With a budget deficit that is as large on its own as the entire federal budget of 1998, the folks in Congress who’d like to avoid a crippling debt crisis (those crazy kids!) are looking for ways to trim the fat. Luckily for legislators there is an area of “USDA prime” waste they can carve out: the U.S. Department of Agriculture’s desperate dash for taxpayer cash in the form of superfluous subsidies for rural broadband efforts.

USDA’s Rural Utilities Service (RUS) is an outdated agency whose roots go all the way back to FDR’s New Deal-era Rural Electrification Administration. Originally meant to help bring electricity to farmers in remote areas, its mission was expanded in 1949 to include telephone service and, half a century later, Internet service. Ostensibly, its goal is to subsidize the construction of broadband networks in sparsely-populated areas that do not have them.

But in its ham-fisted attempt to bring high-speed Internet service to areas where there is none, RUS has consistently given money to organizations which build over existing private broadband networks. A 2005 report from the USDA Inspector General found that “RUS has not maintained its focus on rural communities without preexisting service.” The same report determined that “in one of the more highly publicized cases, RUS issued loans to a company providing broadband access to affluent suburban communities a few miles outside of Houston, Texas.”

This should come as no surprise, since RUS had previously come under criticism for providing taxpayer-backed loans to rural electric cooperatives whose lines of business – such as propane sales – seemed to stray far from the basic, limited mission of helping deliver power to underserved places.

Some observers joke that the latest loans are given based on the number of times an applicant shoehorns the word “rural” into its documents rather than the business case (or lack thereof) that is made. I’m waiting to hear back about my application on behalf of “Andrew’s Rural Broadband Service for Rural Citizens Living in Rural Areas (Rural Rural Rural). Well-intentioned or not, there’s no rational justification for RUS to lend money for rural broadband development to companies that serve wealthy suburbs. We simply cannot afford such excesses if we are to stand any chance of creating a sustainable fiscal future.

Unfortunately, warnings from Congress fell on deaf ears. A subsequent USDA Inspector General Report issued in 2009 found little improvement in the agency’s strange habit of loaning money for projects that build over existing Internet service, rather than bringing it to those who don’t have any.

President Obama has also ignored this tarnished record of gross mismanagement. In fact, he doubled down and put RUS in charge of doling out $2.4 billion in so-called “broadband stimulus” money. Those funds have once again gone to applicants who are building over existing private networks, instead of building out networks into unserved areas.

As Members of the new Congress have begun turning off that “stimulus” spigot through the continuing resolution process, bureaucrats inside RUS are now looking to spend carry-over funds that still exist from the monstrous 2008 Farm Bill.  They’re gearing up to rush out as much as $700 million in ill-advised loans before the portion of the pot that is “unobligated” is returned to the Treasury to help pay down part of our $1.65 trillion deficit. Because Washington insiders see no greater sin on Earth than failing to spend every dime of their budget from Congress, agency officials are doing their best to keep shoveling the cash into unworthy pockets before it “disappears” to the (much worthier) cause of deficit reduction.

So, while the vast majority of Americans are demanding that government cut spending and live within its means, the people who run the Rural Utilities Service are doing everything they can to issue nearly a billion dollars in government-guaranteed loans that will almost certainly be used to duplicate the existence of privately-built networks.

For lawmakers looking to save money and help end the culture of foolish lending practices, removing the RUS’s carryover spending authority is about as clear an example as they are likely to get. The question is, will they take it?

So it was with great interest that I read Robert H. Schell’s thoughtful post that recently called to “End the Subsidy!” for all forms of U.S. energy. Schell perceptively and forcefully argued that,

I hate all subsidies.  In every case they are welfare-reducing for the whole population in the current time period; and I am unconvinced – against all claims – that they are welfare-increasing as a present value of future benefits.

Despite Schell’s making an exception for subsidizing kittens (only a maniac would argue for not subsidizing puppies instead, BTW), his line of reasoning – returning federal fiscal policy to a more economically rational and neutral plane – has plenty of merit. If only the post didn’t cite a flawed report from National Public Radio that has more to do with politics than economics.

According to a September 22 report on NPR’s Marketplace, “[T]oday, federal fossil fuel subsidies in all run about $10 billion a year, more than double those for renewable energy.” This contention seems to assume that renewable energy remains at a federal policy disadvantage – one that’s loaded with half-truths.

As the Government Bytes blog noted several weeks ago, by using the Joint Committee on Taxation’s own (and in our opinion flawed) definition of a “tax expenditure,” renewables are showered with advantages:

Renewables are projected to receive an average of $12.5 billion in “tax expenditures” each year between FY 2009 and FY 2013, while major companies in the demonized American oil and gas industry are slated for less than a billion dollars.

