Thursday, April 27, 2017

The Senator and the Tax Collector

I . . . content myself with wishing that I may be . . . not of that number who are ignorant in spite of experience.
—William Pitt, Earl of Chatham, Speech in House of Commons (1741)

Someone has to get to Treasury Secretary, Steven Mnuchin, and explain to him the facts of Republican life and the Internal Revenue Service. No one is more qualified to do that than Senator Chuck Grassley, of Iowa.

The budget blueprint that was released by DJT in mid-March, proposed reducing IRS funding for the upcoming fiscal year by $239 million. At his confirmation hearing on January 19, 2017, Mr. Mnuchin observed that the IRS had suffered staff reductions of 30% over the last few years, a reduction in staffing not matched in any other agency. He said that such a decrease in staffing “for an agency that collects revenues, this is something that I’m concerned about.” Here is why he should pay a visit to Senator Grassley.

Senator Grassley would explain to Mr. Mnuchin that Republican members of Congress also think collecting taxes is very important, but they have come up with a new old way to do that even with reduced IRS staffing. The Congressional solution involves taking advantage of the skills of the private sector. In order to help Mr. Mnuchin understand what Congress has done, the senator will put it in historical perspective.

He will explain that in 1996 and 1997, at Congress’s behest, the IRS turned over collection of past due taxes to private collection agencies known as PCAs. The program only lasted for two years because it generated no revenue and instead cost the government $17 million. To make matters worse, the PCAs were also violating provisions of the Fair Debt Collection Practices Act in their contacts with delinquent taxpayers. That was the end of that program. But, Mr. Grassley will explain, the Republican dream of tax collection by the private sector did not die.

Senator Grassley would tell Mr. Mnuchin that in 2004, Congress passed the American Jobs Creation Act. That act created jobs by, among other things, handing out collection of delinquent taxes to PCAs. Republican members of Congress projected that the PCAs would be able to collect $1.3 billion in back taxes at a cost of $350 million. The net recovery for the IRS would be eight times greater than if the IRS were undertaking the collections. In 2008, the House Ways and Means Committee held hearings to determine how the program was faring after four years. Mr. Grassley would explain that the committee learned that 85% of the people PCAs contacted owed no back taxes and, accordingly, neither the IRS nor the PCA benefitted from those contacts. He would explain that the PCAs’ cost of collection was $.24 for every dollar collected, whereas the IRS costs were only $.07 for every dollar collected. Mr. Grassley would explain that the IRS had an 11% collection success rate, whereas the PCAs had a 4% success rate. And finally, he would explain to Mr. Mnuchin that the total amount received by the IRS from the PCA efforts was $4.6 million instead of $1.3 billion. He would explain that confronted with those facts, President Obama ended the program and that he, Mr. Grassley, was outraged at the cancellation. He will give Mr. Mnuchin a copy of what he said when the program was canceled. He said that Mr. Obama was cutting “a program that provides jobs to hundreds of people during the middle of a recession, including 60 in Iowa.” He didn’t say anything about the failures.

Mr. Grassley will then explain that the Fixing America’s Surface Transportation Act that was passed in 2015, included a mandate that the IRS hire PCAs to collect back taxes to help fund road improvement projects provided for in the Act. He will give Mr. Mnuchin a copy of his remarks following the passage of that Act. In those remarks he attributed the end of the program in 2009 not to its lack of success, but to the IRS caving in to politics by cancelling the program. Mr. Grassley will then tell Mr. Mnuchin that, responding to the 2015 mandate, the IRS recently hired four companies to collect back taxes. He will tell Mr. Mnuchin that one of the four companies the IRS has hired is Pioneer, a subsidiary of Navient.

Navient is the nation’s largest servicer of student loans. In January 2017, Navient was sued by the Consumer Financial Protection Bureau (CFPB). In its suit the CFPB said Navient created obstacles to repayment by borrowers by providing them with bad information, processed payments incorrectly, didn’t act when borrowers complained, misallocated payments, and cheated borrowers out of their rights to lower repayments. Mr. Grassley will explain to Mr. Mnuchin that Navient denies all the allegations set forth in the lawsuit and will do as good a job for collecting back taxes as other PCAs have done in the past, when helping out the IRS.

