To date, 11 more counties have followed suit and even more are considering.

And no wonder. The Bowling Green Area Chamber of Commerce reported that since Warren County became right-to-work, it has had interest from more than 40 companies, representing over $800 million in potential investment and 4,000 new jobs.

The Center for Worker Freedom (CWF) knows that as news of this economic success spreads, many Kentuckians would like to learn more about local-right-to-work and the truth about labor unions. So to help, and CWF will be hosting a town hall at the Corvette Museum in Bowling Green, Kentucky to promote local-right-to-work.

The town hall will be held on Monday, May 18th and feature a panel of experts and lawmakers:

State Representative Jim DeCesare, 17th District, Warren, Butler counties

Jim Waters, President, Bluegrass Institute

Matt Patterson, Executive Director, Center for Worker Freedom

Ron Bunch, Bowling Green Area Chamber of Commerce

Jason Nemes, Fultz Maddox Hovious & Dickens PLC

Jon Crosby, Field Representative of Senator Rand Paul

The panel will educate workers, managers and business owners on the economic benefits of right-to-work, gives workers the freedom to decide whether or not they want to belong and pay dues to a union.

So come join us Monday for panel presentations from 6:00-7:00 PM CST and a Q&A from 7:00-7:30 PM CST. 

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Grover Norquist: "Audit the Pentagon"

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Posted by Jorge Marin on Thursday, May 14th, 2015, 4:46 PM PERMALINK

Today, Congressman Michael Burgess (R-Texas) and Congresswoman Barbara Lee (D-Calif.) introduced an amendment to bring the Pentagon closer to the audit that it owes to the American taxpayer.

If the Pentagon is worried about the lack of funds for maintaining America’s arsenal, then the solution isn’t to break the nation’s finances, but to stop wasting money on projects which are “too big to fail.” Projects like the F-35, which consistently under-perform and increase in cost.

The amendment requires the Department of Defense to submit a list of the departments and agencies which are most prepared for a comprehensive audit. Americans for Tax Reform President Grover Norquist had this to say about the amendment:

All departments of the United States Government are audited--except the Pentagon.  This is not acceptable.  If the management of the Pentagon cannot pass an audit--get new management.

At a time when resources are scarce it is particularly important that we audit the Pentagon to reduce waste and the costs of mismanagement.

All Americans who want our nation strong and secure know that step one is to ensure that all available resources are being spent wisely.  Every wasted dollar is a cut in our preparedness. An audit is the only way to begin to know how much is misspent.

Representative Burgess also weighed in on his amendment:

As the holder of the purse, Congress has a duty to demand transparency,” Rep. Burgess said. “Our amendment will provide Congress with concrete, concise information as to how close each part of DOD is to achieving the goal. No such list currently exists and Congress to date has not required it. This amendment corrects a crucial missing puzzle piece and allows the Congress to execute a chief governmental function: oversight. –Burgess

In a released statement from Representative Lee’s office, the Congresswoman also addresses taxpayer concerns:

Unauditable is unacceptable. It has been more than two decades since the Pentagon was required to undergo an audit and the Pentagon is still reporting that full audit-readiness is years off. This amendment, which also passed last year, requires a ranked list of all departments and agencies by their audit-readiness status. This list will empower Congress to make decisions on next steps to ensure auditability of the Pentagon,” said Congresswoman Lee. “We need greater sunlight and transparency so the American people know how their hard-earned tax dollars are being spent. It’s past time to end waste, fraud and abuse of taxpayer dollars in Pentagon spending.

The Pentagon’s books have remained closed for too long, the nation deserves a military establishment that demonstrates a culture of fiscal responsibility and efficiency. Representatives should strongly consider this proposal.

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Mike Huckabee: Tax Hikes Are Off the Table

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Posted by ATR on Thursday, May 14th, 2015, 2:44 PM PERMALINK

Former Arkansas Governor Mike Huckabee (R), a candidate for the presidency of the United States, has made a written pledge to the American people to “oppose and veto any and all efforts to raise taxes.”

“Governor Huckabee has pledged in writing to the American people that he will oppose and veto any and all tax increases,” said Grover Norquist, president of Americans for Tax Reform. “His public commitment makes it clear that he will fight to reform government to cost less rather than paper over and continue past failures with higher taxes."

Governor Huckabee also ruled out tax hikes as a candidate for President in 2008. Among declared 2016 GOP presidential candidates, Huckabee joins Marco Rubio, Rand Paul, Ted Cruz, and Carly Fiorina in pledging to oppose any and all tax increases.  

In 2012, all candidates for the Republican nomination for president pledged to oppose tax hikes with the lone exception of former Utah Gov. Jon Huntsman. Huntsman finished seventh in Iowa and third in New Hampshire before dropping out of the race.

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Libertarian Board

This is the same man who begged for tax increases when he was governor of Arkansas. Difficult to trust him due to that.

Federal Gas Tax Hike would Hurt Consumers and Encourage Overspending

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Posted by Justin Sykes on Thursday, May 14th, 2015, 1:50 PM PERMALINK

Just when American motorists thought it affordable to get back on the highways this summer, some Washington lawmakers are calling for massive increases to the federal gas tax. While there is currently a highway-funding gap, the answer is not to raise taxes but to reign in waste. Increasing the gas tax will not only worsen Washington’s spending problem, but will have American taxpayers picking up the tab.

Currently the federal gas tax is 18.4 cents per gallon and revenue from the tax goes into the Highway Trust Fund (HTF).  The HTF was originally created with the goal of financing and maintaining the nation’s highway systems. However in recent years HTF funds have increasingly been siphoned off to fund everything from bike paths to landscaping and -- most infamously -- squirrel sanctuaries.

Overspending on non-highway related projects has gotten so bad that spending of HTF funds is outpacing revenue from the gas tax. In fact the federal government spends roughly $50 billion annually while the gas tax only brings in around $34 billion each year. As a result, Congress has repeatedly had to add short term funding patches to maintain the HTF, with the most recent set to expire May 31st of this year.

With the looming May 31st deadline lawmakers are scrambling to find a solution, with some calling for an increase in the gas tax of up to 80%. One doesn’t have to be an economist to realize that the solution to overspending is not to increase the amount of money that politicians and bureaucrats have to overspend. Such a massive increase comes on the backs of taxpayers and avoids addressing the issue of overspending altogether.

Instead lawmakers should be looking to improve the fiscal responsibility with which HTF funds are spent, ensuring the funds go to what they were originally intended – the highways. For instance since 2008, federal spending on side projects has increased 38% while highway spending has remained flat. In fact using gas tax revenue to pay solely for highways would make the “HTF 98% solvent for the next decade” without increasing taxes.      

Additionally, increasing the gas tax would hit low to middle-income Americans the hardest. Most Americans are currently enjoying increased discretionary income each month due to historically low gas prices. When Americans have more to spend that extra income benefits the economy as a whole. Yet if some in Washington have their way that extra income would instead go to Uncle Sam where it would likely fund more wasteful spending on non-highway related projects.        

It’s clear there is a need for a solution to the inherent lack of fiscal responsibility in the way HTF funds are spent, a solution that doesn’t work to the benefit of government bureaucrats at the expense of American taxpayers. Thus it should also be clear to lawmakers that increasing the gas tax to pay for their fiscal transgressions is outrageously irresponsible, would reduce the discretionary income of millions of hardworking Americans and is simply not the answer. 

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