But what about that word behind the numbers: “subsidy”? We have long argued that tax provisions such as credits, deductions, and other “incentives” distort economic decision-making, empower favor-trading politicians, and add to the complexity of the tax system. But allowing people and businesses to keep more of what they earned is hardly a “subsidy,” even if that’s done through those same admittedly imperfect credits, deductions, and incentives.

Indeed, as a recent study from HIS-CERA noted, the U.S. is falling behind in corporate investment toward oil and gas exploration abroad. David Hobbs, author of the report, Fiscal Fitness: How Taxes at Home Help Determine Competiveness Abroad marshaled convincing evidence showing that America’s closest energy development competitors (United Kingdom, Netherlands, Russia, Canada, Norway, Italy and China) “pay less by way of additional taxes on their repatriated income and are therefore able to compete more effectively against U.S.-based companies—in some cases enabling them to afford to bid twice as much for oil and gas concessions.”

For that reason, recent proposals from high-tax lawmakers to repeal the Section 199 deduction and dual capacity credit for U.S. oil and gas firms are especially short-sighted (as noted here in a letter we wrote to Senators).

Which brings us back to Schell’s post. NPR’s irrelevant number-mongering aside, there’s a right way and a wrong way to “end the subsidy.” The wrong way? Ask Senator Bill Nelson(D-FL) and his colleagues who supported Section 199 repeal merely to fill government’s coffers with another $17 billion. The right way? Scrap the entire tax system and replace it with a consumption tax or a single-rate income tax levied on a broad, simple base of economic activities that neither favors nor punishes anyone. Crazy idea, huh?

Want something in between? How about a guarantee that for every deduction, credit, or other incentive Congress repeals, the tax rate is lowered accordingly to prevent Washington from enriching itself any further. That’s the principle behind the “Bipartisan Tax Fairness and Simplification Act of 2010” authored by Senators Judd Gregg and Ron Wyden – an approach that garnered some praise when the legislation was introduced.

Here’s hoping politicians take away the right message from Schell’s blog. But in the likelihood they won’t do so anytime soon, taxpayers will need to keep sending messages of their own, at the polls and long after.

Soon after, The Hill’s technology blog “Hillicon Valley” ran a story with an explanation from Inslee’s staff:

“But Inslee’s office told Hillicon Valley on Tuesday that Scott did not, in fact, draft the letter on behalf of the congressman. Rather, as Inslee’s staff scrambled to put out something last week in support of the FCC’s goals, it consulted old documents and industry talking points for ideas. A staff member ultimately typed the new letter on top of the Word document that Free Press previously sent Inslee — the date of which was May 7 — meaning the meta-data still reflected Scott as its author.”

At first glance, this sounds halfway plausible. While I’m not an expert on meta-data as it relates to documents like this, my understanding is that it’s possible that writing over top of another person’s original document could lead to a situation where the content is attributable to one person (or organization) while the meta-data suggests authorship by another. This led me to a couple of questions. Did the National Journal, which originally reported the story, get it wrong? Did Inslee’s office legitimately make a mistake by overwriting talking points from Free Press with their own letter, leading to this confusion? Was I, then, wrong to point out the potential conflict associated with a group that decries “astroturfing” allegedly writing a letter for a Member of Congress? To help answer those questions, I decided to reach out to Representative Inslee’s office directly to clarify exactly what happened. The result was…not encouraging.

I asked Inslee’s Communications Director, the person quoted by The Hill, if he’d be willing to publicize the May 7th letter that was mistakenly overwritten in order to prove that its contents differed significantly from the letter that was ultimately made public with his boss’ signature. He responded thusly:

“As I have told news outlets, we are the author of the letter.  There is no question that Jay has a long history on this subject, in fact just a couple of weeks ago he penned a widely distributed op-ed in the Seattle Times.

In the end the letter isn’t the issue, just a cynical ploy to keep the media from talking about what is at stake here.”

In other words, they refuse to make the document public. Perhaps they’d just like this story to go away. Or perhaps the talking points they received on May 7th from Ben Scott at Free Press look suspiciously like the letter bearing Representative Inslee’s name. In the interest of full disclosure, here’s my full exchange with his staffer (with only personalized contact information removed). To the staffer’s credit, he did give me permission to quote the email interchange, so they aren’t completely stonewalling.

Meanwhile, in the days since the article first appeared , we’ve heard not a peep about it from Free Press or Ben Scott . Unless I’ve missed it, there’s been no official response and Ben Scott himself seems to have gone on radio silence. He was strangely absent from the agenda at Free Press’ big summit, where he was featured prominently last year. So the question is, Where’s Ben? See if you can find him in the picture below!