After Mr. Grassley finishes his history lesson, Mr. Mnuchin will marvel at the ability of Senator Grassley and his Congressional colleagues to shun empiricism, apparently preferring the bromide that “the third time is a charm.” He will be joined in his bemusement by the American taxpayers who will not only be bemused, they will suffer the consequences of this inexplicable behavior. Christopher Brauchli can be emailed at brauchli.56@post.harvard.edu. For political commentary see his web page at http://humanraceandothersports.com


Thursday, April 20, 2017

Lies, Immigrants and the CBP

Lies are the mortar that bind the savage individual man into the social masonry.
— Herbert George Wells, Love and Mr. Lewisham

It was nothing more than a coincidence, that on the same day last week’s column on the use of private prisons appeared, an important announcement dealing with those institutions was reported on by the national media. The announcement was that a new $100 million immigrant detention center is going to be built in Conroe, Texas, and it will be built by none other than one of the champions of private prisons described in last week’s column, GEO Group.

DJT’s and Attorney General Jeff Session’s enthusiasm for finding and incarcerating illegal immigrants, has brought joy to the fiscal hearts of both private for-profit prison companies and many Texas counties. The counties are excited because a number of them overbuilt prisons and were suffering from lack of occupants and no way to pay for their construction and upkeep. The happy turn of events gives them the opportunity to rent out unused space to federal or private prison companies thus helping them pay for their facilities. The private prison companies are excited because following the election of DJT the value of their stock has soared.

The new Conoroe facility will be in addition to an existing 1,200 bed facility already located there, and two other prisons in Houston and Livingston. The Conroe detention center is slated to open in 2018 and to generate $44 million in revenue. In addition, it will provide employment to Conroe residents involved in its construction. It is a win-win situation for all but the immigrants.

A number of perceptive readers have asked how the prisons will be able to find suitable employees to staff all the newly available facilities. The question was answered by a headline in the Guardian. It announced that: “Border Patrol may loosen lie-detector use in hiring to meet Trump’s jobs order.”

According to the Guardian, the U.S. Border Patrol has been having difficulty filling its ranks for the past several years. That is not because it lacks applicants. It is because the applicants are unable to pass routine lie detector tests that are part of the employment process. According to the Guardian, more than 60% of the applicants taking the lie detector test fail, and having failed, cannot be hired. In a conference on border security conducted in San Antonio in mid-April, Border Patrol Chief, Ronald Vitellio, addressed the hiring problems confronting the agency and was quoted in the Wall Street Journal as saying: “The polygraph has given us a difficult time. Not a lot of people are passing.” Although Chief Vitellio’s explanation would seem to place the blame for the problem on the lie detector test, a complete reading of reports on hiring difficulties suffered by the agency discloses that the problem lies not with the test, but with the persons taking the test. Their responses to questions posed are often not truthful.

The acting Customs and Border Protection (CBP) commissioner, Kevin McAleenan, prepared a memorandum in which he observes that lie detector tests pose a “significant deterrent and point of failure” for applicants. He says that puts the board patrol at a hiring disadvantage with the Immigration and Customs Enforcement (ICE) people with which his agency competes for employees, since ICE doesn’t require that new hires pass a lie detector test. Implicit in the memorandum, is the suggestion that the test be eliminated or made less difficult, although it is not explained how a lie detector test can be simplified.

The McAleenan suggestion has not met with universal approval. John Kelly, the Homeland Security Secretary, who oversees both ICE and CBP, says that notwithstanding its adverse effect on the number of people CBP is able to hire, administering the lie detector test remains a “good idea.” James Tomsheck, CBP’s Internal Affair Chief from 2006 to 2014, said that McAleenan was “attempting to degrade the vetting to accommodate a political mandate. Ultimately this data deprived decision will greatly reduce security at our borders.”

CBP has not enjoyed a good reputation for how its agents treat those with whom it comes into contact. A Kino Border Initiative report issued in 2015, states that incarcerated immigrants suffer a variety of abuses and the hands of CBP agents. Mr. Tomsheck observed that: “the failure to adequately vet and screen new agents and officers” was one of the main reasons for the problems confronting the agency. Gil Kerlikowsek, CBP’s present commissioner, observed that two out of three applicants fail the lie detector test, and attributed the failure to the kinds of applicants being attracted to the agency.