Or the liberal pro-net neutrality group Free Press, which has an entire section on its site devoted to “outing” so-called Astroturf operations.  This page includes a handy-dandy widget with a graphic of large corporations pulling the strings of Congress. Pretty clever, really.

They claim that the whole movement is the invention of a bunch of Beltway insiders backed by piles of corporate cash.  For them, it simply does not compute that ordinary Americans could be fed up with trillions of dollars in debt, tax hikes, and runaway regulation.  It MUST be the orchestrations of rich puppet-masters in DC, right?  Instead of spending hours debunking those claims, I’ll point to a post I made on the National Taxpayers Union’s old blog after the massive 9/12 March on Washington.  Several hundred thousand people from all across the country, none of whom were paid, will do a better job of dismissing these silly claims than I could here.  Instead, let’s focus on liberal activists employing exactly the kind of shady strategies that they accuse us of using.

So, that group I mentioned, Free Press?  The ones that have a page on their site to expose “Astroturfing?”  Last week, they were outed as being the true authors behind a letter supposedly written by Congressman Jay Inslee (D-WA).  The letter is being passed around to various Congressional offices to solicit support for FCC Chairman Julius Genachowski’s radical effort to thumb his nose at the limits of his regulatory authority, which I blogged about here recently.  But the properties of the electronic file itself show that the real author of the letter was not Mr. Inslee or a member of his staff, but none other than Free Press Policy Director Ben Scott!

Now, it should be noted that this practice isn’t exactly rare in Congress.  Members routinely have lobbyists write talking points, letters, and even legislation.  Some of it is relatively harmless, in that those lobbyists have special knowledge about the issue and lend their expertise to Congressional offices.  Some of it, however, is not so harmless.   Occasionally, there are news reports about special interest groups carving out exceptions for themselves through this kind of process.

To paraphrase President Obama, let me be clear: I’m not accusing Free Press of shady back-door dealing.  They’re an interest group pursuing net neutrality, a policy that I happen to think is a terrible idea.  For his part, Jay Inslee is just a fellow traveler who happened to get caught red-handed outsourcing the writing of a letter to his colleagues.  I’m simply pointing out that Free Press is engaged in exactly the kind of coordination and manipulation that they and others (wrongly) accuse conservative groups like the National Taxpayers Union and FreedomWorks of all the time.

It makes you wonder, what else has Free Press written?  So, Free Press, what say you?  What other seemingly spontaneous pro-net neutrality efforts have you coordinated?  How many other letters or bills have you written behind closed doors without getting caught?

For the uninitiated, net neutrality regulations would allow federal officials to determine how internet service providers could manage the networks they built and own, ostensibly in the “public interest.” In reality, it’s been the cause du jour of lefty activists and major content provider companies like Google for years now. The activists want to have the government own and run the internet like a public utility, and the big content providers want the feds to force internet service providers (ISPs) to supply all the bandwidth needed for the applications without any barriers. A match made in heaven, if you ask me.

This announcement comes on the heels of a U.S. Court of Appeals decision which stated, in no uncertain terms, that the FCC does not have the authority to impose net neutrality regulations under the current regime. In the case of Comcast v. FCC (PDF), the court stated that the Commission does not have the necessary authority and even went so far as to say that their legal defense was “flatly inconsistent” with previous case law. My favorite line from the decision, though, came when it stated that the FCC’s argument would effectively “shatter” the existing limits on their authority. I might be reading into it too much, but it doesn’t sound like the court left much wiggle room there.

So, what the heck is Title II, and why would it be a bad thing for the internet to be regulated under it? The short answer is that it refers to Title II of the 1934 Communications Act, which was drafted in order to regulate so-called “common carrier” monopoly telephone companies. It is an antiquated structure that would allow for a myriad of burdensome restrictions, including government-regulated prices and forcing ISPs to open their networks to competing companies. This kind of regulation would be a dramatic departure from the largely hands-off approach that the FCC and the federal government have taken to the internet during its incredible expansion.

For years, the consensus on internet services is that they were properly regulated under Title I of the Act as an information service. This consensus went unchallenged for years by parties on both sides of the ideological spectrum. Only when it became clear that net neutrality regulation was a legal impossibility under Title I did net neutrality proponents begin to seriously float the idea of reclassifying the Internet under Title II. How…convenient.

This is the New World Order, ladies and gentlemen…pursuit of a bigger and more powerful government, no matter the barriers. My friend Lori Drummer covered that very issue here at BigGovernment.com last month, where she stated that “[c]ramming the Internet into Title II would go against the policy pronouncements of the Congress, the Supreme Court, and even the FCC itself (PDF).” But this Chairman apparently has little regard for long-standing decisions by irrelevant institutions like the legislative, judicial, AND executive branches of the federal government. Not when there’s regulatin’ to be done!