In view of the foregoing, it is no wonder that those hoping for vastly increased number of hires at the CBP, want to eliminate or simplify the lie detector tests. The arrested immigrants who are ruled by the CBP employees while incarcerated may have a different view of it. So should the rest of us.


Wednesday, April 12, 2017

Prisons and Profits

Under a government which imprisons any unjustly, the true place for a just man is also a prison.
— Henry David Thoreau, Civil Disobedience

It turns out that the immigration crackdown that DJT’s ICE is pursuing, though hard on illegals and their families by producing terrible uncertainty for them, is not without its bright side. The light that provides a bright side is shining on the shares of stock in the Geo Group and CoreCivic, and on jails in a number of Texas counties.

Geo Group and CoreCivic operate private, for-profit prisons. Before DJT became president, they were on hard times. For good reason. In August 2016, the U.S. Department of Justice Office of the Inspector General issued a report that was highly critical of the way those companies treated prisoners entrusted with their care. The report found that inmates in facilities run by those corporations “were nine times more likely to be placed on lockdown than inmates at other federal prisons and were frequently subjected to arbitrary solitary confinement simply because there was not space for them among the general population.” Although placing them in solitary confinement so they would not add to overcrowding in the general prison population had the desired effect, solitary confinement is generally acknowledged to be equivalent to torture and has been repeatedly criticized for its excessive use in United States prisons. According to the report, the Bureau of Prisons was using the private prisons on a large scale to “confine federal inmates who are primarily low security, criminal alien adult males with 90 months or less remaining to serve on their sentences.” The report stated that “in a majority of the categories we examined, contract prisons incurred more safety and security incidents per capita than comparable Bureau of Prisons institutions.” It said that the contract prisons “do not provide comparable services [to those operated by the Federal Bureau of Prisons] do not save substantially on costs, and do not maintain ‘the same level of safety and security.’”

At almost the same time that that report was issued, Deputy Attorney General Sally Yates, issued instructions to federal officials to reduce the use of private prisons because of the falling prison population throughout the country. The result was that stock in CoreCivic and GEO, the two largest private prison companies in the United States, fell precipitously. The election of DJT reversed their fortunes.

The day after the election shares in CoreCivic rose 43 percent and share in GEO rose 21 percent. The investors’ optimism was rewarded when on February 21, 2017, Attorney General Sessions, rescinded the order that the private prisons be phased out. Following the announcement, the prison companies enjoyed another jump in share prices. The order should not have been a surprise. Notwithstanding the Justice Department report that was highly critical of the private prisons, DJT, for whom facts are notoriously unimportant, said: “I do think we can do a lot of privatizations and private prisons. It seems to work a lot better.” Of course, private prisons are not the only ones rejoicing in the prospect of more inmates, thanks to the increased attention being paid to illegal immigrants and their incarceration. Jailers in small Texas counties are also excited.

Because of reforms to the criminal justice system, a number of Texas counties are having a tough time making ends meet because their jails are underperforming. An underperforming jail is one located in a community in which the residents do not engage in sufficient criminal activity to provide residents for the local jails. According to a report by the Associated Press, the current problem traces its beginning to the 1990s and the early 2000s. Counties that were losing employment prospects for their citizens, addressed the problem by building new jails with lots of beds. The plan was that, in addition to housing their residents, the jails could be rented out to other counties and the federal government when those entities found themselves short of space. It was a great idea and worked until criminal justice reform took place and alternative sentencing provisions were adopted. Now many of the counties that eagerly built new jails, find themselves trying to pay off the cost of construction without adequate occupants to pay the debt that was incurred to build them. The good news for them is that since DJT has encouraged ICE to round up and jail illegal immigrants, the glut of jail space will soon vanish. Cells that were empty and non-income producing, will once again be fully occupied with illegal immigrants and their families. (In a speech delivered to Police Chiefs Association on April 11, 2017, Attorney General Sessions announced a number of increased enforcement policies including a provision that those who get married to avoid immigration laws, will be charged with offenses that carry a two-year mandatory minimum prison sentence.) If, notwithstanding the prospect of new occupants, counties no longer want to maintain their facilities, they may be able to sell them to private prison companies that will use the space for housing illegal immigrants. It’s a win-win situation for private prisons and Texas counties. The only loser is the pre-DJT United States we knew and loved. The only loser is the pre-DJT United States we knew and loved.