Several grant descriptions suggest that this funding may be in violation of guidelines from the Centers for Disease Control, through which the CPPW program is administered. The CDC’s lobbying restriction guideline states in part that, “no part of CDC appropriated funds, shall be used…to support or defeat legislation pending before the Congress or any State or local legislature.” And yet, that’s exactly what several of the grantees plan to use the money for.

For example, Jefferson County, Alabama plans to spend $7 million on a “tobacco use prevention and cessation initiative [that] will promote changes in policies to reduce smoking opportunities and reduce access to tobacco products.” Pretty straightforward, that. They plan to lobby for more smoking bans and restricting access to legal tobacco products.

New York City, for its part, plans to spend $15.5 million “work[ing] to set policies and create environments that reduce consumption of sugar-sweetened beverages and overly salted foods.” One New York legislator is already trying to “create an environment” where restaurants are prohibited by law from using SALT in their food. Yes, salt, the substance without which virtually every food on Earth would be inedible.

Perhaps my favorite, our nation’s capital is spending $4.9 million on a program called “LiveWell DC,” which will “explore limiting tobacco access through zoning/license restrictions, restrict point-of-purchase advertising of tobacco products, support the elimination of price discounts, and provide social support through quitline and other cessation services.” Quite the laundry list there.

If we can agree on a general definition of lobbying as “attempting to influence government action,” then these programs would certainly seem to qualify. And the outrages don’t end there.

In addition to possibly violating lobbying restrictions, several grantees plan to use the money for, ahem, questionable projects like “signage for bike lanes,” and other similar efforts. (It’s rather doubtful that LaCrosse, Wisconsin will look like Beijing with a few extra signs) In San Diego, the County is using taxpayer money to create a “food distribution center,” which they claim will “link local food demand to supply.” (Apparently the media has dropped the ball in reporting on the mass starvations happening in the area)  In Colorado, they’re spending money to create “community gardens,” which sounds fascinating…and wasteful.

If that wasn’t enough, the whole program just oozes with Orwellian language. CPPW calls their programs “interventions,” which makes it sound like anyone who has ever smoked a cigarette or wolfed down a Big Mac is in for a tearful “education” (another oft-used term) session with government agents. Several grantees plan to employ “evidence-based pricing strategies” with regard to disfavored products, which is just a fancy way of saying that they plan to raise taxes on them.

There’s a lot to be angry about with the stimulus, but spending millions of dollars that we don’t have to lobby (possibly illegally) for policies that will further restrict our choices and increase government’s control over our lives is one of the biggest outrages yet.

The report issued by the Center for Medicare and Medicaid Services estimated that the “Affordable Health Care for America Act” would increase health care costs from the current level of 20.8 percent of GDP up to 21.1 percent a decade from now. It also adds yet another voice to the chorus now showing that preventive care and wellness programs do NOT decrease long-term costs.

In a fascinating development, the White House has now actually admitted, apparently for the first time, that the House bill would increase health care burdens despite President Obama’s repeated assertion that he seeks a health care bill that would reduce costs. In response to the CMS study, Obama aide Nancy-Ann DeParle said, “the good news was that, despite extending coverage to 36 million people, health care spending would rise by only by 0.8 percent.”

The CMS findings could make it very difficult for Congressional Democrats and other proponents to follow through on what might be the central argument for their plan of massive tax hikes, subsidies, and regulations: that it would reduce crippling health care costs.  Several Members, particularly those facing tough re-election fights, have committed themselves to only voting for a plan that would cut long-term health care costs.

Perhaps more importantly, this report adds yet more evidence to the case that the House health care bill does little, if anything, to address the fundamental problems in health care and is actually counterproductive in many respects. Our employer-based health care system creates problems with transitional lack of insurance due to job changes or layoffs and hides the cost of health care services behind massive walls of bureaucracy. Instead of addressing these issues or injecting real competition by allowing for insurance purchases across state lines, the Democrats’ bill resorts to a predictable package of over $700 billion in tax hikes, coupled with huge new government subsidies and strict regulations.

In addition, it adds a so-called “public option” government insurance program, ostensibly to provide “competition” to major health insurance companies. But the logic of creating a government-run plan for insurance is tenuous at best, as the National Taxpayers Union pointed out in a recent letter to MoveOn.org, asking “Why not a public option in everything?”

The onus is now on the Senate, where debate on their version of a health care bill is expected in the next few weeks. The sharp divisions witnessed in the House are sure to be even sharper in the Senate in light of recent developments.

The full report from CMS’ auditors is below.

OACT_Memorandum_on_Financial_Impact_of_H_R__3962__11-13-09_ –